Mezzanine Property Finance – Podcast

What this episode covers

In this episode, we explain step by step what mezzanine capital is and where it sits in the capital structure of a real estate project: between the bank’s first senior loan and the equity of the project sponsors. The subordination makes it look like an additional equity for the bank – and makes financing possible that would otherwise fail at the own funds limit.

We use concrete constellations to show what the typical stratification looks like: Bank 60–75 %, Mezzanine 10–25 %, real own funds 5–15 %. And we explain why the apparently high subordinated interest rate in the mixed calculation of the overall structure usually remains moderate, while the equity leverage significantly increases the yield.

Key points

• Where mezzanine capital stands in the capital structure and how the subordination works.
• Typical applications include equity gaps, land acquisitions and releasing capital from existing properties.
• Why the mixed calculation is more important than the isolated subordinated interest rate.
• What conditions lenders expect – substance, own funds, exit.
• When mezzanine is the wrong tool and you better keep your fingers off.

For whom the consequence is worthwhile

The result is aimed at property developers, property developers and investors who want to use their equity more efficiently and realize several projects in parallel. It provides the basic understanding to ask the right questions in conversation with lenders and to classify offers realistically.

If you want to go deeper, you will find the complete classification with conditions, forms and investor landscape on our service page to the mezzanine capital as well as the calculated numerical example on the page "mezzanine capital for property developers".