Define the gap first
Identify what the senior lender can fund, what the sponsor can contribute and what remains. Additional leverage should be assessed against the project’s ability to service and repay the combined obligations.
Understand the structure
Mezzanine debt is typically secured by interests in the property-owning entity rather than a second property mortgage. Its rights and remedies must be considered with the senior loan and the intercreditor agreement.
Compare the full obligation
Current-pay interest, accrued interest, fees, minimum returns, repayment priority and control rights can be more important than the quoted rate. Model the combined structure through the proposed exit.
Consider other solutions
A different senior loan, seller financing, an assumption, additional sponsor capital or a revised project budget may address the gap. We help evaluate the alternatives and the effect on the transaction.
What to send us
Senior loan terms, sources and uses, ownership structure, project cash flow, the funding gap and the proposed repayment plan.
How we arrange financing · Compare term sheets · Documents lenders request
Test whether more debt solves the actual problem
A shortfall caused by the senior lender’s leverage limit differs from a shortfall caused by weak property cash flow. Mezzanine debt may address a permitted financing gap, but it also adds payment and repayment obligations. If the business plan cannot support the combined debt, adding another loan can make the exit more difficult.
We compare the senior-only structure with the proposed combined borrowing and other available approaches. That means reviewing cash needs, lender consent, accrued balances and repayment under more than one operating outcome before pursuing terms.