What mezzanine finance costs in Australia

Published Australian mezzanine rates run from about 12 to 30 per cent a year, with establishment fees of 2 to 5 per cent and sometimes an exit fee or a 2 to 5 per cent profit share. On a $600,000 gap in a $6m project that is roughly $120,000 to $345,000 over 18 months.

Mezzanine finance is the layer between a senior construction loan and your own equity, and it is priced like it. It ranks second, so the lender wants a higher return for the risk of being paid after the bank. Nobody publishes an official rate, so this guide sets out what lenders, a developer and an adviser actually print, the fees and profit share on top, how far mezzanine stretches the senior limit, and what a $600,000 slice costs on a $6m project against the developer's profit. It ends with how the stack is funded.

What mezzanine finance costs in Australia

There is no official survey of mezzanine pricing in Australia. What exists is what lenders, developers and advisers publish. We opened four pages that put a number on it and set them side by side. The spread is wide, which is the first thing to know: the same $600,000 slice can cost 12 per cent a year at one end of the published range and 30 per cent at the other.

Read the table as indicative market data, not Ventas offers. The HoldenCAPITAL and Roycestone pages are lender-side and sit at the expensive end, with rates of 16 to 30 per cent for smaller or riskier files. Billbergia, an Australian developer, and Feasly, a feasibility software company, publish lower ranges of 12 to 20 per cent that look closer to what a sound project with an approved senior loan can expect. None of the four publishes a rate sheet you can rely on, so the lender's term sheet is the only number that counts.

Funds that lend in this space give a cross-check. Qualitas Real Estate Income Fund (ASX:QRI) reported gross income of 9.28 per cent a year across its whole loan book in April 2026, with mezzanine loans making up 5 per cent of that book and 30 per cent of its loans capitalising interest. That is a blended figure across senior and mezzanine loans, so it says more about how small the mezzanine slice is than about its price.

Fees, profit share and how far it stretches loan to cost

The interest rate is only part of the cost. Four things sit on top:

• Establishment fee. 2 to 3 per cent (Billbergia), 2 to 4 per cent (Feasly) or 5 per cent (HoldenCAPITAL). Feasly says some lenders charge it as a line fee on the committed amount, drawn or not.
• Exit fee. 0.5 to 1.5 per cent on repayment (Billbergia). Feasly says some lenders charge one but gives no figure.
• Profit share. Feasly puts the equity kicker at typically 2 to 5 per cent of project profit, sometimes triggered only above an agreed margin. HoldenCAPITAL, Roycestone and Billbergia do not state one.
• Costs passed through. Legal, valuation and, on Roycestone's page, a quantity surveyor inspection on each drawdown.

On stretch, Billbergia puts senior debt from major banks at 50 to 70 per cent of gross realisation value or total development cost, whichever is lower, and Feasly puts it at 60 to 70 per cent of total development cost. Mezzanine adds 10 to 15 per cent (Billbergia) or 10 to 20 per cent (Feasly) on top. That takes the combined loan to cost to between 75 and 85 per cent on those two pages. HoldenCAPITAL advertises up to 90 per cent of cost and Roycestone caps the combined loan at 75 per cent of value, 80 per cent in some cases. Billbergia notes the stack rarely goes above 85 per cent without preferred equity. Our development loan deposit answer and townhouse development cost guide show where the senior limits sit before mezzanine comes in.

What $600,000 of mezzanine costs against the profit

Take a $6m development where the senior lender will fund 70 per cent of cost and requires 30 per cent equity, $1.8m. The developer has $1.2m. Mezzanine fills the $600,000 gap. We assume an 18 per cent profit on cost, so $1,080,000 before mezzanine costs, and the mezzanine fully drawn for 18 months. Interest is simple and the profit share is taken on that $1,080,000. All of it is illustrative.

Across the published ranges the $600,000 costs $120,000 to $345,000 over 18 months, between 11 and 32 per cent of the project profit. Notice the return on equity. With no mezzanine the developer would need $1.8m in and make $1,080,000, a 60 per cent return. Mezzanine lets the same project go ahead on $1.2m, and even at the high case the return on equity is about the same as the no-mezzanine case. The catch is the downside. If net sales come in 10 per cent lower at $6.372m, profit before mezzanine falls from $1,080,000 to $372,000. In the middle case the mezzanine costs about $197,000 of that (the profit share shrinks too) and the developer keeps $174,840. The lender is paid before you, and a thin margin is where mezzanine stops being worth it.

Mezzanine, preferred equity and a joint venture partner

There are three ways to fill an equity gap. They rank differently, cost differently and give up different things.

Mezzanine is debt secured by a second mortgage, with a priority deed. You keep control and, apart from any kicker, the upside. Preferred equity is not a mortgage, so it needs no second mortgage or subordination deed. The Urban Developer reports that banks are more willing to accept it because they are reluctant to consent to second mortgages on construction projects. It usually carries a fixed return, and some deals add a share of profit. Feasly's worked example puts a 12 per cent coupon with a 10 per cent kicker on $1 million of hard preferred equity, which is one example, not a market rate.

A joint venture partner contributes equity for a share of profit rather than a coupon. We found no published rate range for joint ventures, so we will not make one up. The split is negotiated. Feasly's preferred equity waterfall example moves from 80/20 in the investor's favour to 70/30 or 60/40 in the sponsor's favour as returns pass about 18 to 20 per cent IRR, but that is an illustration of how a waterfall steps, not a benchmark. What is true of every structure is that a partner who shares profit costs more when the project goes well, while a lender with a fixed coupon costs more when it goes badly.

Priority deeds, lender appetite and what makes a deal fundable

Be straight about appetite: mezzanine is a small, selective market. Qualitas holds only 5 per cent of its fund in mezzanine loans. In 2021 the joint managing director of Stamford Capital told Broker News that he had not seen bank-provided mezzanine in three or four years, and Mortgage Business ran a 2018 piece headlined that bank mezz loans were a thing of the past. Today the money comes mostly from non-bank and private lenders. IFR, citing ASIC, puts Australian private credit at about A$200bn with roughly half in real estate. ASIC's Report 820 (November 2025) flagged real estate construction and development lending as drawing the most concern, so lenders are checking valuations and borrower fees harder.

What lenders ask for, according to the pages above:

• An approved project and senior debt lined up. Roycestone wants a copy of the construction loan facility and says mezzanine must sit behind a bank or second-tier lender.
• Size and margin. Feasly puts the minimum project at about $2m to $3m of total development cost, with most mezzanine lenders preferring $5m or more, and lender models wanting roughly 18 to 22 per cent profit on cost. Roycestone states a $500,000 minimum project profit.
• Real equity from you. Feasly says mezzanine lenders want at least 10 to 15 per cent of total development cost in genuine sponsor equity.
• A deed of priority. Feasly lists a cap on the senior facility, standstill periods, cure rights, buy-out rights and notification duties. Personal guarantees, it says, are almost universal.
• The senior lender's consent. Without it there is no second mortgage.

ASIC says loans to companies are outside the credit legislation, and a loan to a natural person to buy or build residential property for investment is caught. Most developers borrow through a company or trust, so these facilities are usually business purpose and not consumer regulated, but check the borrower structure. Ask your accountant how mezzanine interest and any profit share are treated for tax.

Financing the equity gap with mezzanine

A development stack has a senior lender at the front, mezzanine behind it, then your equity. Banks lend roughly 60 to 70 per cent of cost, non-bank lenders go higher, and mezzanine or preferred equity covers part of what is left. Ventas is a broker, not a lender, so we do not quote rates or promise approval. Here is how the example in this guide is built.

Illustrative only, subject to lender assessment. A $6m project:

And how it is typically funded:

The senior lender must agree to the mezzanine in writing, and the combined loan to cost of 80 per cent has to fit both lenders' credit policy. What makes it fundable is an approved project, a senior offer in hand, real equity, a margin that survives a fall in sales, and a clear exit by settlements. Where a senior lender will not consent to a second mortgage, preferred equity is the usual alternative. To get a number, send Ventas the feasibility, the senior offer, the equity you have in and the gap. Start with mezzanine finance and see development finance. Finance is subject to lender assessment and approval.

This is general information only and not financial, credit, or tax advice. Figures are indicative market data from the sources listed, not Ventas offers, and move with the market. Consider your own circumstances and speak to a professional. All finance is subject to lender assessment and approval.

This article is general information only and not financial, credit, or tax advice. Ventas Asset Lending is a finance broker, not a lender. Approvals are subject to lender assessment. Consider your own circumstances and speak to a qualified professional, including your accountant for any tax questions.