Location : Croydon, Surrey

Loan Type : Development / Mezzanine

Loan Size : £4.68m

Loan-to-Value : 89% LTC and 75% LTGDV

The Situation

Our client had purchased a site in Croydon with planning to build 32 apartments. They were involved in other development projects at the same time, so equity was short. Whilst they had the ability to call on investor monies to plug the gap, the cost of this money was too great to bear as it involved paying a profit share.

The Challenge

The client has been involved in property for many years and was already a successful developer, so experience wasn’t an issue. Satisfying the lenders that there was enough bandwidth within the business and the financial resources to meet any unforeseen issues was the bigger problem.

This would have been the third site under development at the same time, and the client also had bids on two further sites.

The Outcome

Whilst the cost of mezzanine finance puts most people off, in this instance it was very easy to demonstrate to the client that it was more cost effective than their current model. By, replacing the more expensive equity loans they had sourced privately, the client was able to stretch his own equity further and run multiple sites because he chose to, rather than because they were chasing the returns needed to repay their investors.

We used a senior lender and mezzanine lender that had worked together many times, and had an agreed ICD in place, as well as sharing professionals where they could. This meant we had a smooth loan process and the professional costs were kept to a reasonable level as the lenders agreed to share the same valuer and QS.