Don't Miss a Fact,
Sign Up for FINfacts!

FINfacts is a weekly newsletter highlighting recent financings and economic insights.

Subscribe Here

Mezzanine Debt: Stabilized or Bridge/Reposition Assets

6 – 13 – 12

Several capital providers are affording higher leveraged transactions with a tranche of internal Mezzanine Debt for stabilized assets as an offering to investors seeking higher levels of senior debt. This presents a win/win as the lenders are securing additional originations while subsequently adding to their over-all yield. One-stop-shopping for 85% leveraged transactions is offered by Wall Street as well as a small handful of Life Company funders. The higher yielding tranche is wrapped with the senior note for a negligible increase in the total coupon. Borrowers seeking higher debt levels on transactional assets are also witnessing a larger appetite for Mezz Debt and/or Pref Equity levels. Larger assets slated for reposition may obtain total leverage up to 90% with a mid-teens IRR on the most senior tranche. Mezz/Pref Equity allocations for turn-around assets should be at least $5,000,000 for terms of 2 to 7 years. Ground-up construction Mezz/Pref Equity requests are currently limited to pre-leased transactions.