Development loans

Property developers looking to expand their existing projects or commence new projects before selling out existing developments can, in today’s climate, find the sourcing of new development loans very difficult.

So where do property developers turn when they want to take opportunity of potential developments? Development loans are available to property developers and builders with proven track records and who meet the lending requirements.

Development loans through “Mezzanine funding” can help property developers double their return, spread their risk and increase their development capacity.

High Street Banks have traditionally funded 50% of the site cost and 100% of the construction cost which frequently represented 70% – 80% of the total residential required for a project.

CALMEZ now can assist in financing builders and property developers with mezzanine funding.

This Mezzanine funding provides the full shortfall of residential development loans for a particular development.

This highly geared mix of senior debt and Mezzanine funding (which equated to the total residential development funding required) was created to enable the property developers to use their own funds for the acquisition of new sites without having to wait for earlier projects to complete.

Following the banking crisis and the ensuing recession, which saw residential property value fall by 20% to 30%, the High Street Banks have largely withdrawn from the residential development funding market.

- a few of the High Street Banks are currently testing the residential development loans market by offering to fund up to a maximum of 60% (but typically) 55% of the total residential Development loans .

This leaves property builders and developers to find 40% – 45% of the residential property development loans at a time where a large proportion of developers are struggling to keep their property development businesses alive!

The growth of two specialist property banks together with mezzanine funders (including CALMEZ) are now between them, able to offer selected developers up to 90% of the required residential development funding in an attempt to re-establish the property market by providing residential development loans essentially required for this recovery!