DEVELOPMENT FINANCE PRICING | OUTLOOK FOR FINANCE COSTS
On March 5th 2009 the UK base rate hit 0.5% - now almost exactly 5 years later rates have not budged and many property professionals have gotten very used to low borrowing costs. In addition investors have been struggling to get good fixed income returns so many have been putting cash into development lending funds and as a result we’re in a property finance market where the established developer can attract a range of debt funding options from banks and private funds. So can borrowing rates for developments get any lower and what’s the outlook for funding costs?
EQUITY vs MEZZANINE FINANCE | WHAT'S THE BEST WAY TO GET THE EXTRA LEVERAGE
Last year most deals we worked on involved mezzanine finance or third party equity as well as a senior debt facility. The general trend seems to have been those with the most experience and active in prime London postcodes have been attracting lots of equity and the less glamorous locations have been relying on mezzanine finance to achieve higher leverage. Mezzanine finance rates vary dramatically depending on leverage, deal size, location and various other risks associated with individual projects but it’s not unusual to see interest rates over 20% for higher risk positions. Developers borrowing these funds.....
UK WIDE DEVELOPMENT FINANCE | LIFE BEYOND LONDON
For a few years now the range of lenders looking to fund residential development projects has increased significantly – some new banks and non-bank lenders are entering the fray, whilst established high street banks have gradually been increasing their lending activity. However many haven’t ventured too far outside the M25. So a common question has been when will funding options for regional projects become easier to source? Our view is that funding is there but you may need to think a bit differently to unlock it......
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