Property, in a custody accountReal estate notes and club deals, issued in Luxembourg
Real estate is an asset class we know well, across senior and mezzanine financing, project companies and club deals. The principle is always the same: investors hold one note, the compartment holds the exposure, and the property sits where it has to sit.
How the money moves
Investors
Professional and
institutional
Compartment
Capital-Hill,
segregated
Project SPV
Local vehicle,
e.g. United Kingdom
Property
Development or
income asset
rental income, refinancing or sale proceeds
returned to investors as coupon + equity kicker
Three structures we see most often
Each sits in its own segregated compartment, exposed solely to the risk of its own underlying.
Loan to a project company
The compartment raises capital from investors and lends it to a project company, typically a local vehicle in the jurisdiction where the property sits. That company acquires or develops the asset. Investors receive a fixed coupon and, where agreed, an equity kicker linked to the outcome of the project.
Senior or subordinated facility · Fixed coupon · Optional profit participation
Mezzanine in a real estate company
The compartment invests in the mezzanine layer of a real estate company that needs capital above its senior debt but without diluting its shareholders. Investors are paid a higher coupon than senior lenders, in exchange for ranking behind them.
Subordinated to senior debt · Higher coupon · Often with warrants or profit share
Club deal for a defined group
A known group of professional investors backs a single property or portfolio together. Instead of a shareholders' agreement and a chain of holding companies, each participant simply holds a note in their own custody account.
Defined investor group · One instrument · No cap-table administration
In practice
Our first private debt issuance: EUR 10 million of notes financing the acquisition of a real estate complex in London, reserved for professional investors.
As reported by LegalcommunityIn plain terms
What mezzanine actually means
A property is rarely financed by one source. A bank lends the senior portion, secured on the asset and repaid first. The sponsor puts in equity, which is repaid last and carries the upside. Between the two there is usually a gap: the bank will not lend more, and the sponsor does not want to dilute.
Equity
10 – 20%
Repaid last · takes the upside
Sponsor
Mezzanine
10 – 20%
Repaid after the bank · higher coupon, often with profit share
The gap
Senior debt
60 – 75%
Repaid first · secured on the asset
Bank
Mezzanine fills that gap. It ranks behind the senior lender and ahead of the equity. Because it is repaid after the bank, it carries more risk, and it is paid a higher coupon in return. It is often accompanied by a profit share or warrants, so that part of the return follows the success of the project rather than a fixed rate alone.
For an investor, mezzanine is a way to be paid like a lender while taking part of the outcome like an owner. For a sponsor, it is capital that does not cost a share of the company. Historically it has been the territory of specialist funds. Wrapped in a note with a European ISIN, it becomes accessible to investors whose setup only allows them to hold securities.
Why do it through a compartment
It reaches the investor
A note with a European ISIN clears through Euroclear, Clearstream and SIX and sits in an ordinary custody account. No shareholders' agreement, no transfer restrictions, no side letters.
It is ring-fenced
Each transaction lives in its own compartment. Creditors of one compartment have no claim on the assets of another, by statute rather than by contract.
It is quick
Each issuance is a supplement under existing programme documentation, not a new vehicle and not a new approval.
It is administered
Coupon and redemption processing, compartment-level accounting, annual audit and lifecycle management are handled at platform level.
Issuance Configurator
Financing a property, or syndicating one?
Tell us the shape of the transaction, the size and who the investors are. We come back with an indicative structure and a timeline.
Open the configuratorNo commitment. Reserved for professional and institutional investors.