Greenwich Development Finance
Greenwich Development Finance - mezzanine finance
Second-Charge Development Lending

Mezzanine Finance in Greenwich — Boost Your Development Leverage

Layer second-charge mezzanine lending on top of your senior debt to achieve up to 90% loan-to-cost. Reduce your equity requirement and maximise returns on your Greenwich development project.

Get Mezzanine TermsUnderstand the Capital Stack

Up to

90%

Combined LTC

From

1.0%

Monthly Rate

As low as

10%

Equity Required

Flexible

6-36 months

Loan Term

What Is Mezzanine Finance?

Mezzanine finance is a specialist form of property lending that sits as a second charge behind the primary senior development finance facility. It is designed to fill the gap between what the senior lender will provide and the total amount of funding the developer needs, significantly reducing the cash equity required to deliver a project.

In practical terms, if a senior lender provides 65% of your total project costs and you have 10% equity available, there is a 25% funding gap. Mezzanine finance bridges this gap, taking the combined borrowing up to 85-90% of total costs and allowing you to proceed with a much smaller equity contribution than would otherwise be required.

For developers working in Greenwich, where land values have been rising steadily due to the borough's regeneration programme and excellent transport links, mezzanine finance can be the key to unlocking projects that would otherwise require too much upfront capital. It enables you to take on more ambitious projects or run multiple schemes simultaneously by reducing the equity tied up in each individual development.

The mezzanine lender takes a second charge on the development site, meaning they sit behind the senior lender in priority for repayment. This higher risk position is reflected in the interest rate, which is typically 1.0% to 1.75% per month. However, the blended cost of senior and mezzanine debt combined is almost always cheaper than the cost of equity or profit share from a joint venture partner.

Why Use Mezzanine Finance

Reduce your equity contribution to as little as 10% of project costs
Retain full ownership and control of your development
Cheaper than giving away equity or profit share
Take on larger or more ambitious projects
Run multiple developments simultaneously
Structured to align with senior debt drawdown schedule
Interest rolled up — no monthly payments during the build
Available for first-time and experienced developers

The Capital Stack — Where Mezzanine Fits

The capital stack represents all layers of funding in a development project. Mezzanine finance sits between senior debt and developer equity, bridging the gap to reduce your cash requirement.

Developer Equity

15%

Your cash in the deal. Highest risk, highest return. First loss position.

£300,000

Mezzanine Finance

25%

Second charge. Fills the gap between senior debt and equity. Repaid after senior.

£500,000

Senior Debt

60%

First charge. Lowest risk, lowest cost. Repaid first from any proceeds.

£1,200,000

Example: £2,000,000 total project cost

Senior 60% + Mezzanine 25% + Equity 15% = 100% of costs funded

How Each Layer Works

Senior Debt (First Charge)

The foundation of the funding structure. The senior lender has first priority on repayment and takes the lowest risk. This translates to the lowest interest rates in the stack, typically 0.65% to 1.0% per month.

Typical LTC

55-70%

Rate

0.65-1.0% pm

Mezzanine (Second Charge)

This Service

Sits behind the senior lender and is repaid after the senior debt is cleared. Higher risk than senior debt but significantly cheaper than equity. Enables combined leverage of 85-90% LTC.

Typical Tranche

15-25% LTC

Rate

1.0-1.75% pm

Developer Equity

Your own capital contribution. Equity bears the highest risk (it is the first loss piece) but captures all the profit above the cost of debt. With mezzanine, equity can be as low as 10-15%.

With Mezzanine

10-15%

Without Mezz

30-45%

Mezzanine Finance vs Stretched Senior

Both products can increase your leverage beyond standard senior debt, but they work differently. Understanding these differences helps you choose the optimal structure for your Greenwich project.

FeatureSenior + MezzanineStretched Senior
Number of LendersTwo (senior + mezzanine)One lender provides all
Maximum Combined LTCUp to 85-90%Up to 80-85%
Blended Interest Rate0.80-1.20% pm (blended)0.75-1.25% pm
Intercreditor AgreementRequired (adds time and cost)Not required (single lender)
Legal ProcessesTwo separate legal processesOne legal process
Arrangement FeesTwo sets of fees (1-2% each)One set (1.5-2.5%)
Completion Timeline4-8 weeks typical3-6 weeks typical
ComplexityHigher — two lenders to manageLower — single point of contact
FlexibilityMore flexibility in structuringLess flexible but simpler
Best ForMaximum leverage (85-90% LTC)Speed and simplicity at 80-85% LTC

* We can advise on the optimal structure for your specific project. In some cases, stretched senior may be more cost-effective despite a slightly lower maximum LTC.

The Intercreditor Agreement

When mezzanine finance is layered with senior debt, both lenders must agree on a set of rules governing their relationship. This is documented in an intercreditor agreement (ICA), which is a legally binding contract between the senior and mezzanine lenders.

The ICA is a critical document that must be negotiated and agreed before both facilities can complete. While it adds complexity and time to the process, it provides clarity and protection for all parties, including the developer. Understanding the key provisions helps you navigate the process more effectively.

Many senior lenders have pre-approved mezzanine providers with whom they already have template ICAs in place. Using these "approved pairings" can significantly reduce the time and legal cost of arranging a combined facility. We maintain an up-to-date database of which senior lenders work with which mezzanine providers and can recommend the most efficient pairings for your project.

Payment Priority

The ICA confirms that the senior lender is repaid in full before the mezzanine lender receives any repayment. This waterfall structure protects the senior lender's position and is the reason senior debt carries lower rates.

Enforcement Restrictions

The mezzanine lender cannot take enforcement action (such as appointing a receiver) without the senior lender's consent. This prevents the mezzanine lender from disrupting the project or the senior lender's security position.

Standstill Period

If the mezzanine debt is in default, there is typically a standstill period (usually 90-180 days) during which the mezzanine lender cannot take action. This gives time for the situation to be resolved without escalation.

Cure Rights

The mezzanine lender typically has the right to cure a default under the senior facility by making payments on the developer's behalf. This protects the mezzanine lender's position by preventing the senior lender from enforcing.

Information Sharing

Both lenders agree to share relevant information about the project, including QS reports, drawdown requests, and any issues that arise during the build phase. This ensures both lenders are kept informed.

Mezzanine Finance — Worked Example

See how mezzanine finance reduces your equity requirement and impacts your return on equity for a typical Greenwich development project.

Without Mezzanine

Senior debt only — 65% LTC

Total Project Cost

£2,000,000

Senior Debt (65% LTC)

£1,300,000

Mezzanine

N/A

Your Equity Required

£700,000

GDV

£3,000,000

Gross Profit

£1,000,000

Senior Interest (12 months)

-£101,400

Arrangement Fees

-£26,000

Net Profit

£872,600

Return on Equity

124.7%

Higher Return on Equity

With Mezzanine

Senior + mezzanine — 90% combined LTC

Total Project Cost

£2,000,000

Senior Debt (65% LTC)

£1,300,000

Mezzanine (25% LTC)

£500,000

Your Equity Required

£200,000

GDV

£3,000,000

Gross Profit

£1,000,000

Senior Interest (12 months)

-£101,400

Mezz Interest (12 months)

-£75,000

All Arrangement Fees

-£36,000

Net Profit

£787,600

Return on Equity

393.8%

The Mezzanine Advantage

£500,000

Less equity required

269%

Higher return on equity

£85K

Lower net profit (cost of additional leverage)

* Illustrative example using 0.65% pm senior rate, 1.25% pm mezzanine rate over 12 months. Actual returns depend on individual project circumstances.

Common Questions

Mezzanine Finance FAQs

Answers to common questions about mezzanine finance for Greenwich development projects. Contact us for advice specific to your situation.

Mezzanine finance is a form of second-charge lending that sits behind the senior (first-charge) development finance in the capital stack. It fills the gap between what the senior lender will provide (typically 55-70% of total costs) and the developer's available equity. By layering mezzanine on top of senior debt, you can achieve a combined loan-to-cost ratio of up to 85-90%, significantly reducing the cash equity you need to contribute. The mezzanine lender takes a second charge on the property, meaning they are repaid after the senior lender in the event of a sale or default. Because of this higher risk position, mezzanine finance carries a higher interest rate than senior debt, but it is substantially cheaper than giving away equity or profit share to an investor.
The amount of mezzanine finance available depends on the total project costs, the senior lender's maximum loan-to-cost ratio, and the overall viability of the scheme. Typically, mezzanine finance covers the gap between the senior debt (usually 55-70% LTC) and a combined LTC of 85-90%. For example, on a Greenwich development project with total costs of £2 million where the senior lender is providing 65% LTC (£1.3 million), a mezzanine lender might provide an additional 20-25% LTC (£400,000 to £500,000), taking the combined funding to 85-90% of total costs and reducing your required equity to just £200,000 to £300,000. Minimum mezzanine facility sizes are typically £100,000 to £250,000, with no upper limit on larger schemes.
Mezzanine finance interest rates typically range from 1.0% to 1.75% per month (12% to 21% per annum). The exact rate depends on several factors including the combined LTC ratio (higher leverage means higher rates), the strength of the scheme and the developer's track record, the senior lender's attitude to the mezzanine (some senior lenders offer preferential terms when paired with preferred mezzanine providers), and the overall risk profile of the project. While these rates are significantly higher than senior debt, the blended cost of capital (combining the cheaper senior debt with the more expensive mezzanine) is typically much lower than the cost of alternative equity or profit-share arrangements. Interest is usually rolled up and paid on exit alongside the senior debt.
An intercreditor agreement (ICA) is a legal document that governs the relationship between the senior lender and the mezzanine lender. It sets out the priority of payments, the rights of each lender, and what happens in the event of default or enforcement. Key provisions typically include confirmation that the senior lender is repaid first from any proceeds, restrictions on the mezzanine lender taking enforcement action without the senior lender's consent, standstill periods during which the mezzanine lender cannot take action, cure rights allowing the mezzanine lender to step in and remedy a senior debt default, and information-sharing requirements between the two lenders. The intercreditor agreement is a critical document and must be agreed by all parties before the facilities can complete. This can add 1-2 weeks to the overall timeline compared to a standalone senior debt facility.
Stretched senior is a single facility from one lender that provides a higher loan-to-cost ratio than standard senior debt, typically up to 80-85% LTC. Mezzanine finance is a separate second-charge facility from a different lender that sits behind the senior debt. The key differences are: stretched senior involves one lender, one legal process, and one set of fees, while mezzanine involves two lenders, two legal processes, and two sets of fees. Stretched senior is simpler and quicker to arrange but may have higher rates than standard senior because the single lender is taking on more risk. Mezzanine can achieve higher combined leverage (up to 90% LTC) but involves more complexity due to the intercreditor agreement. The choice depends on your specific circumstances, the leverage you need, and the lender options available for your project.
Mezzanine finance is generally more accessible than you might expect for first-time developers, provided the overall scheme is strong and the professional team is credible. Some mezzanine lenders specifically target first-time developers because these borrowers often have the greatest need for enhanced leverage. However, the terms may be less competitive than those available to experienced developers. Key factors mezzanine lenders consider include the quality of the scheme and planning consent, the competence of the professional team (architect, QS, main contractor), the strength of the senior lender and their commitment, the developer's background (related professional experience counts), and the cash equity contribution. We work with several mezzanine providers who have specific products for first-time developers undertaking projects in Greenwich.

Related Finance Services

Mezzanine finance works alongside other funding products in the capital stack. Explore our full range of property finance solutions for Greenwich developers.

Development Finance

Senior debt funding that forms the foundation of your capital stack. Mezzanine finance layers on top to boost your total leverage.

From 0.65% pm

Bridging Finance

Fast short-term funding for site acquisition while your development and mezzanine facilities are being arranged. Complete in 5-10 days.

5-10 day completion

Development Equity

If you need 100% funding or prefer to avoid additional debt, equity partners provide capital in exchange for a share of development profit.

Up to 100% funding

Calculate Your Development Finance

Use our free calculators to model senior and mezzanine scenarios for your project.

Development CalculatorProfit Calculator

Boost Your Greenwich Development Leverage

Reduce your equity requirement and maximise your return on capital with mezzanine finance. We source competitive second-charge lending from our specialist mezzanine panel and manage the entire process including intercreditor negotiation.

Combined leverage up to 90% LTC
Equity requirement as low as 10%
Pre-approved senior/mezzanine pairings for faster completion
Full intercreditor negotiation support
Prefer to talk? Call us on 07595 366094

Get Your Free Mezzanine Finance Quote

Tell us about your project and we will present mezzanine options alongside senior debt terms.

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Mezzanine Finance Across Greenwich

We arrange mezzanine finance for development projects throughout the London Borough of Greenwich.

Greenwich Town CentreSE10BlackheathSE3CharltonSE7WoolwichSE18ElthamSE9KidbrookeSE3PlumsteadSE18Shooters HillSE18