At Clopton Capital, we act as a specialist intermediary to help UK property developers and investors secure mezzanine financing real estate. As a leading commercial mortgage broker, we match your project with institutional mezzanine lenders to provide the “top-up” capital required to reach higher leverage (LTV/LTC) than traditional senior debt allows.
Mezzanine financing is a form of subordinate debt that sits between the senior mortgage and the borrower’s equity in the capital stack. In the UK, it is often referred to as “junior debt” because it is secondary to the first charge mortgage.
Because mezzanine debt is subordinated, it is higher risk for the lender. Consequently, it carries a higher interest rate than a senior mortgage. However, for the borrower, it is a powerful tool to reduce the amount of personal equity required for an acquisition or development, thereby significantly increasing the Return on Equity (ROE).
Unlike a senior mortgage which takes a first legal charge over the “bricks and mortar,” mezzanine financing is typically secured by:
A Second Charge: A subordinate lien on the property.
Equity Pledge: A charge over the shares of the Special Purpose Vehicle (SPV) that owns the property.
In the event of a default, the mezzanine lender can “step into the shoes” of the borrower by taking control of the SPV, allowing them to manage the asset without disrupting the senior debt.
Higher Leverage: While a UK high-street bank might cap lending at 60% LTV, adding a mezzanine layer can push total leverage to 75%–85%.
Lower Cost of Capital: While “Mezz” is more expensive than senior debt, it is significantly cheaper than bringing in a Joint Venture (JV) equity partner who would take a large share of the project’s profits.
Retained Control: Mezzanine is debt, not equity. This means you retain full ownership and control of the project’s upside once the interest is paid.
Intercreditor Complexity: UK senior lenders and mezzanine lenders must sign an Intercreditor Agreement, which defines their relationship and rights in a default scenario. This adds legal complexity to the closing process.
Higher Interest Rates: Expect rates to be higher than senior debt, often priced as a fixed double-digit coupon or a margin over SONIA.
Loan Size: £750,000 to £50,000,000+
Total Leverage: Up to 85% LTV / LTC.
Terms: Typically 12 months to 5 years (usually coterminous with the senior loan).
Repayment: Usually Interest Only, with the principal repaid upon the sale or refinancing of the asset.
Pricing: Range of 8% to 15% depending on the asset risk and position in the stack.
Imagine an LLC or Trust looking to acquire a £10 million office block in Manchester.
Senior Debt: A bank provides £6 million (60% LTV).
The Gap: The borrower only has £2 million in cash but needs £4 million more to close.
The Solution: Clopton Capital structures a £2 million mezzanine loan (20% LTV).
Result: The total leverage is now 80%. The borrower completes the acquisition using only half of their own cash, allowing them to deploy the remaining £2 million into a second project.
Don’t let a lack of equity stall your next big UK property deal. Leverage our network of institutional mezzanine lenders to bridge the gap.
Mezzanine is a debt instrument with a charge/lien. Preferred Equity is an equity investment that sits within the company’s share structure. Mezzanine is generally considered more “senior” than Preferred Equity in the event of a liquidation.
Yes. We arrange mezzanine financing for assets across all UK regions, from prime London developments to regional industrial and retail centres.
This is a legal contract between the senior lender and the mezzanine lender. It governs how they interact, who gets paid first, and the mezzanine lender’s “right to cure” a default on the senior loan.
Absolutely. Mezzanine construction loans are common in the UK to help developers bridge the gap between their senior development finance and their own equity.
