Financing · Mezzanine

Mezzanine capital

Subordinated capital closes the gap between the bank loan and equity \u2013 making projects feasible that would otherwise tie up too much of your own money.

Mezzanine capital sits economically between debt and equity. It ranks behind the senior loan but is served ahead of equity. For developers this means a significantly lower equity contribution and a higher return on equity – with a contractually fixed coupon instead of an open profit share.

We structure mezzanine tranches as classic subordinated loans as well as profit-participating loans or silent partnerships. What matters is alignment with the senior lender: subordination, standstill agreements and cash-flow waterfalls must be set up so that both capital providers accept the structure.

Fox Capital runs these negotiations in parallel and in competition between several capital providers. That shortens the process considerably and measurably improves terms compared with approaching a single lender.

Suitable for

Developments with high capital needs during construction
Land acquisitions ahead of planning consent
Investors pursuing value-add strategies
Developers running several projects in parallel
Equity-efficient portfolio growth

Key facts

Volume: from € 2m
Loan-to-cost: up to 90%
Term: 12 – 60 months
Coupon: project-dependent, usually bullet
Security: subordination, share pledge
First indication: 48 hours

Request terms

Benefits

Why this structure works

Less equity tied up

Your own contribution often falls from 30% to below 10% – capital stays free for further projects.

No loss of ownership

Unlike with equity partners, entrepreneurial control remains fully with you.

Bank compatible

We align ranking and cash flows so the senior financing remains workable.

Bullet structure

Interest and repayment follow the project timeline and do not burden the construction phase.

Scalable

Tranches can be structured per asset or as a framework line across several projects.

Fast decisions

Mezzanine providers typically decide much faster than classic credit committees.

Process

How we proceed

Step 01
Review of key figures
We assess costings, timeline, planning status and exit assumptions and evaluate feasibility of the junior tranche.
Step 02
Structure proposal
Volume, ranking, term, security and pricing defined in alignment with the senior financing.
Step 03
Lenders in competition
Parallel approach to suitable mezzanine funds, family offices and debt funds from our network.
Step 04
Term sheet & negotiation
Comparison of offers, renegotiation of covenants, fees and prepayment terms.
Step 05
Due diligence & closing
Support through review, documentation and drawdown – together with your legal advisers.

From practice

What actually decides the deal

The senior bank has to play along

No mezzanine tranche closes without a clean subordination and a workable standstill agreement. We settle that with the senior lender early, usually before the first term sheet. Do it the other way round and you lose two or three weeks.

The exit carries the structure

Mezzanine is repaid from the sale or the take-out financing. Lenders therefore look past today's rents and straight at the exit case. Two scenarios are enough: the plan, and one where everything slips twelve months.

Price it fully

Beyond the coupon there is an arrangement fee, a commitment fee and sometimes an exit fee. We convert the total into a cost on equity employed — that is the only number that tells you whether the tranche pays off.

Reporting is real work

Junior lenders want construction progress, cost status and sales figures, usually monthly. If you cannot produce that internally, friction starts by the second quarter.

Questions