The return of Mezzanine finance for property developers

We know developers are finding that the banks have reduced senior debt levels (Bank lending e.g 65% of cost) to 50% to 55% of GDV thus requiring more cash from the developer. This increased cash requirement often means that a good scheme cannot be started.

To help solve this problem our partner CDPF has made arrangements with half a dozen mezzanine finance providers (or "top up" lenders) who between them can cover a wide spectrum of developments and finance needs. Under the section FUNDERS we show you how this might help you to prosper in 2010.

Funders

1 - £50,000 - £100,000 - These lenders prefer to put finance into projects at the outset but can also assist should cash become short during the course of a scheme e.g if the bank lender does not honour its original agreement to  finance all the build costs. This does not mean that these lenders will lend on problem schemes and there must still be a very healthy profit in the development once it is completed. Sites in the south of England are preferred.

2 - £100,0000 - £500,000 - These mezzanine lenders prefer to  finance developments from the outset. They will only lend on housing schemes and prefer to finance schemes in the south of England

3 - £500,000 - £3,000,000 - There is a good deal of flexibility where larger loans are needed. Some of our funders prefer family housing whereas others will put funding into high value single units in top quality locations across the country and will also consider lending on apartment schemes.

The common denominator for all the lenders is that the developer must have good experience and the scheme must have strong viability. Most of these lenders will need some cash contribution from the developer.

Chris Dowdeswell has worked in residential development finance for 25 years. Since setting up CD Property Finance in 1999 he has helped raised over £100m for property developers to finance their schemes.

If you’d like advice get in touch today using the links below – and don’t forget that as a Builderbusiness member you’ll qualify for a free business consultation with Chris plus save 10% on finance arrangement fees!