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Vision Finance work with a number of stretched senior debt and mezzanine finance lenders, providing up to 90% of total costs for experienced property developers.
In general terms, for prime developments, senior lenders are typically lending 55% to 60% of GDV, or around 65-70% of total costs. This clearly leaves a gap of approximately 35% of total costs for the developer to fund as equity.
However, Vision Finance works with a number of lenders offering what we call “stretched senior” finance. These lenders (many of which are exceptionally well capitalised) will offer up to 90% of all costs, and up to 70% to 75% of GDV. Previously borrowers would need to raise mezzanine finance in addition to senior finance to achieve a GDV percentage of 75%. These lenders will effectively finance both the senior debt, as well as the mezzanine tranche, and offer the borrower an attractive blended rate.
The lender will therefore expect the borrower to invest 10% to 20% of the total costs themselves as equity. Allowing the developer to invest this reduced amount results in the developer being able to undertake larger schemes with the same amount of capital.
There are also a number of additional benefits that result from dealing with just one lender. Reduced legal fees, reduced project monitoring costs, and avoiding inter-creditor agreements are just some examples.
We have shown typical terms which could be expected below:
Maximum Loan to Costs: 90%
Maximum GDV: 75%
Minimum profit on cost: 20%
Loan duration: Generally up to 24 months
Maximum loan amount: £25m, however funding up to £50m is available for the right project
Borrower equity: 10% of total costs
Please speak to our Development Finance team if you would like further information on senior development finance, stretched senior, or mezzanine debt. We will be very happy to discuss generally, or a specific case if appropriate. Please call 0207 206 2500 or email developments@visionfinance.co.uk
