WHAT THIS PRODUCT IS
Mezzanine loans provide a layer of debt funding to fill the gap between the senior debt, which would typically be provided by a bank, and the equity investment.

They are generally used by property developers who need additional capital for a project but do not want to give away equity. Instead, they are happy to postpone their return in the funding structure behind the mezzanine debt and pay a fixed return to the lender.

HOW THIS PRODUCT WORKS
Our Mezzanine Loan products are secured by a second charge on a given property. A charge is the means by which lenders enforce their rights to property. Its seniority determines the order in which lenders make a call to recover their funds in the event that the borrower defaults on repayments. Mezzanine loans rank in priority above the equity in a project but behind the bank and deliver a fixed return for investors.

A mezzanine facility allows for increased leverage on a property by adding a second layer of debt on top of the Senior Loan. This could take the total leverage on a project up to 80%, or even 90% which is significantly higher than the 60% to 75% currently being offered by senior lenders.

By using Mezzanine debt, developers can attain a higher return on their projects because it is cheaper than bringing in equity partners into the deal.

The return offered on a mezzanine loan will be reflective of the total amount of debt on a project and can be between 14% to 16% per annum.

RISK AND REWARD PROFILE
Given that mezzanine loans rank behind the senior loan, in the event of a default the mezzanine holder may not get back all of this capital and the risk of capital loss is higher than with a senior facility. This is reflected by a higher rate of return for investors – typically between 14% to 16% per annum.

This would suit an investor who is happy to take more risk than the Bridge product carries and prefers a fixed return, but who does not want to make an equity investment.

Your capital is at risk. Please refer to Key Risks. for further details. Investments are not covered by the Financial Services Compensation Scheme.