Filling the Gap: Is Mezzanine Lending the Solution to the Funding Gap?
1 It is a universal truth that borrowers now require more capital to secure debt finance for refinancing or new real estate investments. With traditional channels for raising capital and debt severely constrained for the foreseeable future, opportunities for new investors to bridge this funding gap have been created. Mezzanine finance sits in the space between low-risk senior lending and full equity risk. It’s possible for these lenders to recoup higher returns, as they occupy the space directly above a senior lender on the risk curve. Post–Lehman Bros, more than 100 mezzanine lenders have emerged across Europe. This group has been widely discussed as offering the “solution” to the funding gap — but can or will they be the answer to the real estate industry’s hunger for debt? Here I look at where they might be most active and why. There is currently €960 billion of