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Mezzanine
Financing

Top-up funding that sits behind senior debt to close the gap between bank LVR and what your project actually needs.

Mezzanine finance fills the gap between a senior lender's loan and the equity a developer can actually contribute. It sits as a second-charge facility behind the first mortgage, lifts the combined LVR on the project, and lets developers preserve equity for the next deal or get a project off the ground when the senior loan alone doesn't reach the funding required. At Commercial Property Funding, mezzanine-style structures are delivered through a combined first-and-second mortgage facility on construction projects, lifting total leverage to up to 75% of Gross Realisation Value.

Overview

  • Loan SizeUp to $10 million
  • Combined LVRUp to 75% Gross Realisation Value (1st mortgage to 65%, plus 2nd mortgage component)
  • Interest RatesFrom 7.5% p.a.
  • Loan TermsUp to 24 months
  • Property SecurityResidential or commercial
  • Senior DebtCPF first mortgage or compatible bank/non-bank senior facility
  • Pre-salesLow or no pre-sales required
  • Interest StructureCapitalised - no monthly debt servicing during the build
  • DrawdownsStaged in line with construction milestones
  • Settlement SpeedLetter of Offer in 48 hours; settlement within 7 days of executed docs
  • LocationAvailable across all Australian states and territories
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Mezzanine finance fills the gap between a senior lender's loan and the equity a developer can actually contribute. It sits as a second-charge facility behind the first mortgage, lifts the combined LVR on the project, and lets developers preserve equity for the next deal or get a project off the ground when the senior loan alone doesn't reach the funding required. At Commercial Property Funding, mezzanine-style structures are delivered through a combined first-and-second mortgage facility on construction projects, lifting total leverage to up to 75% of Gross Realisation Value.

Mezzanine Finance in Australia

Mezzanine finance is the layer of funding that sits between senior debt and equity in a property development capital stack. The senior lender - typically a bank or first-mortgage non-bank - funds the largest portion of the project up to a conservative LVR, often 60% to 65% of Gross Realisation Value. The developer contributes equity as the bottom layer. Mezzanine fills the layer in between, taking second-charge security behind the senior debt and lifting the combined loan-to-value ratio to a level that makes the project actually fundable.

For developers, mezzanine solves three recurring problems. The first is an equity shortage - when the senior loan plus available equity simply doesn't reach total project cost, and the choice is either to walk away from the deal or find a layer of capital to bridge the gap. The second is equity preservation - when the developer has the equity to deploy but would rather hold it back for the next site, accepting a higher cost of capital on this project to compound activity across multiple deals. The third is post-acquisition cost movement - when feasibility shifts, costs blow out, or the senior lender's final LVR comes in tighter than expected, and the project needs additional capital to complete.

At Commercial Property Funding, mezzanine-style funding is delivered through a combined first-and-second mortgage construction facility. The first mortgage sits at up to 65% of GRV; a second mortgage component lifts the combined position to up to 75% of GRV. Both layers come from CPF as the single lender, which simplifies the inter-creditor position, removes the friction of negotiating between separate senior and mezzanine providers, and keeps the funding decision with one party. Where a sophisticated borrower needs a mezzanine layer behind an external senior lender, or a more complex capital structure including preferred equity or joint-venture equity, CPF works with those scenarios through the broader Capital Structures program.

Why Developers Use Mezzanine Finance

  • imgLift combined LVR to up to 75% GRV - beyond senior bank thresholds
  • imgReduce equity required to get the project funded
  • imgPreserve developer equity for the next acquisition or project
  • imgSingle lender for both senior and mezzanine - cleaner inter-creditor position
  • imgCapitalised interest - no monthly debt servicing during the build
  • imgAsset-led assessment - no full borrower serviceability test
  • imgLetter of Offer in 48 hours, settlement within 7 days of executed docs

When Mezzanine Finance is Used

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Closing an Equity Shortfall

Senior debt at 65% GRV plus available equity doesn't reach total project cost. Mezzanine fills the gap making the project viable.

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Preserving Equity for the Next Project

Use mezzanine to reduce the equity contribution on this project, keeping capital available for the next project.

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Cost Movement After Acquisition

Project costs have moved since acquisition - construction inflation, scope changes, council requirements.

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Senior LVR Coming in Tight

The senior lender's final LVR is lower than originally modelled - common after valuation, QS review, or feasibility.

Need to Lift the Funding on Your Project?

Submit your scenario for assessment or speak with our team about mezzanine and combined-mortgage structures for your next development.

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Projects We Fund Through Mezzanine Structures

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Townhouse and duplex construction projects
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Multi-unit residential and apartment developments
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Commercial construction - office, retail, industrial
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Mixed-use developments with residential and commercial components
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Mid-build takeovers requiring additional funding to complete
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Land subdivisions where total project costs exceed standard LVR
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Refinances of existing senior debt with a new mezzanine layer

frequently asked questions

Mezzanine finance is a layer of funding that sits between senior debt and equity in a property development capital stack. It takes second-charge security behind the senior loan, lifts the combined loan-to-value ratio on the project, and reduces the equity the developer needs to contribute.

CPF delivers mezzanine-style funding through a combined first-and-second mortgage construction facility. The first mortgage sits at up to 65% of Gross Realisation Value; a second mortgage component lifts the combined LVR to up to 75% GRV. Both layers come from CPF as the single lender - which simplifies the inter-creditor position and removes the friction of negotiating between separate senior and mezzanine providers.

Yes - through the broader Capital Structures program. Where a sophisticated borrower has senior debt with another lender and needs a mezzanine layer behind it, CPF can structure the second-charge facility subject to inter-creditor arrangements with the senior lender. These deals are assessed case-by-case under the Capital Structures mezzanine program.

Up to $10 million combined across the first and second mortgage layers, structured to a combined LVR of up to 75% of Gross Realisation Value. The exact split between layers depends on the project, the security position, and the borrower's overall capital structure.

Mezzanine sits in a more leveraged position than senior debt, which means it carries higher pricing to reflect the second-charge risk. CPF prices each structure to the deal - security position, combined LVR, project profile, and exit strategy. Indicative pricing is provided on request and confirmed in the no-cost, no-obligation Letter of Offer.

No fixed pre-sale percentage is required. Mezzanine layered on a CPF construction facility follows the same flexibility as the underlying construction loan - low or no pre-sales required, with assessment focused on the project, the builder, and the exit strategy.

Funds are released progressively against construction milestones - typically slab, frame, lock-up, fixing, and practical completion. A quantity surveyor inspects each stage and confirms the work is complete before the next drawdown is released. Both first and second mortgage layers draw in line with the program.

No monthly debt servicing is required across either layer. Interest is capitalised into each facility and repaid at the end of the term, when the project completes and the agreed exit strategy plays out.

The basics - the borrowing entity, development approval, fixed-price building contract with progress schedule, builder's details and insurances, project feasibility and capital stack, an "as-if-complete" valuation, and a clear exit strategy. For sophisticated structures involving external senior debt, copies of the senior facility documents are also required for inter-creditor review.

The most common exit is the staged sale of completed stock, which repays both the first and second mortgage layers in full at completion. Other exits include refinance to a longer-term facility once the project is complete, or progression to a CPF residual stock loan if some stock remains unsold at the end of the loan term.

Mezzanine, preferred equity, and joint-venture equity are three different ways to fill the layer between senior debt and developer equity. Mezzanine is structured as debt with second-charge security. Preferred equity provides priority equity returns without taking debt-style security. JV equity shares in project profit. Each suits a different deal profile. CPF covers the full spectrum through the Capital Structures program.

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