Whole Loans: Integrated Real Estate Finance

Whole loans for property projects explained

A property project’s capital structure traditionally has several layers: a first-ranking Senior loans from a bank, complemented by Mezzanine capital to address the equity gap. Two lenders also mean two assessments, two agreements, subordination arrangements and additional coordination throughout the term.

The Whole loans addresses this issue. A single lender, usually a debt fund or institution, provides the entire debt facility, typically up to approximately 85–90% of total costs. The blended rate lies between bank lending and subordinated debt pricing, while avoiding separate intercreditor negotiations and parallel approval processes.

Whole loans have become an established option where banks lend more cautiously. They replace separate senior and subordinated tranches with an integrated structure and a single point of contact.

Advantages of whole loans in property finance

• One lender, one agreement: no separate intercreditor agreement, subordination negotiation or coordination between a bank and mezzanine lender.
• Higher leverage: up to approximately 85–90% loan-to-cost, above typical bank leverage and therefore requiring less committed equity.
• Speed: one credit assessment, one due diligence process and one decision-making body, which can be important for time-sensitive acquisitions.
• Flexible repayment: bullet repayment, repayment from sales proceeds and partial security releases may be negotiated.
• Discretion: one professional lender rather than broad market outreach, which can matter for sensitive transactions.

The trade-off: The blended rate exceeds pure bank lending rates. Lenders also expect reliable documents, a credible exit and experienced sponsors. A whole loan is a financing option rather than a discount.

How much of your project can a whole loan finance?

Loan-to-cost (LTC) measures the share of total project costs funded by the loan. A senior bank loan typically reaches 60–70% LTC, while a whole loan can reach approximately 85–90%. This materially affects project funding: on €10 million of costs, increasing LTC from 65% to 88% reduces the equity requirement by €2.3 million.

Maximum leverage depends on the asset class, location, presales or pre-letting, and sponsor experience. Residential projects may attract higher leverage than specialist assets, and established locations may support more than peripheral markets. An experienced sponsor with a sought-after project can generally target stronger terms than a first project in a less certain location.

The higher leverage has a cost: the blended rate exceeds a pure senior bank rate. The structure makes economic sense where the improvement in equity returns outweighs that premium, which is more likely for higher-margin projects. We compare a whole loan with separate senior and mezzanine finance for your project, so the decision is based on the financial appraisal.