Mezzanine Finance is an exciting product, providing Property
Developers and fast growing businesses with crucial additional funding
that might not otherwise be available to them.
Often referred to as “Junior Debt”, it is basically a
Second Mortgage, sitting behind the First Charge or “Senior Debt”. By
accessing a higher Loan to value, the Mezzanine element will often
provide sufficient funds to unlock a development deal or simply increase
the LTV on higher risk ventures.
Although more expensive than Senior Debt, a
structured finance package that includes Mezzanine Finance will often
reduce the developers cash contribution to as little as 10%, which is a
very attractive proposition and great selling point. In addition, most
Mezzanine Lenders are happy to use third party specialist reports such
as valuations, thus avoiding unnecessary fees.
We have a comprehensive range of Lenders
providing this type of finance for residential, commercial and mixed use
projects. The minimum Loan amount is typically £100,000 with no
maximum. Detailed below are a couple of cases studies:
Case Study 1
A developer, who we regularly assist, had terms produced for a site
in London, to build out two houses on one plot with a GDV of £12m. We
had already secured him the £4m senior debt and he was financing the
rest of the site from his own equity, which was a combination of capital
he already held and the sale of one of his current developments. It
became apparent quite quickly leading up to completion that the sale of
his current development would not happen in the timescales expected and
as such required another £1.8m as a mezzanine fund. As we already had
extensive files on the development, terms were secured for the developer
the same day, the lead times for completion were not disrupted and the
completion deadline was met by all parties.
Case Study 2
A developer was acquiring a site in the South of England and had
obtained planning permission for the development of 4 houses. The total
cost of the development was £1.5m with an estimated GDV of £1.85m. He
had secured the first charge bank funding of £945,000, and was investing
£226,000 of his own capital. The mess finance required was for
£315,000. We successfully secured the required funds and he was clear of
the development having sold all the properties within 4 months of
completing the build.
