Common Features of Mezzanine Finance:
Subordinated Debt: Mezzanine loans rank below senior debt in repayment priority but above equity, making it higher risk for lenders.
Flexible Repayments: Often structured with interest paid upon project completion or capitalized into the loan amount.
Hybrid Characteristics: Combines elements of debt (interest payments) and equity (profit participation), offering unique flexibility.
Higher Loan-to-Cost Ratio (LTC): Mezzanine finance increases funding capacity, often up to 85–90% of project costs when combined with senior debt.
No Collateral Required: Typically secured against project returns or a second charge on assets rather than requiring additional security.
PFG has established a strong record of structuring mezzanine debt facilities that has assisted many clients that would otherwise have had to source expensive equity for projects.
Mezzanine finance is also referred to as a second mortgage and/or subordinated debt finance.
Mezzanine finance assists the client in bridging the gap between the first mortgage finance offered and the funds required to complete a transaction. It is priced at a higher rate to reflect the risk of the funds in the transaction. However, when coupled with the overall finance cost of the transaction it is a very useful and relatively inexpensive resource for financing property development, large investment transactions and bridging arrangements.
We have a bank of Private Investors, Institutions and Investment Banks that actively invest in this form of finance. Given PFG’s experience in packaging mezzanine debt arrangements, this form of finance is readily available for applicable transactions, and with its proper use can easily add considerable value to a client’s project and/or transaction.
Typical loan parameters for Mezzanine Finance Loans
From $5,000,000 – >$50,000,000
Facility Limits: up to 75% LVR or 90% LTC
Pricing: from 12% – 18%
Locations: all metropolitan locations and major regional and sub-regional locations