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Mezzanine Finance: The Misunderstood Tool
Mezzanine sits between senior debt and equity in a development stack. It allows developers to increase their total leverage above what a senior lender will provide, typically at a higher rate — but preserving more equity than a JV would require.
Senior lenders on development typically lend to 65% LTGDV. Mezzanine lenders bridge the gap to 80–85% LTGDV, taking a second charge. The blended cost rises, but the developer retains full equity ownership rather than splitting profit with a JV partner. For experienced developers with strong GDV confidence, mezzanine often produces better overall returns than equity dilution.