The Rise of Mezzanine Debt
Mezzanine debt is set to become an important source of capital for real estate investors, developers and those looking to refinance following the tougher capital regulatory requirements introduced by the Australian Prudential Regulation Authority and tighter underwriting by the big four banks.
Mezzanine finance bridges the gap between senior debt and equity investment. In our report, Trident Real Estate Capital examines the typical deal terms of mezzanine finance in a real estate transaction and utilises a case study to explain how mezzanine finance may boost expected returns for equity investors. The paper warns real estate players that before committing to mezzanine debt they must understand the real risk of increasing leverage in order to weigh up whether the expected return is commensurate with the additional risk and transaction complications.
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