Property adviser Savills has identified 30 providers of mezzanine finance in the UK, active in both the commercial and residential markets, with an appetite to fill the gap between a reduced level of loan to value from senior debt providers and the equity slice.
Property adviser Savills has identified 30 providers of mezzanine finance in the UK, active in both the commercial and residential markets, with an appetite to fill the gap between a reduced level of loan to value from senior debt providers and the equity slice.
Loan to values (LTVs) have fallen over the past eight months and interest rate margins have increased by 100 bps to 325 bps from around 225 bps for prime investment, according to Savills.
LTVs against prime investment are currently in the region of 55-60% with some banks having difficulty lending above 50%. This, Savills suggests, opens up increasing opportunities for mezzanine providers and banks preferring to take participations.
‘The number of lenders in the market is encouraging to see,’ says William Newsom, Savills UK head of valuation. ‘But the further reduction in loan to value ratios means that borrowers may increasingly access the mezzanine market in order to bridge the funding gap.’
Savills has identified 50 senior debt providers which are active at the smaller and medium-sized ends of the spectrum. The adviser confirms there is a weaker appetite for secondary assets and, whilst commercial development finance continues to be scarce, there are least 20 providers of finance for residential development schemes, particularly for smaller projects. In addition, there are at least 10 organisations seeking to buy distressed debt.
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