Stretch senior finance is a loan provided by a single lender (A financial institution) that goes to a higher leverage position with more layers of debt.
This type of loans usually offers leverage going up to 85% of the loan’s value in one loan. Stretch senior loan does the work of both a senior loan (leverage going up to 60%) and a mezzanine loan (which covers the second tranche, from 60% to 85%). There are projects that the lenders tend to gear up to 90% of costs, allowing developers to spread equity amongst a range of different developments or purchases.
Only some of the alternative lenders offer stretch senior loans to the real estate sector; also, there are vast differences between the lenders.
Some of them offer up to 85% of costs including interest rate, and some offer 85% of costs plus interest. Most of them don’t lend more than 90% loan to cost with a regular finance structure.
There are different finance possibilities to structures the property finance in a way that will allow the property developers and investors to obtain more than 90% of costs. Sometimes up to 100% finance with additional structure and another type of property finance.
Stretch senior loan can be used for development finance, for a new project, for an investment project or refurbishments including residential, commercial, mixed used, hotels, student accommodation, PRS and PD schemes
A property developer needs £ 5,000,000 for a residential project with a GDV of £ 6,400,000
(Includes purchase costs of £ 2,000,000 and development costs of £ 3,000,000)
A stretch senior loan facility can be structured up to an amount of £ 4,500,000. This loan will be from one lender, and the interest rates will be usually more competitive than two or more loans from different lenders with different conditions.
If the developer needs higher leverage than 90 percent loan to cost, there are some lenders that can offer also preferred equity or JV (joint venture) up to 100% property finance.
Providing, a sponsor of a project, a finance facility which includes a senior stretch loan of 90% LTC, allows the sponsor to realise his project or his property deal with only 10 percent of his equity.
Dealing with one lender who provides a Stretch Senior loan instead of two increases the ability to realise the deal as well as to have a smooth and fast transaction.
We at property finance partners listen and analyze the borrowers’ needs and provide him with a special tailor made business and property finance solution, which will enable him to realise his real estate development or project.
According to his needs, we find him the most suitable lender that will have the possibility to offer the borrower the best stretch senior loan as well as, the best terms and conditions.
We together with our client (the borrower) look on the whole “lenders’ package” on the lenders’ flexibility and on the opportunity to create a “strategic finance partnership” for the long run with other projects.
We have strong working relationship with lenders that offer stretch senior finance to the real estate sector.
To find out how we can help, call today on 020 3393 9277