Loans
Mezzanine finance
Mezzanine finance is a subordinated layer that sits above the senior debt in the capital stack — behind your senior facility on security and repayment, ahead of your equity. It closes the gap between what the senior facility will advance and what the project needs to complete, so your company or trust can proceed without tipping in more equity. It is priced for the higher-risk junior position and repaid once the project sells or refinances.
Indicative only — subject to assessment. Placeholder figures.
How mezzanine finance works
Mezzanine finance is a subordinated layer that sits behind the senior debt on a project and ahead of the developer’s equity. The senior facility funds the bulk of the cost and stays first-ranking; mezzanine takes the position above it — usually secured by a second mortgage or a charge behind the senior security — to close the gap the senior facility leaves. Because it ranks behind the senior debt on both security and repayment, it carries more risk and is priced higher. Interest is often capitalised into the facility rather than serviced monthly, and the mezzanine is repaid after the senior debt once the project sells or refinances. A mezzanine layer generally needs the holder of the senior facility to consent to the arrangement, which we confirm before settlement.
Where it sits in the capital stack
Senior debt on an Australian development typically caps out around 70–75% of project cost. Mezzanine sits above that line, taking the combined position to roughly 80–85% — sized on loan-to-cost and a share of the project’s end value, not a single property’s LVR. It is assessed on the project: the feasibility, the margin, the builder and the exit. Where the build itself is the question, development finance funds the whole project and construction finance funds the build against a fixed-price contract; mezzanine is the layer that closes the equity gap above either.
Where it makes sense — and where it doesn’t
Developers use mezzanine to preserve equity for the next project rather than locking it all into this one, or to proceed when the senior facility stops short of the full requirement. It suits a project with a credible feasibility, a real margin and a clear exit. It does not suit a thin-margin or speculative project: adding a higher-cost layer to a deal that barely stacks erodes the very profit it is meant to unlock, and that is a conversation for your accountant and a quantity surveyor first. Mezzanine also does not lead the stack — there needs to be a senior facility, approved or at term sheet, for it to sit behind.
What we’ll need to start
The senior term sheet or facility, a feasibility with costs and end values, the security on offer, and the exit — end-sales or a refinance. The file is light and the assessment is on the project, not full historical financials. Business-purpose only, for companies, trusts and developers.
- Developers with a senior facility approved or at term sheet, needing to close the gap above it
- Sponsors who want to preserve equity for the next project rather than lock it all into this one
- Projects with a credible feasibility, a real margin and a clear exit (end-sales or refinance)
- Owner-occupiers or consumer borrowers (business-purpose only)
- Projects without an approved or term-sheet senior facility to sit behind — mezzanine does not lead the stack
- Thin-margin or speculative projects, where a higher-cost layer erodes the very profit it is meant to unlock
How it compares
FAQ
Does mezzanine finance replace the senior facility?
No — it sits behind the senior debt, not in place of it. The senior facility stays first-ranking; mezzanine takes a position above it in cost and risk and is repaid after it.
Why is the rate higher than senior debt?
Because the position is subordinated. Mezzanine ranks behind the senior facility on security and is repaid after it, so it carries more risk and is priced accordingly. The figure shown is representative and subject to assessment.
Do you need the senior facility's consent?
Usually, yes. A mezzanine layer behind a senior facility generally needs the holder of that facility to agree the priority arrangement. We confirm the position before settlement.
How is the amount worked out?
On the project, not a single property value. Mezzanine is sized on loan-to-cost and a share of the end value — the gap between what the senior facility funds and what the project needs — with combined leverage typically reaching around 80–85% of cost.
Is mezzanine the same as a second mortgage?
A second mortgage is one way the security is held. Mezzanine describes its place in the capital stack; it is often secured by a second mortgage or a charge behind the senior facility, but the position, not the document, is what defines it.
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