STRETCHING DEBT FOR DEVELOPERS
In 2012 a number of funds were launched with a mandate to provide so called ‘stretched debt’ to residential property developers and their numbers looks set to increase further in 2013. Stretched debt is effectively the combination of senior debt and mezzanine finance in one convenient package, and the majority of lenders offering this product are private funds. Some of these funds were formed by mezzanine lenders that found they weren’t deploying the volume of cash they were hoping to and others are newly capitalised ventures. Unsurprisingly the vast majority of funds are London centric but for the right project, leverage up to 90% of the total project cost ....................
The German word ‘Zugswang’ literally translates as the ‘the compulsion to move’ and is most commonly used in chess to describe when a player is in a position where every available move will put them in a worse position. If the rules of the game allowed the player to pass and remain as they are, then that would be the best option. Many commercial property investors have been facing similar dilemmas in recent years although the rules of that particular game are typically set by their lenders.....................
FINANCE FOR PLANING PLAYS
Developer appetite for new residential development projects has been strong in London and the South East in 2012. Most developers rely on some form of third party finance, whether it’s senior debt, bridging facilities, mezzanine loans or third party equity investors, and therefore project demand is dictated as much by the funding available as it is by the developer’s strategy. The availability of finance has almost exclusively been for the residential projects in Greater London and the South East but importantly only those projects with a workable planning consent in place...................
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