"We provide mezz but once presales hit the trigger hurdle, the bank refinances us out. Everyone likes it: our investors, the bank, and the developer," a family office backed credit fund recently told me.

This is a fascinating collaboration between competitors:

 • major banks seeking to defend borrower relationships
 • private credit funds seeking better-quality sponsors and earlier repayment

The first stage of this collaboration was bank-led uni-tranche loans.

Now, in some cases, it is evolving into what I would call 'triggered mezzanine' loans.

Since 2025, the banks have aggressively re-entered the CRE market, lifting LVRs, lowering presales hurdles, and cutting margins.

In 2026, they are finding ways to selectively share borrowers with approved private lenders.

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𝗧𝗿𝗮𝗱𝗶𝘁𝗶𝗼𝗻𝗮𝗹 𝗺𝗲𝘇𝘇𝗮𝗻𝗶𝗻𝗲 𝗹𝗼𝗮𝗻𝘀
Mezzanine loans are second-ranking loans offered by private lenders to developers:

 • at higher interest rates, often 16-20% pa
 • that reduces upfront equity
 • and improves project EIRR

Under an intercreditor agreement, the mezzanine debt sits behind the first mortgage loan (from a bank or another private lender).

This means the senior loan must be 𝗳𝘂𝗹𝗹𝘆 𝗿𝗲𝗽𝗮𝗶𝗱 before the mezz is repaid.

That can make mezzanine debt expensive, even where the project de-risks materially during construction.

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𝗧𝗿𝗶𝗴𝗴𝗲𝗿𝗲𝗱 𝗺𝗲𝘇𝘇𝗮𝗻𝗶𝗻𝗲 𝗹𝗼𝗮𝗻𝘀
This dynamic changes with a triggered mezzanine loan:

 • the senior is provided by the bank
 • a bank-approved private lender provides mezz
 • the intercreditor terms specify a trigger event, usually linked to presales
 • upon the trigger, the bank lifts its LVR
 • bank refinances the mezz

This can materially reduce the developer's total mezzanine interest cost, with a similar upfront equity to higher mezz LVR loan (eg, 80%) given there is less capitalised interest.

It works for the bank because it helps retain or win a borrower who may have opted for a private credit stretch-senior facility.

It works for the private lender because it gets a bank-quality sponsor and likely repayment before construction completion.

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𝗞𝗲𝘆 𝗶𝗻𝘀𝗶𝗴𝗵𝘁𝘀
 1. Banks are no longer just competing with private lenders. In some cases, they are now collaborating with them
 2. Triggered mezzanine loans allow banks to defend borrower relationships while private lenders provide short-duration leverage
 3. Developers can reduce upfront equity and mezz interest costs
 4. These loans work best where the trigger event is clear and realistic
 5. Only carefully vetted private lenders with strong bank relationships can participate

𝗗𝗲𝘃𝗲𝗹𝗼𝗽𝗲𝗿𝘀: are banks now proactively offering these structures?

Developers wanting confidential benchmarking of current terms, or introductions to lenders and equity JV partners, are welcome to reach out.

#mezzanine #privatecredit #constructionloans

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