How is mezzanine debt priced?

Mezzanine pricing has 3 components: (1) cash coupon paid monthly (typically 8 to 12%), (2) PIK accrual that compounds to principal (typically 2 to 4%), (3) sometimes warrants or kickers at exit (1 to 3% IRR equivalent). Effective IRR to lender = sum of all three. Real estate mezz typically 12 to 15% all in. Recap mezz 14 to 17%. Construction mezz 15 to 18%.

What is PIK in mezzanine?

PIK = Payment In Kind. The unpaid interest portion accrues to the principal balance and compounds. Worked example: $5M mezz at 11% cash + 3% PIK over 5 years. Cash coupon $550K/yr. PIK accrues from $150K year 1 to ~$170K year 5 (compounding). Term end balance ~$5.85M (vs. $5M par). Effective IRR ~14% combining cash + PIK.

When do warrants make sense in mezz?

Warrants typically appear in: corporate mezz (LBO + growth equity), real estate mezz on construction or repositioning where equity like upside justifies, sponsor friendly structures with longer term/lower cash coupon. Warrants worth ~1 to 3% IRR equivalent at exit. Real estate stabilized mezz typically NO warrants, pure cash + PIK structure.

Free Mezzanine Tool

Mezzanine Pricing Calculator

Cash coupon + PIK accrual + term + warrants → all in effective cost + balloon balance. Real estate, corporate, recap, construction mezz scenarios.

Mezzanine Terms

Mezzanine Principal

Cash Coupon (% paid monthly)

PIK Rate (% accruing to principal)

Term (years)Warrant IRR Equivalent at Exit (%, 0 if none)

Real estate mezz typical: 10 to 12% cash + 2 to 4% PIK + no warrants. Corporate mezz: 9 to 11% cash + 3 to 5% PIK + 1 to 3% warrants. Construction mezz: 11 to 13% cash + 3 to 5% PIK + 1 to 2% warrants.

Pricing Output

Annual Cash Coupon Payment

$550K/yr

Total Cash Paid Over Term

$2.75M

Term End Balloon Balance (incl. PIK)

$5.80M

PIK accrued: $796K (compounds annually)

Total Cost (Cash + PIK)

$3.55M

Effective All In Rate (Cash + PIK + Warrant)

14.00%

Vs. senior CRE debt at ~6 to 7%, mezz premium ~6 to 9 points

About these figures

Rate, spread, leverage and term levels shown here are indicative. They reflect general conditions among direct capital sources as of October 1, 2026 and describe what the market has recently supported, not an outcome available to any specific borrower.

Actual pricing, leverage and terms are determined by the lender through underwriting, once full transaction materials have been reviewed. Nothing shown here is a quote, a commitment, an offer of credit or a guarantee.

PeerSense is a capital advisory firm. We source capital through a curated network of commercial lenders and capital sources. Every credit decision belongs to the lender.

Market conditions move. Figures may change without notice, and a level that cleared last quarter may not clear today. What these terms mean.

See Today's Mezzanine Rates →

Your Mezzanine Pricing Result Is Ready

Want a real mezzanine quote with cash + PIK + warrant structure?

Talk to PeerSense. The capital source sets the cash, PIK, and warrant. This sizer is not a quote.

Save your results

You can get the numbers from this estimate by email.

Mezzanine Financing: The desk will reach out. No obligation.

How big is your deal?

Where are you in the deal?

Equity or down payment ready

Credit score

Timeline to close

What best describes your company

Liquid funds available outside this deal

Where is the property or business

By checking this box and submitting my information, I electronically sign and agree that PeerSense, Inc. and its affiliates, funding partners, and franchise partners may contact me at the email address and phone number I provided, including by phone call, SMS/text message (including autodialed, prerecorded, or artificial voice messages), and email, for marketing, franchise research, and funding related purposes, even if that number is on any Do Not Call list. Message and data rates may apply. Consent is not a condition of purchase. I may opt out at any time by replying STOP to texts or emailing info@peersense.com. I have read and agree to the Privacy Policy and Terms of Service.

Referral fee realized at closing · Or call (317) 452 6990