mezzanine finance

Mezzanine finance sometimes referred to a ‘Mezz Funding’ or ‘Stretched Senior Debt’ provides additional loan capital to help fill a gap between a developer’s equity and the amount that the senior lender will provide. This is normally secured with a second charge over the property in question, with the senior lender holding a first charge. 

Over recent years it has become harder for property developers to gain funding from senior lenders at a higher loan to cost above 65%. Capital constraints imposed on Banks require them to be more aware of the risks involved to the property sector. A bank will now typically restrict the Loan to Cost covenant to between 50-75% and the loan to gross development value to 55-65%. 

By taking out Mezzanine finance the developer can achieve a maximum return with minimum cash contribution/equity. Assured will consider up to 90% loan to cost for periods from 6-24 months for experienced developers. This can often provide the ability to Invest In other opportunities. 

Mezzanine finance allows property developers to use their capital across more than one scheme or onto the next project pending sales income from a previously completed scheme or where equity is tight. This increases development capacity and widens development options.