Our flexible pools of capital and in-house decision-making allow us to, in certain situations, create very unique short-term financing solutions. These are loans outside of what is usually available or expected in the market as a whole and really stretch the limits.
One example of this is our stretched bridging loan solution for prime real estate owned by HNW individuals. At a time when loan to value is in many cases more important than price to borrowers, this type of lending is very much in demand.
Like all lenders, we have loan-to-value limits – for us these are self-imposed and reflect our view of the market and our risk profile. At the moment for example, for high-value UK single-unit residential properties this runs at 65-75% loan to value. We are a bit lower for European property – 55-65% loan to value. Every loan is assessed individually and based on the asset and the borrower’s profile.
In some circumstances, we are happy to go well beyond these limits and we do that by introducing a Mezz slice over our first charge loan – increasing the overall loan to value.
For example;
- Property value – £5,000,000
- First charge loan – £3,500,000 (70% loan to value)
- Mezzanine loan of £500,00 (taking to 80% Loan to Value)
We can do this with 1 or more of the below in place;
- The borrower has a short-term plan to repay the Mezz piece in the near term.
- The borrower is high quality and has a strong asset and liability statement.
- Other assets are added as security, like a share portfolio or other property
- If there are 3rd party guarantees – perhaps a trust or corporate guarantee for example.
- The property is on the market to sell.
The borrower will get our standard interest rates on the first charge and will pay a premium on the mezz slice, however, given this second part is for a lower amount and for a short duration this is usually more than acceptable if it gets the desired loan to value.
We used this solution recently for a case which was downvalued after we had agreed on terms. We offered terms on a central London property – the borrower stated a value at £10m however the valuer came back with a £9m value.
The borrower really needed £7.5m to clear his existing loan and give more time to sell the property.
We really liked the deal and had originally offered 62.% first charge and £1,250,000 as a Mezz loan to get to 75% loan to the required £7.5m.
The reduced valuation limited our first charge to £5,850,000 so, to get the deal done we increased the mezz part to 1,8750,000 – getting to the required £7.5m total.
We did this because we knew the property, it was on the market to sell, and the borrower had a strong balance sheet which supported a personal guarantee and gave other routes to repay the mezz piece in the short term.
If we like the proposition we will do all we can to provide terms which match the borrower’s requirements. If you would like to see how we can help you, drop us a line.