• Arik Alaev

Mezzanine Financing - The Safe Way To Invest In Real Estate Profitably

Investing in general during 2020 has been particularly wild, however the real estate sector has remained relatively stable, contributed to by many factors, including interest rates remaining low, supply and demand remaining steady, thereby maintaining investor confidence in this area of investment.

The challenges that we have seen during 2020 have forced the real estate market to adapt and change is being accelerated through commitments to ESG (the environmental, social and corporate governance agenda), and the drive to net zero emissions.

Several areas have still seen relative stability, with logistics, data centres, life sciences buildings, energy infrastructure, and industrial property as well as classical housing all benefitting.

For 2021, there are notable trends that stand out in this market which include ghost kitchens, last-mile distribution, micro units, commercial real estate tech, and multifamily conversions.

Retail and office space are continuing to adapt during the pandemic, industrial distribution is strong, and multifamily properties will continue to grow as more people choose to go down the route of affordable housing.

What is Mezzanine Financing?

In the real estate sector, the primary source of financing is often limited on average to no more than 70% of the value of the property. The potential buyer will often have to obtain additional financing if they are unable or unwilling to put up the remainder of the funding to complete the purchase.

Mezzanine financing, a type of multi-tiered financing arrangement which is commonplace in real estate transactions, is one way to make up this shortfall and ensure the purchase as well as the investment project goes through. It has benefits to both buyers and lenders, and is often necessary to make a deal feasible for all parties, and has the advantage for investors of not putting all their eggs in one basket, so investments can be spread across multiple sources, thereby dispersing the risk involved.

Benefits of Mezzanine Financing for Investors

Mezzanine debt provides a secure way of realising a higher return on investment. Investors that operate completely at the mercy of the market, especially during these volatile times, are less protected when operations go south whereas investing in real estate projects in form of mezzanine offers higher returns.

Investors can expect higher repayment rates than normal, often receiving between 10-18%+ per annum. They can also structure their investment as a hybrid of equity and debt, so that in the event of property owner default, the investor will have a share of equity in the property. The repayment period for a mezzanine loan is also far shorter usually deal term is between 1 to 3 years. Therefore an investor can expect to receive those returns within a relatively brief period of time.

Who is Fonto Capital?

Fonto Capital is an independent consulting and investment firm, focusing primarily on the real estate market in Central Europe.

They focus primarily on advisory mandates within the real estate sector providing structuring and financing solutions (equity, mezzanine and senior/whole loan financing) for real estate projects across all asset classes, identifying themselves as the bridge between real estate developer and investor.

In addition to comprehensive consulting services, they offer their clients access to investment opportunities within different asset and capital classes. Their client base primarily includes real estate funds, family office and private investors, insurance companies as well as real estate development companies.

Fonto Capital possesses a strong local network within core markets of Austria, Germany and Switzerland.

As a result of its broad and reliable network Fonto Capital has expertise in locating the right capital partner for every project. Fonto is the closing gap element between project developers and investors. Based on Fonto’s range of services we are able to offer the right capital strategy for every project.

In addition, through its broad and diverse network, Fonto has an exceptional access to off-market opportunities and can manage acquisitions and selling processes discreetly and effectively.

Fonto Capital Founder Arik Alaev & Grammig Advisory invite you to a virtual investors MeetUp to identify and learn about structured financing solutions for real estate projects as an alternative investment opportunity to diversify your portfolio.

Investment Opportunity: Real Estate Financing Investor MeetUp

17 February 2021 – 16:00 CET

Registration Link: https://bit.ly/2L4M6Oz

In case of questions or if you wish to speak to Arik Alaev prior to the scheduled investors MeetUp, please contact David Grammig – david@grammigadvisory.com

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