Genuine competition on terms
Several houses review in parallel – which shows in margin, fees and covenants.
Financing · Senior debt
Senior debt
In many real estate financings, senior debt forms the senior-ranking debt tranche – we run it in competition instead of accepting the first quote.
Senior debt is the senior-ranking loan, regularly secured by senior-ranking real estate security. Because of its senior risk position, senior debt typically carries lower financing costs than subordinated capital, and it sets the framework for junior tranches through covenants and drawdown conditions.
Economics are not driven by the interest rate alone but by the interplay of leverage, amortisation profile, covenants, drawdown conditions, prepayment terms and enforcement rights. On leverage it also matters whether the ratio refers to market value (LTV), to an internally determined lending value, or, for developments, to total cost (LTC) – the reference base changes the result considerably.
The pool of potential lenders is wider than often assumed: commercial banks, savings banks, mortgage banks, insurers, pension institutions and debt funds with bank-like structures. Each house has its own review grid, asset preferences and regional focus.
Suitable for
- Acquisition of standing assets with stable cash flow
- Developments with secured planning consent
- Extensions and follow-on financings
- Portfolio financings across several assets
- Refinancing of existing loans
Key facts
- Mandate size
- from € 10m
- Ranking
- senior
- Leverage measures
- LTV, lending value or LTC
- Interest
- floating or fixed
- Security
- typically senior-ranking real estate security; in Germany often a first-ranking land charge
- First indication
- targeted within 48 hours
Benefits
Why this structure works
Bankable documentation
Costings, rent roll, cash flow and sensitivities prepared the way credit committees need them.
Covenants in focus
Not only the margin counts: DSCR, LTV triggers, cash sweep and top-up provisions are negotiated as well.
The right houses, not just your bank
Access to banks, insurers, pension institutions and debt funds with different risk profiles.
Structured timetable
A managed process avoids idle time between valuation, due diligence and committee dates.
Combinable
The senior tranche is considered together with junior capital or equity from the outset.
Process
How we proceed
- Step 01
Asset and credit analysis
Assessment of location, cash flow, lease structure and borrower credit standing.
- Step 02
Financing strategy
Definition of volume, structure, interest terms and the target lender group.
- Step 03
Lender process
Targeted, parallel approach to suitable houses with complete credit papers.
- Step 04
Offer comparison
Comparison of margin, fees, leverage measures, covenants and prepayment terms.
- Step 05
Committees & drawdown
Support through credit committee, documentation and drawdown.
From practice
What actually decides the deal
Do not stop at your house bank
Two quotes compare two review grids. We approach several houses in parallel – banks, insurers, pension institutions, debt funds. Only then do margin, fees and covenants become genuinely comparable.
Check the reference base of the leverage
LTV refers to the property value, the lending-value ratio to an internally determined lending value, LTC to total cost. Two offers with the same percentage can therefore mean very different loan amounts.
Covenants are negotiable
Everybody discusses the margin; LTV triggers, DSCR thresholds, cash sweep and top-up obligations far less. That is exactly where a delayed project runs into trouble.
Documents in credit-committee format
Committees read to their own template. Presenting cash flow, sensitivities and security overview the way the house needs them shortens the decision.
ESG is part of the review
Energy standard, certification and refurbishment roadmap are now regularly part of lenders' review grids. How strongly this feeds into pricing differs from house to house.
Questions
What clients ask us most
The structures described are for general information. Availability, leverage, term, pricing, security and other terms depend on the asset, the borrower, the market environment and the specific financing. None of this constitutes a financing commitment.
Also relevant
Other building blocks
Most structures end up as a combination. These are the pieces we mix most often.
Is this the right structure for your project?
Send us your key figures — we respond with a reliable first assessment.