Application of Mezzanine Financing in the Real Estate Industry

This thesis focuses on the use of mezzanine financing in the European real estate sector. Its aim is to present mezzanine capital as a hybrid financing instrument that combines elements of debt and equity, and to assess its potential as a complement to traditional forms of financing for development projects. The thesis is divided into a theoretical part, which outlines the fundamental characteristics of mezzanine financing, and a practical part based on the analysis of five empirical studies. The findings reveal a sharp increase in the volume of mezzanine capital between years 2000 and 2006, its structural transformation during the financial crisis, and its adaptability under credit constraints. The crisis led to higher interest rates, reduced payment-in-kind interest, and greater use of warrants. A negative correlation was identified between cost components, as well as a weakening of the substitution relationship between mezzanine and senior debt. A case study on Estonia revealed barriers related to a conservative banking environment—similar to those observed in the Czech Republic. The thesis also introduces a typology of four forms of mezzanine investments and emphasizes the need for a more comprehensive risk assessment. In conclusion, mezzanine capital is recommended as a promising financial tool, particularly in times of increasing market and geopolitical uncertainty.