Struggling To Raise Development Finance?
Check out the benefits of Collective Investment Schemes, a viable alternative source of much needed capital.
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Development Finance
Projects in London, SE, Home Counties
GDV £1m - £10m
Interest - Combined rate equivalent circa 10 - 12% per annum
Family housing
Apartments (London only)
Arrangement Fee - Bank 1% + Mezz Lender 2% + Monyy 1%
Exit fee -Bank 1% of loan + Mezz lender 1% of GDV
Gross Profit Margin must show - 30% on total cost (before bank interest)
Use us to make a complex loan, simple
Higher gearing, lower developer equity
A structured loan is a combination loan of Senior Debt + Mezzanine Finance. It exists in order to provide a much higher LTC to the developer, who then provides a much lower equity slice as a result.
Some lenders will provide both components of a structured loan, charging differently for each component. More commonly, 2 lenders working together create structured loans on behalf of the developer. Typically, a High Street bank or Merchant Bank will provide the senior debt proportion, whilst a specialist lender provides the Mezzanine Finance component.
Interest rates and fees for the senior debt proportion are much lower than those charged for the mezzanine are. By combining the two sets of interest rates, overall rates tend to range c10% -12% per annum across the whole lending. Such rates reflect the increased gearing and risk to the 2 lenders.
Add to this arrangement fees and only the more profitable deals can afford these higher overall costs. Lenders therefore look for a gross margin of 30% on total costs (including senior debt finance costs but not mezzanine finance costs) challenging the developer to buy sites very competitively, perhaps even at distressed prices.