bridge to mezzanine

realising value through site enhancement

Bridge to Mezzanine

In some instances, some form of enhancement is required to a site before a senior lender will advance development funds. This could be securing full planning permission, planning enhancement or putting in infrastructure / service works.

In such cases, a bridge-to-mezzanine facility could be the ideal way to assist with the site improvement, and give peace of mind that a portion of the development funding is already secured.

How does a bridge-to-mezzanine facility work?

  • The facility will be structured in two phases;
    • Phase 1: acquisition or site refinance, together with enhancement works (planning uplift / gain or infrastructure works)
    • Phase 2: development of the site with the benefit of the Phase 1 enhancements, through to sale or refinance
  • Full planning permission is not always required for Phase 2, but positive pre-apps and / or council correspondence is strongly recommended.
  • Funding is advanced as follows:
    • Phase 1: upon close, covenanted against the current value of the site
    • Phase 2: once the development works are ready to commence. The aggregate of the Phase 1 and Phase 2 facilities will be covenanted against the GDV of the whole project

Projects where the intention is to sell the site with the benefit of the enhancements at the end of Phase 1 are generally not considered for funding.

Security Structure

Bridge-to-mezzanine facilities can be structured either on a first-charge basis or on a second-charge basis:

  • First-Charge Basis: the facility ranks first during Phase 1, and drops to a second charge once senior funding has been secured and Phase 2 begins
  • Second-Charge Basis: the facility ranks second during both Phase 1 and 2, though the senior lender may change between Phase 1 and Phase 2

The ranking of the facility will determine the pricing. To discuss an opportunity, please contact one of the team.

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