Launch off the starting blocks with Mezzanine Finance and preferred equity.
For many property developers, Mezzanine Finance and preferred equity offers a path to boost their borrowing potential beyond previously set financial boundaries.
When a gap exists between the senior facility available and a developer’s equity, a Mezzanine loan or preferred equity can provide the required funds to push a project into commencement.
Both finance options work in a similar fashion, with the key distinguishing factor being that Mezzanine loans are secured by a second mortgage, whereas preferred equity is not.
Other requirements of this kind of finance include that the project is ready for construction to commence, a feasibility study has been conducted, and the relevant risk mitigation (pre-sales, for example) strategy is in place.
Mezzanine loans and preferred equity hold the following benefits for developers:
- Access to Mezzanine Finance can be sourced more quickly than equity
- It can be more cost effective option that yields a higher return on equity
- Developer control is retained and not reallocated to any partners in a joint venture
- Developers have more control over the level of equity they wish to pledge
- Risk diversification remains possible, as equity is permitted to be used elsewhere
- Well-performing projects can enjoy the passive qualities of Mezzanine Finance.
Our Bayside Mortgages experts are well versed in the complexities of Mezzanine loans and preferred equity. We assess all aspects of the financing structure to ensure our clients get the best deal and feel confident in their decision to pursue this alternative funding model.
Call us today on 02 4423 6660 to discover how it can work for you.