List of Mezzanine Funders

[Hernan Crespo]

I was hoping to start a list of mezzanine funders here and hoping the rest of you more experienced people can add to the list

1. Paridian
2. Investec
3. Ray White Invest
4. Ashe Morgan Winthrope
5. Equititrust

Once I have a comprehensive list of say a dozen of them, I will call each of them up to find out their terms, conditions and rates. I will post the information back on this forum.

I would like to have a list of mezzanine funders, not brokers.

Hopefully it will be of value to other developers/finance brokers who are interested in acquiring mezzanine funding.

 

[kommepc]

Gallery Capital

 

[sailor]

Scuse my ignorance...what is a mezzanine funder please?

 

[kommepc]

Scuse my ignorance...what is a mezzanine funder please?

it's a funder who provides a flexible form of funds which is neither purely equity or standard loan but has features of both of them.

more info
http://en.wikipedia.org/wiki/Mezzanine_loan

 

[sailor]

Thanks Kommepc.

 

[Glucose]

Please 'scuse my ignorance too, but who would use such funders, and for what purposes?

 

[grossreal]

hi Hernan Crespo
you are going to have a long list
but heres a few
abacus
first capital
mirvac
addisons
meares funding
this is five but there is alot more then this
these are off the top of my head
in sydney there are about 2000
and twice as many externals
mezz funders are second tier lenders some times called vanilla finance.
if you put a second mortgage in place technically you are a mezz funder.
with regards to ringing up to get rates forget the phone call its a waste of time.
rates are dependant on the project and vary from 18% for say a 15% profit margin to 12% for a 30% margin.
they are very project specific and your rate with say mirvac will be very different to another borrower so for me it would be impossible to get a rate
the simplest way to look at it is you walk onto a car lot with no price and say I want to buy a car, can you give me a price
it the same
there is no set rate you can get mezz up to 25% very short term for say to finish off a project high risk but also high return.
and just one last little bit don't try to negotiate your own deal with these lender agood broker in this market will save a packet just shop around a few brokers and get there best deal.
my .002 good luck

 

[kommepc]

in sydney there are about 2000

What a number for such type of finance!

 

[grossreal]

hi kommepc
most finance thats on top of any major lending is mezz and they are alot of suppliers that are not main stream
like solicitors, some super funds,alot of the major charted accountants etc
and for me no broker would have even a fraction of the total amount on there books.
and most major lenders have on there books other mezz funders that they can recommend officially or unofficially.
the ones that have been in the paper of late are only the big ones
there are alot of the smaller ones out there.
most have brokers or lead people that come to them and it is very hit and miss.
there is a down side with smaller mezz funders and that if they run out of money when you need it and this is one of the major problems for the smaller development sites and does cause a big headache

 

[Hernan Crespo]

Thanks for the feedbank, I had no idea there were that many mezz funders out there. Is there some kind of directory for them? Google does not actually give out too much when you look for them there. Most of them are brokers too, for instance Global Capital Corp whom i was badly burnt by before.

Problem with most brokers they want a 'commitment fee' which is a couple of grand, that's all good but i've had experiences when they don't deliver anything so I'd much rather deal with the source.

In recent days i have realised that many of the bigger banks actually would contact mezzanine funders on your behalf and see if they would provide the funding together with the senior debt, which of course makes it even easier. However that doesn't guarantee the best product.

That leads me to my next question,

Grossreal, from your extensive experience, would you have any suggestions on how to go about securing private equity funding on top of the mezzanine finance?

Just to explain to others on the forum who are new to this form of finance here's what happens (ballpark figures only ok)

Bank Normally funds 80% of development and purchase cost on a development site. Around 8%+ interest rate.

Mezzanine funder goes up to 90-95% of the costs. 15%-20%+ interest rate.

Developer needs to come up with balance 5-10% of the costs, or raise it from private investors, normally for an equity share of the project. 20%-40% annualised return for the investor.

 

[mortgageman]

Hi Hernan,

There are a myriad of mezz funders out there. There are also quite a few wealthy individual investors who are attracted to the high returns of this type of financing and will look at funding for certain projects. You are quite right to be wary of brokers in this area as there is a bit of a problem in the private lending area of the industry of brokers posing as lenders and charging upfront fees. However, please don't judge all brokers by this, as there are plenty of honest ones out there, and if you see a broker who understands mezz financing it may save you considerably as the terms of these loans can vary astronomically.

Kind Regards,

Cameron Perry
Director
Perry Financial Strategies

 

[grossreal]

hi
let me say a couple of things here and it will not be like by a few brokers.
1. up front fees are the biggest problem you pay and when they don't do the deal you are chasing to get the money back and in alot of cases you fight tooth and nail to get it I have one at the moment that the broker took the money out of his account and put it into his personal account and then left the company and the company is saying as they don't have the money that tey are not responsible to return it.
2.have a look at dept of fair trading and asic and they both have a complaint procedure and thats great but they don't have a register of people that have been complained against in stead they have a media release that you have to check go to asic in media releases and start looking.
3. most people think its hard to become a broker and that just not the case and you can and do have guys sticking adds in for commercial finance with we can get you 100% finance take the commission and away they go and there is very little you can do.
4. I pay via a credit card an I am just disputing one right now to get the commission back.
and I would love a site that said who has lost there upfront fees and these fees are not small amounts they are upwards of 10 to 20k I know of 60k for large projects.
if need be I can post at least 5 brokers that have taken fees and I am chasing all fun and games.
and private equity search under equity market.

 

[mortgageman]

Hi Grossreal,

I'm sorry to hear of your experience and it is unfortunately not an uncommon occurrence. I concur that you should be very wary of paying upfront fees to any brokers. However, not all brokers are dodgy and not all will charge upfront fees, even on large development deals. Under no circumstances should anybody pay $60k upfront no matter what size the deal is. Signing a mandate should be sufficient comfort to the broker. On your second point, any good broker will be registered with the Credit Ombudsman (COSL) to whom you are able to make complaints if not happy with the brokers services. On your third point, no its not hard to become a broker, but it is difficult to become a good broker, particularly in the commercial area. You need to have a good understanding of the market and often be a good problem solver with complex commercial deals.

Kind Regards,

Cameron Perry
Director
Perry Financial Strategies

 

[APerry]

Hi Gross,

I'm sorry to hear the problems you have had with commercial brokers and their commitment fees. The problem with this section of the market is that it was, for a long time, very difficult to get into. As a consequence brokers could charge anything they wanted and clients had little choice but to pay or go it alone with a bank.

Fortunately, now that banks are becoming more aggressive with their lending and pricing policies and it is not as difficult to break into commercial broking, you no longer need to pay commitment fees. While good commercial brokers are not a dime a dozen, there are still plenty who offer good service without upfront charges.

Regards
Alistair