Mezzanine Financing
Mezzanine loans are financings that are subordinate to a property's first mortgage debt but senior to the equity invested by the borrower. The loans have both debt and equity characteristics. They offer a fixed or floating interest rate that is paid currently by the borrower; have collateral in the form of assignments of partnership interest or other subordinate collateral; and, importantly, receive equity participation in the cash flow streams and/or residual value of the projects.
The return on investment percentages shown in the chart to the left are hypothetical and are used to demonstrate how mezzanine investing can enhance return. The opportunity for loss also exists in all investment activity, including mezzanine investing, and therefore nothing in the chart should be construed as a guarantee of positive returns. |
