How to get Greek citizenship?
Greek passport provides free access to 174 countries of the world. Its owner gets the opportunity to live, work, travel, study, buy real estate and conduct business in any country…

Continue reading →

Spare airfield in Greece: the top 5 holders of the Greek “golden visa”
The Greek program for obtaining a residence permit in exchange for investment is one of the most profitable in Europe. To acquire resident status, it is enough to buy one…

Continue reading →

Athenian Riviera: a place to live and invest
Athens Riviera called the southern suburbs of Athens, which occupy the coast of the Saronic Gulf from Piraeus to Cape Sounion. These include Paleo Faliro, Glyfada, Voula, Vuliagmeni and Varkiz.…

Continue reading →

Mezzanine loan and equity partnership: pros and cons

Investors can invest in value-added projects (construction or renovation of real estate) in two ways:

– Providing a mezzanine loan (mezzanine financing): the investor gives the developer a loan in exchange for interest on the loan, and sometimes, as an additional incentive, and in exchange for a portion of the project’s profit (equity kicker).

– Equity partnership: the investor provides the developer with equity capital, participates in the project and makes a profit from its implementation.

Each of the two strategies has pros and cons, which the investor in a development project abroad should be aware of.

Read more about Tranio value added projects.

Yield
In case of mezzanine financing, the investor receives interest on the loan. In addition, the lender may claim additional remuneration from the net profit of the project in the form of securities: warrants or options. On average, a mezzanine loan brings the investor an income of 5-10% per annum on invested capital.

The share partner receives a portion of the profits from the project. Its size is determined by a number of factors: the cost of capital in the market, the value of the developer’s investments, the quality and location of the project. On average, an investor can count on 10–20% per annum on invested capital.

Risks
The assessment of the riskiness of the two strategies is related to the turn in which project participants make a profit. The mezzanine investor makes a second profit after the bank, which removes it from the risk of losing the invested capital. For him, it is important how much capital the developer provides, since the latter’s funds protect the mezzanine in the event of a negative scenario.

The equity partner is protected worse: he makes a profit after the mezzanine investor and, if the project is unprofitable, the first after the developer will suffer losses. However, with a share partnership, the profit growth potential is greater, and this scheme will be more profitable if the project is successful.

Flexibility
For an investor, a less flexible mezzanine loan is more reliable: it receives fixed payments in a predetermined time frame. The profit of the equity partner depends entirely on the success of the project, so such flexible conditions may not be in his favor.

At the same time, a mezzanine loan is more flexible financing conditions (regularity of payments, debt repayment, interest rates, loan period) compared with a bank loan and is not always supported by collateral.

Control
The question of investor participation in the project is decided in the negotiation process. As a rule, the equity partner has a greater influence on making key decisions than the mezzanine investor, because he is less protected from the risk of capital loss. The mezzanine investor, in turn, can acquire a representative with the right to vote on the board of directors.

Less flexible, but simpler and more defined (fixed payments and payment terms)

Less defined, but more flexible (payouts depend on cash flow)

Russian-speaking investors in profitable real estate abroad: an analytical study of Tranio
In early 2018, Tranio once again investigated the behavior of Russian-speaking investors abroad. We relied on the results of an online survey, which involved 476 real estate market leaders from…

...

The procedure for the purchase and registration of real estate in Greece
To buy property in Greece, it is enough to come to Greece once. The purchase process includes 7 simple steps.                     …

...

The cost of housing in Germany: buying an apartment
Berlin: a market with great potential West Germany: liquid real estate market East Germany: dynamic market development The German economy is the largest and most stable in Europe, so the…

...

Investment Instruments: How to Get High Yield in Europe
Investors often compare real estate in Europe with other profitable instruments - government bonds and bank deposits. Government bonds are one of the main instruments of saving funds for wealthy…

...