Flexible loan structures

Following the financial crisis, the real estate finance market saw a retreat of conventional bank lending and an influx of non-bank lenders (NBLs) including insurers and real estate debt funds. Through 2012 and 2013, the absence of bank lending enabled these NBLs to strengthen their position and become established players in the market. With the return to confidence in the real estate investment market and bank lending from 2014, some NBLs, in particular real estate debt funds, are moving up the risk curve away from the senior debt space. This has resulted in a competitive market for real estate debt across the capital stack.

Banks, insurers and debt funds have different strategies and focus on optimum deal size, asset class and loan purpose. Four commonly used flexible loan structures are:

1. •

   flexible senior loans

2. •

   stretched senior loans

3. •

   mezzanine loans, and

4. •

   preferred equity loans

Flexible senior loans

Banks have a strong presence in this area along with some insurers, albeit the senior loans provided