Product types

Mezzanine Finance

Junior debt that sits behind senior development debt in the capital stack, repaid from project profit — more expensive than senior, cheaper than pure equity.

Mezzanine finance is the layer of debt that sits between senior development debt and the developer’s own equity. It takes a second charge over the asset (behind the senior lender) and is repaid from sales proceeds or an exit refinance.

It is not a sweetener; it is a deliberate tool for raising the overall leverage of a scheme when equity is tight.

Where mezz sits in the capital stack

Exit (sales + refinance)
        │
        ▼
  [ Senior debt ]    ← first charge, ~60–70% LTGDV, ~6.5–9% p.a.
  [ Mezzanine  ]    ← second charge, up to 85–90% LTGDV combined, ~12–18% p.a.
  [ Equity     ]    ← developer cash + JV equity
  [ Land       ]

What mezz does for your numbers

Assume a £10m GDV scheme with £6.5m build cost and £2m land. Senior at 65% LTGDV gives you £6.5m — which covers build only. You need £2m land plus fees before senior drawdowns start, and you have £600k of equity.

Mezzanine at 20% of cost (roughly £1.7m here, sitting behind the senior) lets you close on the land and fund pre-commencement costs without tripling your equity cheque. Your blended cost of debt rises, but your project is bankable.

Pricing mezz in the UK (2026)

Typical range 12–18% p.a., sometimes structured with:

A coupon (monthly or rolled)
A participation (a share of profit over a hurdle) or an exit fee (2–5% of facility)
Arrangement fee of 2–4% on drawdown
No early repayment fee beyond a minimum term (often 12 months)

A mezz lender with a profit share is effectively pricing itself closer to 20–25% IRR on the money, which is why it’s behaving like quasi-equity.

When mezz makes sense vs. a JV partner

Mezz: you keep 100% of profit above the mezz hurdle, give up a second charge and a coupon.
JV equity: you keep 50–60% of profit, give up board/veto rights, but often pay nothing if the scheme fails.

Mezz is the right call when you are confident in the GDV and want to retain the upside. JV is the right call when you’re happy to share downside risk.