Pure Structured Finance has arranged a £5.9m funding package for the development of 12 large family homes in Essex, combining senior debt and mezzanine finance to achieve 75% loan-to-gross-development-value (LTGDV) on a 2-year term.
The client had purchased the site and obtained planning permission, initially financing the acquisition with a bridging loan.
That facility needed to be repaid while also securing the construction funding to deliver the homes.
However, the gearing required exceeded the capacity of a senior debt funder, and with the developer already engaged in two other schemes, there were insufficient funds to cover the shortfall.
To address the gap, Pure Structured Finance secured senior debt at 65% LTGDV before creating and presenting an investment pack to a panel of mezzanine funders.
This outlined the remaining capital requirement, enabling a mezzanine lender to step in behind the senior facility.
The firm worked closely with the senior debt provider to ensure the deed of priority was agreed and in place prior to completion.
The deal ensures the client can both repay the original bridging loan and access the necessary development funding to progress the project.
Tom Lee, managing director, said: “Mezzanine lending, while a more common method of lending over the years, has been limited in the market over the last few years due to shifts in the development space, and the broader economy.
“We worked closely with the developer, senior debt provider and mezzanine funder to create a structure which worked for all.
“Mezzanine and Equity are spaces that we are becoming increasingly more involved in again due to our experience and contacts, and we are excited to see these tools becoming more widely available.”
