mezzanine lender

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fullout
Member
@fullout
Join Date: 2003
Post Count: 233
July 12, 2004 - 10:00 am
DOes anyone know if i approach a mezzanine lender as a business to build property for a profit, what will they be looking at?
Would I need to have something as a colateral?
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melbear
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@melbear
Join Date: 2003
Post Count: 2,429
July 13, 2004 - 2:28 am
Generally – definitely need collateral to secure – perhaps the property that you are building. Macquarie may provide more info as they provide finance – at steep rates….
Cheers
Mel
Terryw
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@terryw
Join Date: 2001
Post Count: 16,213
July 13, 2004 - 3:15 am
It will be hard. They will probably need to look at your track record, off the plan sales etc. Some are willing to lend on future value.
Terryw
Discover Home Loans
North Sydney
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Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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fullout
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@fullout
Join Date: 2003
Post Count: 233
July 13, 2004 - 4:21 am
May i know where can i find mezzanine lenders? DO the banks provide mez loan themself? or other lenders?
Anyone got any recommendation>?
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Stuart Wemyss
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@stuart-wemyss
Join Date: 2003
Post Count: 598
July 13, 2004 - 6:18 am
Mezzanine is noramlly used in addition to normal “prime” finance through a 2nd mortgage (or similar). It is really used instead (or in addition to) equity.
So what is your LVR? Or is this a general question?
Cheers
Stu
fullout
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@fullout
Join Date: 2003
Post Count: 233
July 13, 2004 - 6:57 am
Hi,
the approximate value of the completed project will be 400k at a minimum (420 more realistic, according to the current sales in that area. Plus this will be a brand new home, so i guess 420k or more is realistic). Say we take 400.
Land + to build is about 330k. I will take out a primary loan of 230k, and looking for a 100k mezzanine finance or private investor.
Will that be alright for mezz lender?
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Stuart Wemyss
Member
@stuart-wemyss
Join Date: 2003
Post Count: 598
July 13, 2004 - 7:07 am
This would be very difficult.
1.LVR too high.
2. You don’t have any equity in the property (until it’s built).
3. Exit strategy? How will Mezz lender get their money back? They are a short term lender only so you either need to refinance (pre-approval) or sell the property (pre-sell?).
4. Loan is very small and there not much money to be made for a Mezz lender. Not attractive.
5. 20% profit ($70k) is bear minimum. To be honest it’s a bit tight.
I think you are better off finding a joint venture partner.
Cheers
Stu