Aussie fintech launches blockchain-backed mezzanine finance app

MezFi, a Melbourne-based fintech, has launched a new blockchain-backed investor platform offering exposure to the global mezzanine finance market.

Pitched at Australian and New Zealand retail investors, the platform leverages the Ethereum blockchain network, with investors purchasing Digital Fund Tokens (DFTs) exposed to mezzanine-financed – “high-yield” – property development deals.

Investors as of today can purchase DFTs priced at AU$5,000 each; these represent an individual unit in the MezFi Fund 1. Investors will also have the choice of purchasing tokens in either Australian dollars or cryptocurrency (USDC).

MezFi Fund 1 is an ASIC-registered managed investment scheme. MezFi projects returns of 9% to 13% per annum (pre-tax, after fees and costs) for the fund. The fund’s management fee is 2.2% p.a.

MezFi says the platform will “democratise access to mezzanine finance in the property sector” – one that has “previously [been] reserved for high net-worth individuals and institutions”.

“Combining blockchain technology with traditional financial expertise, MezFi is breaking down the walls around mezzanine finance, opening up new doors for Australia’s retail investors and those seeking new entry points to investing in lucrative property finance deals in Australia and overseas,” the fintech wrote.

“By dramatically lowering the financial barriers to entry in mezzanine finance deals, you no longer need to be an ultra-wealthy individual to invest like one,” added MezFi founder and chief executive Jerome Dadon.

Mezzanine financing refers to a hybrid of debt and equity financing. Effectively, this asset class enables lenders to convert debt to an equity interest in a company in case of default.

MezFi notes that investors’ security will be subordinate to the senior lender and paid after them in case of default. As a result, ‘mezz’ financing – once known as ‘second mortgages’ – involves a higher degree of risk than senior bank debt or mortgage funds, but typically offers more generous returns.

At the conclusion of a four-month offer period (referred to as the “mint window”), MezFi will release capital raised from investors to an investment team for investments in Australian and international property developments.

As a registered managed investment scheme, MezFi touts its Fund 1 as offering investors the dual benefits of decentralised blockchain technology and Web3 innovation with ASIC’s regulatory oversight.

“By bridging Tradfi [traditional finance] and Web3, MezFi is democratising access to the high-return world of mezzanine finance, and bringing transparency, real-world assets and high returns under one roof for both Web3 native and traditional investors,” the fintech writes.

Founded in 2022, for Dadon – touted by the fintech as “an experienced funds manager, property developer, and seasoned entrepreneur” – “MezFi is the realisation of an ambition to level the playing field for everyday investors and crypto adopters in Australia eager for new, flexible access to Australia’s vibrant property sector”.

“It also represents the coming together of considerable technological, financial, and strategic talent to make what was barely imaginable a short time ago, a new part of every savvy investor’s portfolio.”

MezFi DFT holders also automatically acquire a non-fungible token (NFT) digital art piece “immutably linked to their investment and recorded on the blockchain”.