Typical Terms
Indicative ranges — actual terms depend on individual project assessment.
What is Mezzanine Finance?
Mezzanine finance is a second-charge loan that sits behind the senior development finance facility in the capital stack. It fills the gap between what the senior lender provides and the total project costs, reducing the developer's personal equity requirement. This additional leverage allows developers to take on larger projects or fund multiple schemes simultaneously.
For Brent developers, mezzanine finance can be the difference between funding one project at a time and maintaining a pipeline of concurrent schemes. By reducing the equity required per project from 25–30% to potentially 10–15%, mezzanine enables more efficient capital deployment.
How the Intercreditor Agreement Works
When mezzanine finance is used alongside senior debt, the two lenders enter an intercreditor agreement (ICA) that governs their respective rights and priorities. This is a critical document that defines:
Priority of Payments
The senior lender is repaid first from any proceeds, with the mezzanine lender receiving their return only after the senior facility is satisfied in full.
Consent Rights
The senior lender typically has consent rights over key decisions including drawdowns, variations to the build programme, and any changes to the development plan.
Default Provisions
The ICA defines what happens if the borrower defaults, including the senior lender's right to enforce their security and any standstill periods for the mezzanine lender.
Information Rights
Both lenders receive monitoring reports and are kept informed of project progress, with the senior lender typically receiving information first.
Mezzanine vs Stretched Senior
Developers seeking higher leverage have two main options: mezzanine finance (from a separate lender) or a stretched senior facility (from a single lender offering higher leverage):
Mezzanine + Senior
- • Two separate lenders with different appetites
- • Potentially lower blended cost if senior terms are strong
- • More complex legal structure (ICA required)
- • Longer arrangement timeline
- • Maximum leverage: up to 85–90% of costs
Stretched Senior
- • Single lender provides full facility
- • Simpler legal structure
- • Faster to arrange
- • May have higher blended rate
- • Maximum leverage: typically up to 80–85% of costs
Suitable Project Types
Common scenarios where mezzanine finance is used in Brent.
Example Scenarios
Illustrative examples of how similar facilities could be structured — not completed transactions.
Residential Development, Wembley Park
Frequently Asked Questions
Common questions about mezzanine finance.
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