Development finance

Mezzanine Development Finance

Subordinated debt sitting behind senior development finance and ahead of developer equity. We arrange institutional and family-office mezzanine on schemes from £250k to £15m, structured around the senior facility.

The product

Filling the gap between senior debt and developer equity

Mezzanine sits in the capital stack between senior debt and developer equity. Senior development lenders cap leverage at around 65% LTGDV and 80-85% LTC. Mezzanine fills the next 5-15% of cost, lifting effective leverage to 90% LTC without bringing in JV equity. The developer keeps 100% of the profit share above the mezzanine coupon - in exchange for a higher cost of capital on that layer.

Pricing on mezzanine ranges from 12% to 20% per annum, structured as a rolled-up coupon repaid on exit rather than serviced monthly. Some structures replace the coupon with a profit share on the development residual. Mezzanine sits second behind senior on security, with an inter-creditor deed governing how the two layers interact on a default or sale.

Doulton arranges mezzanine from a panel of institutional providers (LendInvest, Cohort, Atelier, Avamore) and a network of family offices and high-net-worth funds active in the development market. Cases run from £250k to £15m of mezzanine, alongside senior debt of £1m to £50m+. Most useful when the developer wants to recycle equity into the next site rather than tie it all into one scheme.

Get a Quote Call 0204 6211776

£250k - £15m

Mezzanine range

12-20% pa

Rate range

90% LTC

Senior + mezz

Rolled up

Coupon structure

Why Doulton

What makes this work in practice

Institutional and family-office providers

Broad mezzanine panel covering institutional funds, family offices and HNW investors. Each provider has a different risk appetite and pricing logic - we map the case to the strongest match.

Coupon and profit-share structures

Most mezzanine is priced as a rolled-up coupon at 12-20% pa. Some providers will replace the coupon with a residual profit share, lower headline cost in exchange for upside. We model both routes against your appraisal.

Senior + mezz arranged together

We arrange the senior development loan alongside the mezzanine through the same brokerage. One process avoids the deal stalling because senior and mezz are pulling in opposite directions on inter-creditor.

Inter-creditor deed negotiation

The deed governing senior and mezz interaction on default or sale is the single most important document in the stack. We negotiate it from the developer's side so neither layer has unfair control on remedies.

Equity recycling for multi-site developers

Mezzanine is the cleanest way for developers running two or three live schemes to lift leverage and keep equity spread across the portfolio. Cheaper than JV equity in absolute terms where deals make 20%+ margin.

Single drawdown or staged

Some mezzanine providers fund in a single drawdown at completion. Others stage alongside the senior drawdown cycle. We pick the structure that minimises rolled-up interest on the mezz tranche.

The process

How it works

Stack design

We review the senior debt structure and the equity gap. Mezzanine sizing modelled to fit the cost stack. Indicative terms back from three to four mezz providers within 48-72 hours.

Provider selection

Best-fit mezz provider chosen on price, control and inter-creditor terms. Heads of terms agreed on senior and mezz in parallel.

Inter-creditor and legals

Solicitors negotiate the inter-creditor deed in parallel with the senior facility legals. Mezz tranche drawn alongside or after the senior at completion.

Drawdowns and exit

Senior drawdowns released monthly against MS valuations. Mezz coupon rolls up. On exit, senior repays first, mezz second with rolled-up interest, then developer equity.

Talk to a mezzanine development specialist

Send us the appraisal, the senior debt heads of terms (if you have them) and the equity gap. We will come back with mezz indications from three or four providers and a view on the strongest senior + mezz combination.

Get a Quote Call 0204 6211776

FAQs

Frequently asked questions

What is development finance?

Development finance funds the construction, conversion or major refurbishment of property. Lenders advance money in stages ('drawdowns') as works progress, verified by a quantity surveyor or monitoring surveyor. Total cost facilities are typical: day-one land advance plus a build facility.

How much can I borrow on a development project?

We arrange development funding from £125k to £300m+. Typical sizing is up to 65-70% of gross development value (GDV) and up to 90% of total project cost, with the balance funded by your equity or mezzanine finance.

Do I need prior development experience?

Experienced developers get the widest lender access and sharpest pricing. First-time developers can still secure funding, usually via specialist lenders, with a capable main contractor and a smaller initial scheme. We have a dedicated route for first-time developers.

What about planning permission?

Most lenders require detailed planning to be in place before drawdown of build funds. Land loans with planning gain exits, outline-only sites and permitted-development conversions can also be funded, but terms and LTVs reflect the higher planning risk.

How is interest charged on development finance?

Interest is almost always rolled up and repaid on exit from sales or refinance, so your project does not need to carry monthly repayments during the build. Lenders size the facility to include a build-in interest reserve.

Related finance

Explore related pages

Other Doulton specialisms and lenders that commonly fit alongside this one. We always compare the full 130+ lender panel before recommending a deal.