Mezzanine Finance

Over recent years it has become harder for property companies to gain funding from banks 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%.

Mezzanine funding allows property developers to secure that next project pending sales income from a previously completed scheme or where equity is tight. It allows the risk to be spread increasing overall development capacity.

The developer can achieve a maximum return with minimum cash contribution/Equity. Stranks Investments will potentially fund up to 90% Loan to Cost for periods from 12-24 months for experienced developers.

One of the key benefits of mezzanine finance is that it allows the developer with limited equity to spread that limited equity across several schemes.

Equity spread

Our lending criteria

  • Consented residential development schemes in England and Wales
  • Experienced developers with a demonstrable track record
  • Funding requirements of between £50,000 and £1,000,000
  • Borrowers to have a minimum of 10% of development costs

Deal structure

  • 2nd charge security against the asset
  • Formal DoP/ICD with the senior debt lender
  • Loan terms of up to 24 months
  • Flexible interest rates on a non-compounded basis
  • Interest rolled up and added to the facility