October 28th, 2021. Tom Lee
Deal of the Month October 2021: Brokerage Collaboration to Arrange £1.5m Finance
Sometimes, despite best-laid plans, not everything goes as you hoped it would. This was the case for a client recently when slow sales meant they had a shortfall in funds and required a financial top up. Discover how we were able to help secure the necessary finance for them to complete their project, below.
About the Deal
Recently, the team at Pure Structured Finance were approached by another commercial brokerage who needed specialist assistance in sourcing and arranging the right finance for a complex property development.
The Managing Director of the commercial finance brokerage reached out asking us to assist in arranging top up finance for a long-standing property development client of his. They had secured senior debt for the scheme in Manchester, but there was a shortfall.
The client was in the process of selling several units from a previously completed development, using the proceeds towards funding this new scheme. Unfortunately, they had not sold enough of the units to fully meet their assumed equity contribution for the new deal and had a £1.5m shortfall.
There are several funding options for a deal such as this, but there were two issues that heavily reduced the pool of lenders:
- The client needed to complete within two weeks.
- The senior lender did not like having a second charge funder behind them.
Fortunately, we knew just who to bring in to cover the £1.5m. We have close ties with a European fund that not only moves quickly but is creative and amenable with their funding structures due to them being a family office.
The timescale was never a concern for the deal, our funder piggybacked off a large portion of the senior debts due diligence and their solicitors worked around the clock. To get around the lack of a second charge being available though, the funder pulled out all the stops.
The requirement was technically a mezzanine one, but our funder structured it as if it were a true equity play by taking shares in the company buying the scheme. They waived their voting rights though, to allow the client full control of their scheme.
They also kept the pricing at a sensible level as a profit share would have been unfair on the client. By pricing themselves at 16%pa with minimal fees in they essentially ended up as an equity partner, charging the mezzanine debt pricing. A big win for all involved.
This deal has left the client extremely happy, and they are now exploring other potential schemes to work on with the fund. We are also looking at more deals with the brokerage that brought the deal in, as we made a good team.
The collaboration has been a success and moving forward two “rival” brokerages working together to structure debt, mezzanine finance and arrange equity funding, with each focussing on their strengths, will allow clients to successfully fund their schemes in the efficient, cost-effective ways.
Andrew Hosford, Director at Pure Structured Finance said:
“Two brokerages working together to arrange finance for a client is not that common an occurrence. However, that is what happened on this transaction. The egos were left at the door and both firms pulled together to get the right deal for the client.”
Could Pure Structured Finance Help You?
If you have found yourself in a similar situation to this client and require funds fast, please get in touch with our friendly and experienced team to discuss your options for mezzanine loans and other forms of finance. We’re specialists in tailor made finance for unique projects and properties.
Article By Tom Lee
October 28th, 2021
Tom is one of the founding members of the company and has been a part of the Pure Group since 2013 playing an integral part of the business’s growth and direction.
He had over 10 years of experience in the real estate financial sector prior to joining Pure with a major bank. Tom has a wealth of experience providing debt advisory on large, complex deal structures for developers and investors across all asset classes, throughout the UK and parts of Europe.
He has built a strong network across the property and finance sector, which enables him to provide a total package solution to his clients and contacts, with whom he has built long standing relationships.See more articles by Tom