Simple & Efficient

Property Finance

  • Who

    Identity withheld for privacy

  • What

    Mezzanine Finance

  • Where

    South London

  • When

    April 2018

About Project Lydia

(Loan notes now full redeemed)

Planning permission was in place for the demolition of an existing building and the development of residential units, car parking spaces and associated landscaping.

The project was financed by a senior development loan facility from a major commercial bank and we provided the junior facilities. A substantial amount of equity was invested by the borrower and will remain invested as cash equity in the scheme for the duration of the project. No equity will be released at any time prior to full repayment of senior and junior debt.

Our junior loan term is co-terminus with the senior lender who took a conservative approach imposed by their credit team. However, the borrower agreed that the existing debt will be refinanced when construction is complete and our position will be taken by less expensive capital. We worked with the borrower to provide them with flexible payment terms which would allow for a longer sales period at lower cost for the sponsor to maximize profits.

The attraction here is the strong risk-adjusted return provided by short-term recycling of capital, lower leverage and interest being part-paid current in advance with an exit fee.