What changes the funding
Stretch senior replaces a two-tranche senior-plus-mezzanine stack with a single, higher-leverage facility. One lender, one deed, one drawdown process — priced between senior and mezzanine, and reaching a higher loan-to-cost than a standard bank senior.
The trade-off is cost versus simplicity: you pay more than vanilla senior, but avoid the complexity and intercreditor negotiation of a separate mezzanine layer.
| Leverage | Higher LTC / LVR than standard bank senior |
|---|---|
| Structure | One facility, one lender, one deed |
| Pricing | Between senior and mezzanine |
| Best for | Higher leverage without a second tranche or equity dilution |
Worked example
The same reference deal runs across all our capital-stack pages: a 24-apartment project with an $18.0m end value and a $12.5m cost base (land, build, consultants and contingency, before finance). Here is how it looks funded with a single stretch-senior facility pushed to a higher leverage point — one loan instead of two, at a blended price between senior and mezzanine.
| Layer | Amount | % of cost |
|---|---|---|
| Stretch senior @ 9.75% | $10.20m | 75% |
| Developer equity | $3.40m | 25% |
| Total development cost | $13.60m | 100% |
| End value (GRV) | $18.00m |
|---|---|
| Loan to value (LVR) | 56.6% |
| Loan to cost (LTC) | 75.0% |
| Cost of debt | 9.75% |
| Finance cost (interest) | $994,182 |
| Brokerage — BluCow (indic.) | $101,476 + GST |
| Development profit | $4.04m |
| Margin on cost | 29.7% |
| Return on equity | 119.0% |
| Equity multiple | 2.19x |
Illustrative only — a single $18.0m reference deal is used across our capital-stack pages so you can compare structures like-for-like. Actual figures depend on the lender, valuation, QS report and the deal.
When it's the right structure
Stretch senior suits developers who want the leverage of a senior-plus-mezzanine stack without the second lender — cleaner, often faster, and with a single point of control through construction.
Advantages and limitations
Advantages: higher leverage, one relationship, no intercreditor deed. Limitations: priced above vanilla senior, and the margin must support the added debt.
Related services
Frequently asked questions
What is stretch senior finance?
A senior facility written to a higher loan-to-cost or loan-to-GRV than a standard bank senior loan, so one lender covers ground a senior-plus-mezzanine stack would otherwise split. It sits, in price and leverage, between traditional senior and mezzanine.
When is stretch senior better than adding mezzanine?
When the simplicity and speed of a single facility and one lender relationship — no intercreditor deed between two funders — outweighs the blended cost. It's often cleaner for developers who want higher leverage without surrendering a share of the project.
How much leverage can stretch senior reach?
Higher than standard senior, typically to a higher percentage of total cost or GRV, with the exact ceiling set by the margin, presales and asset. It's still debt, so the development margin must comfortably support the added leverage.