Capital Stack
Mezzanine Finance for UK Property Development
structured to perform
30+ years · 110+ specialist lenders · £68.6m largest facility
Mezzanine finance sits between senior debt and your equity — filling the funding gap and reducing the cash you need to put into a project. This increases your return on capital employed and allows you to take on more projects simultaneously.
£500k — £20m+
Loan Size
6 — 24 months
Typical Term
Up to 90% LTGDV
Typical LTV
Key Features
What We Offer
Reduce Your Cash-In
Mezzanine sits behind senior debt, reducing the equity you need from 30–40% down to as little as 10% of costs.
Increase ROCE
Less of your own money in the deal means a higher return on capital employed. Scale faster across multiple sites.
Structured Alongside Senior
We arrange mezzanine and senior debt as one package — not as an afterthought. Cleaner, faster, more competitive.
Interest Rolled Up
Like senior debt, mezzanine interest is typically rolled up and repaid at exit. No monthly payments during construction.
Flexible Providers
Access to 15 specialist mezzanine lenders, family offices and private capital sources across the UK.
Ideal For
Common Scenarios
Stretch Senior Debt
When senior debt covers 55–65% of GDV, mezzanine fills the gap to 75–80% — leaving you with a minimal equity requirement.
Scale Your Portfolio
Instead of putting 35% equity into one project, spread your capital across three or four with mezzanine support.
Land and Planning Stage
Mezzanine can fund the gap between what a senior lender will advance and total land and pre-planning costs before a full development facility opens.
Cost Overrun Cover
If your project has gone over budget, mezzanine can provide additional capital to complete without selling equity.
Capital Stack
Where mezzanine sits in the stack
Mezzanine finance fills the gap between senior debt and your equity. It's a second-charge loan — junior to the senior lender but senior to your own capital.
Senior development debt typically covers 55–70% of GDV (gross development value). Mezzanine can take total borrowing up to 75–80% of GDV — typically adding a tranche of 15–25% of GDV on top of senior debt. Your equity requirement drops from 30–35% to as little as 10–15%.
Interest on mezzanine is higher than senior debt — typically rolled up and repaid at exit. We model the blended cost of capital in every appraisal so you know the true cost before committing.
We coordinate the entire structure — senior lender, mezzanine provider, and inter-creditor agreement — as one package. Senior development finance and mezzanine are arranged together, not sequentially.
Equity
Equity
Mezzanine
Debt
We structure the optimal mix for your project
Worked Example
£5m GDV scheme — how the stack looks
Illustrative example only — actual terms depend on scheme, lender, and market conditions.
Senior Debt
£3,000,000
60% of GDV — first charge, lowest rate, primary development facility
Mezzanine
£750,000
15% of GDV — second charge, fills gap from 60% to 75% GDV, interest rolled up
Developer Equity
Remainder
25% of GDV — covers the balance of build costs not funded by debt
How it works on exit: sales proceeds repay senior debt first, then mezzanine (with rolled-up interest), then the developer takes their profit. Total debt = £3.75m (75% of GDV). The mezzanine provider's higher coupon is compensated by their junior position — they are repaid before the developer, but after the senior lender. See also: forward funding as an alternative structure that removes both the debt and the sales risk.
Compare Structures
Mezzanine, forward funding or dev exit?
Three capital stack structures, three different risk and reward profiles.
| Feature | Mezzanine Finance | Forward Funding | Dev Exit / Stabilisation |
|---|---|---|---|
| Stage | Construction / land + planning | Pre-construction to completion | Practical completion / sales stage |
| Role in stack | Second charge, behind senior debt | Institutional buyer funds 100% of costs | Refinances senior development debt at practical completion |
| Typical leverage | 15–25% of GDV on top of senior debt | Up to 100% of costs | 60–75% of current value / day-1 GDV |
| Interest treatment | Rolled up, repaid at exit | Developer profit fixed at agreed margin — no interest to service | Serviced or rolled; lower rate than construction debt |
| Best for | Reducing equity and scaling pipeline while retaining upside | Capital-light developers; BTR, PBSA, affordable housing | Schemes nearing completion needing to extend past development facility maturity |
| Developer retains profit upside? | Yes — full profit after debt repayment | Fixed margin only — buyer captures the yield | Yes — refinance buys time to sell at full value |
Not sure which structure fits? See all finance products or explore bridging finance for short-term land funding.
Mezzanine FAQ
Mezzanine finance — common questions
What is mezzanine finance in property development?
Mezzanine finance in property development is a second-charge loan that sits between senior development debt and the developer's equity in the capital stack. It increases total leverage — typically taking the developer's equity requirement from 30–40% down to 10–15% of cost — at higher pricing than senior debt, with interest usually rolled up. Mezzanine providers take a junior position to the senior lender, governed by an inter-creditor agreement, and are repaid alongside senior debt on exit. The structure suits developers who want to scale across multiple schemes rather than concentrate equity in one.
What is the difference between mezzanine finance and development finance?
Development finance (senior debt) is the primary construction loan — first charge, lowest rate, typically covering 55–70% of costs. Mezzanine finance is a second loan that sits on top of senior debt, filling the gap between what senior debt covers and the total funding needed. They are not alternatives: mezzanine is arranged alongside senior development finance as part of a layered capital stack. Senior debt is cheaper; mezzanine is more expensive but allows the developer to reduce their equity contribution — improving return on capital employed at the cost of a higher blended interest rate.
Can mezzanine finance cover 100% of costs?
No. Mezzanine fills the gap between senior debt and developer equity — it does not replace equity entirely. Combined senior debt and mezzanine will typically take total debt coverage to 85–90% of costs (or 75–80% of GDV), leaving a residual equity requirement of 10–15% that the developer must fund. This is a structural requirement: mezzanine lenders need the developer to have real skin in the game, and intercreditor agreements with senior lenders limit combined leverage. If 100% of costs is required, equity finance or a forward funding structure may be the appropriate route.
What security do mezzanine lenders take?
Mezzanine lenders take a second charge over the development site, sitting behind the senior lender's first charge. The inter-creditor agreement (ICA) between senior and mezzanine lenders governs the priority of payment on exit, cure rights (the mezzanine lender's ability to step in if the developer defaults with the senior), and standstill provisions. Some mezzanine providers also take a charge over the developer's SPV shares. The security position is junior to senior debt, which is why mezzanine pricing is higher — the lender's recovery in a distressed exit is after the senior has been repaid.
How does UK mezzanine finance work?
In the UK, mezzanine finance for property development is typically arranged alongside the senior development facility — same broker, same closing timetable, single underwriting package. The senior lender holds first charge over the site; the mezzanine provider takes second charge with cure rights and step-in provisions defined in an inter-creditor agreement. Drawdowns are synchronised so the mezzanine doesn't run ahead of the senior, and both facilities are repaid on exit from sales proceeds or refinance. Most UK mezzanine providers operate in the £500k–£20m+ bracket against schemes with strong GDV evidence and disciplined cost plans.
When does mezzanine finance make sense for a development scheme?
Mezzanine makes sense when the developer wants higher leverage than senior debt alone provides — typically when the equity requirement on a scheme would otherwise tie up capital better deployed across multiple sites. It also makes sense for first-time or growing developers who can fund a scheme's equity but only by concentrating their balance sheet in one project. The trade-off is cost: mezzanine pricing is materially higher than senior debt, so the additional leverage needs to be earning more than it costs. We model the blended cost of capital and the impact on developer profit-on-cost in every mezzanine appraisal.
What is an example of mezzanine financing in property?
Worked example on a £5m GDV scheme: the senior lender advances 60% of GDV — £3m. A mezzanine facility fills the gap to 75% of GDV — a further £750k (15% of GDV). Total debt is £3.75m. The developer's equity covers the remainder of build costs not funded by debt. The mezzanine is repaid — with its higher rolled-up coupon — out of sales proceeds at exit, after the senior loan but before the developer takes their profit. The effect: less equity locked in one scheme, a higher return on the capital employed, and the ability to run more projects simultaneously — at the cost of a higher blended interest rate.
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Get a development appraisal or arrange a call with a specialist.