Mezzanine Cost of Capital is the rate of return demanded by mezzanine lenders or investors who provide subordinated debt or preferred equity as part of a property development project’s funding mix. Positioned between senior debt and common equity within the capital structure, mezzanine capital carries greater risk, resulting in a higher cost than senior loans. This cost usually includes both interest payments and profit-sharing or equity participation components. For UK property developers and industry professionals, accurately assessing the mezzanine cost of capital is essential to evaluate project feasibility, balance financing sources, and optimise overall funding strategies within property development finance UK.
This sits beneath Equity Cost Metrics, introducing a more specific variant of the measure without changing its core interpretation. It is commonly considered alongside Cost of Preferred Equity, as both are closely related measures used to assess similar aspects of performance or risk.
View glossary entry