Crowd with Us reports surge in mezzanine lending
Crowd with Us has reported a surge in new mezzanine lending in response to the soaring cost of construction materials.
The specialist property development lender said that borrowers are increasingly looking at mezzanine finance as a way of dealing with overruns and rising costs on their property developments.
It comes as some market commentators, such as cost consultants Taylor and Townsend, are forecasting 8.5 per cent cost inflation for the rest of the year.
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“It’s quite noticeable how most of our new loans and potential loans are where our financing is solving a problem related to cost inflation,” said Rob Wilkinson, one of the directors of Crowd with Us.
“Where a senior lender is struggling to increase LTGDV from say 65 per cent, we are coming in with another 10 to 15 per cent of funding and making sure the scheme is still properly funded to completion, without the need for the developer to put in more equity or borrow against other assets.”
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Crowd with Us rarely puts up more than 10 per cent of the overall funding, but Wilkinson noted that it is that 10 per cent that is needed to get things moving again.
He added that inflation-linked cost burdens are stretching viability for new projects, as well as impacting ongoing developments where cost contingencies are being exceeded.
“We are seeing increased new lending where the development is already on-going and we are coming into the deal to provide the buffer that is needed to get to completion,” he added.
“With new deals we are finding we can provide a level of cash contingency in the deal which helps the borrower, and the senior lender, in closing out the loan.”
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