Mezzanine Finance Solutions for Property Developers in the UK

WHAT IS MEZZANINE PROPERTY FINANCE

Mezzanine property finance provides an additional layer of debt to the typical structure by sitting behind senior debt and thereby reducing the level of equity that a developer needs to input into a given project. As a mezzanine finance provider, we can help businesses to secure mezzanine funding for open market residential property development, with short to medium-term timescales. 

 

Mezzanine property finance is secured on a 2nd charge basis with the senior debt lender holding a 1st charge position. The senior debt lender has a priority charge over the development asset and the relationship between the two lenders is governed by a Deed of Priority (DoP) or Intercreditor Deed (ICD).

 

Rather than raising outside equity, mezzanine financing allows companies who have maximized their senior debt borrowing to raise additional capital for growth projects. At Davon Ltd, we are an experienced provider of mezzanine finance solutions for property development and have worked with clients in Berkshire, London, and throughout the whole of the UK.

WITHOUT

Equity

Senior Debt

WITH

Equity

Mezzanine

Senior Debt

HOW MUCH CAN I BORROW?

On a typical scheme with a 20% return on cost the combined lending of a senior debt facility and a mezzanine facility can provide up to 90% of total costs. With this structure the developer can significantly reduce his equity contribution compared to a structure where only senior debt is being provided.

A KEY BENEFIT

One of the key benefits of mezzanine finance is that it allows an opportunity rich developer with limited equity to spread that limited equity across a number of schemes. Not only can he do more but he can also diversify his exposure across a number of different schemes.

 

In addition, mezzanine compares favourably against an alternative joint venture arrangement as the developer is able to keep 100% of the upside on any improvement in sales value and can maintain full control over the scheme.

Equity

Equity

Equity

Equity

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ANOTHER BENEFIT

Finally a mezzanine structure can also be used to release some of the developer’s equity part way through the schemes so that funds can be used to acquire options on land, cover the ever increasing cost of planning applications and fund the associated professional fees, items which are notoriously difficult to fund.

MEZZANINE FINANCE LENDER FOR RESIDENTIAL PROPERTY DEVELOPMENTS

At Davon Ltd, we specialise in providing mezzanine finance for residential property developments by experienced property developers and consented development schemes in England and Wales. With senior debt and mezzanine funding up to 90% LTC, we are an independent specialist that works with a wide range of UK mezzanine lenders.

Our mezzanine finance solutions give property developers the freedom to minimise the amount of personal capital that is tied up in their projects enabling them to invest in multiple projects at the same time. Most mezzanine finance lenders will provide up to 20% of the gross development value helping developers secure the additional funding they need to complete their development without tying up their capital.

 

OUR LENDING CRITERIA

  • Consented residential development schemes in England and Wales

  • Experienced developers with a demonstrable track record

  • Funding requirements of between £100,000 and £3,000,000

  • Borrowers to have a minimum of 10% of development costs

OUR 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

  • No exit fees

GET IN TOUCH

To discuss your funding requirements, get in touch using the contact details below.

Tel: 0118 9783 955

Email: mail@davonltd.com