Background
A Gold Coast-based developer with a strong track record in boutique residential construction engaged Development Finance Partners to support their latest project. The client specialises in architecturally designed, high-end homes for the prestige market.
Project Overview
The development involved a luxury coastal residence with a combined construction facility of $6.29 million. With equity already committed to the land and no presales in place, the developer required a tailored funding structure to cover the full build cost while working in step with the existing senior lender.
Key Metrics
Facility Type: Senior construction loan with mezzanine top-up
Loan Amount: $6.29 million
Senior LVR: 70%
Total LVR: 78.1% against GRV excluding GST
Loan to Cost: 68.3%
Presales: Nil
The Challenge
A funding shortfall emerged when the original land facility proved over-leveraged. To move into construction, a refinance was required, but the senior lender would not exceed 70% of the project’s value. This left a gap that could not be filled with further equity.
Construction was ready to commence, and delays would have disrupted the program. Introducing mezzanine finance behind a senior lender can be complex. The solution needed to satisfy the senior lender’s risk position, align on repayment terms, and avoid friction across the capital structure.
DFP’s Strategic Solution
Development Finance Partners structured a funding solution that addressed both the capital shortfall and the complexities of introducing mezzanine debt.
A $650,000 mezzanine facility was secured behind the senior loan, lifting overall gearing to 78.1%. DFP selected a mezzanine lender with a proven history of working alongside the senior provider, which helped reduce execution risk and streamline negotiations.
To formalise the arrangement, DFP facilitated a Deed of Priority that outlined repayment order, security rights, and coordination between both facilities. This gave each lender the confidence to proceed and ensured smooth execution.
The final structure was cost-effective and efficient. The developer advanced to construction without raising new equity, while the blended cost of capital remained commercially viable.
Results and Benefits
DFP’s solution allowed the developer to proceed without delay and avoid equity dilution. The facility was settled efficiently, enabling works to begin in line with the construction schedule.
By managing coordination between both lenders, DFP achieved full alignment across the capital stack. The mezzanine provider was introduced to a reliable sponsor and has since expressed interest in funding future projects.
This outcome preserved momentum, supported long-term lender relationships, and positioned the client for faster access to capital on future developments.
Conclusion and Developer Insights
This case demonstrates how structuring the full capital stack is critical in high-leverage construction scenarios.
Access to mezzanine construction finance to bridge funding gaps can allow projects to proceed where senior debt alone is insufficient. When structured correctly, a blended approach aligns lender requirements with the developer’s objectives while maintaining momentum.
The key takeaway is that funding gaps should be anticipated and structured early. When executed properly, a coordinated capital stack can improve leverage, reduce settlement risk, and enable project delivery without additional equity.
What This Means for Developers
- Mezzanine finance can bridge funding gaps beyond senior debt capacity
- Blended capital structures improve leverage in high-LVR scenarios
- Early structuring reduces settlement risk and funding delays
- Coordinated senior and mezzanine funding supports project continuity
Whatever the size of your development plan, DFP have a wealth of experience and strong relationships to help you succeed. Contact us to explore your tailored finance options.
