Cheaper mezzanine funding on the cards for developers
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The resurgent housing market has delivered a double boost to residential developers in the form of cheaper debt as banks look to partner again with mezzanine lenders.
“Residential is back with a vengeance and, particularly over the last six months, off-the-plan developers are able to show the strong pre-sales needed to secure mezzanine finance through the main trading banks,” Michael Hynes, joint managing director of mortgage originator Stamford Capital, said.
Mezz is back: Stamford Capital’s co-managing directors Domenic Lo Surdo, left, and Michael Hynes.
Mezzanine finance is a higher-returning – but riskier – form of credit that ranks behind the senior, or bank, debt for repayment. By combining bank debt with a mezzanine loan from a non-bank lender, Mr Hynes said developers could cut their borrowing costs by 15 to 20 per cent.