Investing in property loans: how a syndicated loan works
A syndicated loan puts a group of lenders behind one development scheme. Security is a first legal charge, lending does not exceed 60% of the value of the completed project, and Helmsley funds the whole of the build cost in stages. Interest is fixed at the outset and paid with the capital at the end of the term.
Written by Edward Harrowsmith, Director, Investments. Last reviewed September 2026.
Who borrows, and why they come to us
Borrowers are developers who need the land and the build funded together, on a timetable a credit committee will not usually meet. The loan is secured on the land or property being developed, so the scheme itself is the asset we look at.
Two features matter more to a borrower than the headline cost. We fund the whole of the build cost, so the borrower is not asked to find the last tranche of equity part way through. And interest is paid with the capital at the end, rather than serviced monthly out of a scheme that produces no income until it is sold or let.
The security and the 60% limit
Security is a first legal charge on the land or property being developed. First charge means we rank ahead of other creditors on that asset, and we control enforcement if it comes to that.
Lending does not exceed 60% of the value of the completed project. The 40% headroom is the cushion against a fall in value between drawdown and sale, and against the project costing more than allowed for. A cushion is not a guarantee. If the scheme is worth materially less on completion than it was appraised at, the headroom absorbs the first part of that, and lenders are exposed to the rest.
Monitoring and staged drawdown
An independent quantity surveyor monitors each scheme. Funds are drawn down in stages against works that have been inspected, so money is released for value that exists on site rather than against a programme.
That is the single most useful discipline in development lending. It limits what can be lost if a borrower stops work, because what has been advanced should be matched by works in the ground. It does not remove the risk that the cost to complete rises above what remains available.
Term, interest and repayment
Terms usually run 12 to 18 months. The average period from drawdown to full repayment has been 15 to 16 months, so a loan written on a twelve-month term should be expected to run longer than its face term rather than shorter.
Interest is fixed for each loan at the outset. It is paid with the capital at the end of the term, and it can be rolled up. Rates are set loan by loan and stated in the documents for that loan. We do not quote a rate in advance of a specific offer.
A lender receives nothing until repayment. There is no quarterly income along the way, which is the opposite position to a let syndicate.
A participation is not ownership of the building
A lender holds a debt, not a property interest. There is no share of any uplift in the completed value, no rent, and no vote on how the scheme is run. The return is the contracted interest, and the best outcome available is repayment in full and on time.
The reverse also holds. A lender sits ahead of the borrower's equity, so the developer's profit is at risk before a lender's capital is.
What happens on default
If the borrower fails to repay or breaches the facility, we can appoint a receiver and enforce the charge. In practice that means taking control of the site and deciding whether to complete the works, sell as it stands, or sell with the benefit of the planning consent.
Recovery depends on what the asset then fetches, not on what the appraisal said. The variables are the state of the works when the borrower stopped, the cost to complete, how long the sale takes, and the costs of enforcement, which come out of the proceeds first. A part-built scheme in a weak market can sell for less than the sum advanced against it. Lenders should assume that a default extends the term well beyond 18 months.