Development · Mezzanine

Mezzanine development finance

A second layer of debt that sits behind the senior lender, reducing the cash you need to commit while leaving the profit with you.

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How mezzanine finance works

Mezzanine finance fills the gap between the senior loan and the developer’s equity. It is secured by a second charge (or sometimes a charge over the shares in the SPV) and ranks behind the senior lender for repayment, which is why it is priced higher.

The senior lender must consent to mezzanine debt, and the two lenders sign an intercreditor agreement setting out how they work together. Not every senior lender allows mezzanine, so the two layers are best arranged together from the start.

When mezzanine is the right fit

Reducing the equity requirement on a scheme with strong margins
Freeing capital to run several schemes at once
Plugging a funding gap after cost increases, with senior lender consent

Questions

Frequently asked questions

Is mezzanine worth the extra cost?

It depends on what you would otherwise do with the equity it frees up. If that capital lets you start another profitable scheme, the higher cost can be well worth it. If not, plain senior debt or stretched senior may be better. We model both before you decide.

Will my senior lender allow mezzanine debt?

Some senior lenders do, some do not, and some have preferred mezzanine partners. Arranging both together avoids finding out too late.

Working up a scheme?

Share the appraisal as it stands — even in draft. We will look at the capital stack with you before anything goes to a lender.

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