European Bridging, Term Loans and Development Finance
Apart from the UK, we have also entered the European real estate alternative finance market. As reflected by most of our services contained here on our website, our advisory activities for financing real estate Europe makes us to stand-out from other firms providing similar services.
Our Products
1. European Bridging
One of the premium services we offer around Europe since early 2015 is bridging finance. It is a short-term financing option, utilised by companies, SMEs, and other bodies, for the purpose of quickly acquiring a target property, gaining time to exit or solving their temporary funding needs. Exits for such loans could be selling the property or refinance for more sustainable long term financing option. We help and support companies by offering bridge financing deals in forms of loans, ranging from €2m—€1bn. We never get involved in asset M&A transactions.
With our team of highly experienced experts, we advise on bridge finance options to many European locations. The markets successfully covered by our services include Germany, Ireland, Austria, Switzerland, Lichtenstein, Italy, France, Belgium, Netherlands, Luxembourg, Spain, Portugal, Denmark, Sweden, Finland, Norway, Iceland and Monaco. Depending on each market, structuring the deals and measuring the Loan-to-Value ratios and the specific terms and conditions of the deal depend on the market of the transaction, the experience and financial standing of the client involved in the transaction, and the nature of the project.
When your company hires our services, our experts will work hand in hand with you in determining the form of bridge financing your project needs from LTV and potential terms perspective. We will also reach a suitable agreement as to the term of the loan, as well as the level of interest to be added to the repayment plan.
Examples of Bridge Financing Transactions
Depending on the needs of that particular transaction and its location, can search and examine the available options for you company and advise on the nature of bridge financing to be adopted. Here are some examples of bridge financing transactions which we covered:
- Loan size:
- €1 500 000
Land bridge in order to provide to the Client funds to acquire another asset
- Loan size:
- €150 000 000
Exit bridge for a trophy hotel asset during COVID in order to refinance current obligations, invest into renovation and gain time to sell the asset at the highest possible price
- Loan size:
- €2 000 000
Deal in order to acquire quickly and renovate a property in Paris and sell at the highest possible price
- Loan size:
- €4 500 000
Bridge in Portugal against a large trophy asset in order to complete the acquisition of another property
- Loan size:
- €21 000 000
Bridge to acquire land in Portugal and fund the development through off-plan and forward sales
- Loan size:
- €250 000 000
Bridge to development in one of gateway cities in Europe, in order to refinance some obligations, cover necessary relocation costs, cover tax liabilities and prepare syndicate of banks for the full development
- Loan size:
- €52 000 000
Land bridge enabling the client to acquire the land and obtain planning
- Loan size:
- €5 200 000
Bridge in Germany enabling the client to acquire an asset, relocate tenants and refinance through long-term bank loan
- Loan size:
- €3 200 000
Complete and exit loan against a large house in Marbella, Spain
Bridge Finance Costs
Bridge loans have a reputation of having high financing costs. However, one needs to also understand that the lenders do a lot of work in order to lend on such transaction (which are also typically carrying high levels of risk) and they will only have very short period of time in order to make their returns as opposed to say a mortgage lender who does work once and then enjoys income for many years.
Project business plan also justify borrowing at high rates. Let us give you some examples:
- Client bids to acquire distressed property at say 20% discount to the market and needs money quickly to acquire the property.
- Client obtains an exit bridge to avoid default on their current financial obligations or avoid selling the property at knock-down prices.
- Client acquires pre-planning property (majority of institutional lenders typically do not take planning risk) and once planning is obtained, they refinance with development lender. Property value also increases by say 50% (hypothetical number) as a result of planning gain.
- A client uses the bridge finance in order to acquire the property, but this finance is a small portion of the total funding sources of the future development. For instance, a client is developing a large residential asset, with highly liquid units to be sold on off-plan basis. Here, say the land cost is only 20% of total cost. So, the client borrows from a bridger in order to acquire the land and then finance returning the bridge loan and building the future property through off-plan sales.
2. European Term Loans
In the UK and core Western Continental Europe (Germany, Ireland, Austria, Switzerland, Lichtenstein, Italy, France, Belgium, Netherlands, Luxembourg, Spain, Portugal, Denmark, Sweden, Finland, Norway, Iceland, and Monaco), we also offer term loans for income-producing real estate assets.
Deal sizes range from €5m to €2bn. Our clients in this product category are typically real estate private equity houses, real estate holding companies, REITs, and real-estate heavy corporates. There are two types of term loans we offer:
1. Classic stretched senior term loan
This is usually utilized for the purposes of obtaining the maximum leverage on simple acquisition and limited value-addition of healthy income producing assets, such as offices, completed PBSA (purpose-built student accommodation), logistics/industrial, PRS (private rented space or multi-family) etc. This type of financing is typically completing with banks and although work out more expensive than banks and because of their interest-only nature, on cash-on-cash yield basis, they work out better for the needs of the client.
The term lenders, we work with are usually willing to finance up to 75-90% of acquisition price of the asset (could be higher or lower, depending on the valuation, strength of tenants and the market liquidity of the asset). The funding agreements can last up to 10 years or more (typically around 5 years), with the pricing starting from 3.25% pa++.
Who would this type of loans work for? Usually, these types of loans work well for investors that around 5-year hold strategy. Let us give a case study.
In 2021 we were approached by a Swiss family office who identified an interesting office asset in Frankfurt, Germany. The acquisition price was €21m, and the market value was around €22m. The net income yield (NIY) on the asset was around 5.2%. A local bank offered an acquisition mortgage covering around 65% LTV on purchase price basis at around 1.12% interest + around 3% amortization. One of lenders we introduced offered 4% interest, but 80% of purchase price. Although interest rate offered by the lender, we introduced was higher than that of a local bank, the client still decided to go with us, because our deal offered more leverage, higher cash-on-cash yield and higher exit multiple. For the client, it was also easier to work with our lender because it involved less procedure and bureaucracy than working with the bank.
Please contact us if you have UK/European term loan enquiry
Enquiry about financing
2. Transition loans
In some circumstance, the client is interested in acquiring the asset and adding value to it through asset management, capital expenditure or repositioning. Usually, the underlying project's business plan results in substantial value appreciation of the asset. Such deals sometime include no immediate cash-flow potential, and the lender will need to wait until the cash starts flowing.
Transition loans are similar to development loans but carry typically longer time horizon and allow a period for stabilization. Typical tenors for transition loans are 3+1 years, where 3 years is the initial loan term, and it allows an additional automatic 1-year extension. Sometimes, it also involves ground up development of mainly pre-let assets in commercial development space. Within the UK and Europe, we helped to provide loans for the purpose of developing real estate projects in offices, supermarkets, retail shops and stalls, hotels, or apartments space.
Typically, transition loans carry higher LTCs (around 80-85%) and higher interest rates (4-8%+/-).
Please contact us if you have UK/European term loan enquiry
Enquiry about financing
3. European Development loans
Beyond the United Kingdom, we also advise on development loans and credit across different areas in Europe, as in close neighbouring countries and far into the continent. We advise on debt finance used to develop real estate property, covering major parts of the development process. All you need to do is identify the project to be developed, then contact us to discuss terms.
Our financing for such deals is between the range of €10m - €10bn. Specifically, the markets we cover include Ireland, Germany, Austria, Lichtenstein, Switzerland, Benelux, Scandinavia, Spain, Portugal, Monaco, Italy, and France.
Beyond construction and improvements to the real estate property, it also covers excavation work, other infrastructure projects such as roads, storm sewers and major facilities. We also help in covering the holding costs of the property in development, until a time when it can be finally sold.
The loan-to-value ratio of these projects across Europe is not fixed. It varies according to projects and location and depends on different factors, including the market where the project is being developed, as well as the credit standing of the client with the project in need of financing.
It is reasonable and advisable to work with us on sourcing financing for your development projects because we will negotiate the best possible terms for your financing needs.
Please contact us if you have European development loan enquiry
Enquiry about financing
At Stanley Corporation, we have adequate and timely data and information as to the state of the real estate financing market, which our experts use and apply, to provide premium services and the necessary support to our clients. Our communication channels are open, which you can use to contact us (email, phone), and register your concerns across. Be assured that your privacy is guaranteed, and no information provided by you, on our website, or during personal meetings will get in the hands of any third party.
In 2021, one thing that markets around the world have experienced is the uncertainty of events and the possibility of risk. Therefore, services should be provided with even more caution and care, by companies. Individuals, large companies, and SMEs are financially in delicate situations. We at Stanley Corporation recognise this fact, and will channel our expertise, network, and market access towards making our clients more financially upright and less risk averse.