Although the property market is in the ascent again, lending is still not back to its pre-recession levels and developers often find themselves with a shortfall between the total of their principle lending, their own equity and the gross development cost.
If that sounds familiar, mezzanine finance could be the answer – it is short-to-medium form of property finance that will bridge the gap in your funding and maximise your own return on your equity.
How mezzanine funding works
Typically, we can provide up to 20% of the gross development value in mezzanine funding to get your scheme off the ground, and limit your own equity invested to 10%.
While the structure of every development is different, typically with a mezzanine funded scheme, your principle lender will provide 70% of the gross development value, your equity will be a further 10%, and then mezzanine funding will make up the shortfall of 20%.
With that structure, you could get up to a 65% share on the profit of the development and the mezzanine funder would receive 35% of the profit.
Mezzanine funding will be secured against your development, so a second charge will be placed on it, alongside the first charge from your senior lender.
Who can use mezzanine funding?
Whether your scheme is a new-build residential development or a mixed-use project, if you are an experienced property developer, mezzanine funding is a good way of topping up the investment in your development and making sure you can capitalise on every opportunity that comes your way.
At Access Commercial Finance, we can reach an excellent range of mezzanine funders to find the deal that’s a good fit for your development.
As well as our financial acumen, we are experienced property investors ourselves, so we understand the challenges that you might face when you are looking for mezanine funding. We can use our insight into the property market, to assess the value of your development, spot its potential and then help you unlock it.
To successfully structure a mezzanine deal, funders need to liaise with principle lenders, and our know-how, experience and contacts will help us do this with ease, ensuring smooth delivery of the finance that underpins your development.