Mezzanine finance
When considering whether to proceed with a construction project, an assessment of funding options will generally be carried out. One of the options may be 'mezzanine finance', particularly in times of economic hardship when banks may take a more risk adverse stance in relation to property development.
Mezzanine finance provides a second layer of debt funding to bridge the gap between the senior debt (typically provided by a bank or fund), and the actual requirements of the developer. In the event of default the mezzanine lender will be paid only after the senior lenders. Equity investors are than last in line and receive whatever is left.
This means mezzanine financiers are bearing more risk than senior lenders, but less than equity owners.
Returns on investment for lenders of mezzanine finance can be around 20%. While this is typically more expensive for the developer than senior debt, it may be less expensive in the long term than their own equity, and as short-term funding it can help to unlock potential profits, so the longer-term benefits can be considerable.
[edit] Related articles on Designing Buildings Wiki
Featured articles and news
HSE simplified advice for installers of stone worktops
After company fined for repeatedly failing to protect workers.
Co-located with 10th year of UK Construction Week.
How orchards can influence planning and development.
Time for knapping, no time for napping
Decorative split stone square patterns in facades.
A practical guide to the use of flint in design and architecture.
Designing for neurodiversity: driving change for the better
Accessible inclusive design translated into reality.
RIBA detailed response to Grenfell Inquiry Phase 2 report
Briefing notes following its initial 4 September response.
Approved Document B: Fire Safety from March
Current and future changes with historical documentation.
A New Year, a new look for BSRIA
As phase 1 of the BSRIA Living Laboratory is completed.
A must-attend event for the architecture industry.
Caroline Gumble to step down as CIOB CEO in 2025
After transformative tenure take on a leadership role within the engineering sector.
RIDDOR and the provisional statistics for 2023 / 2024
Work related deaths; over 50 percent from construction and 50 percent recorded as fall from height.
Solar PV company fined for health and safety failure
Work at height not properly planned and failure to take suitable steps to prevent a fall.
The term value when assessing the viability of developments
Consultation on the compulsory purchase process, compensation reforms and potential removal of hope value.
Trees are part of the history of how places have developed.