Mezzanine loans on commercial properties are becoming increasingly popular. Mezzanine lenders reported zero losses on mezzanine loans. Mezzanine loan rates are falling.
A mezzanine loan is a form of commercial loan used to finance a large commercial properties - typically tall office towers, large hotels, shopping centers and industrial parks.
Mezzanine loans are large loans, typically at least $3 million. They are generally placed behind large first mortgages of at least $8 million. Few institutional mezzanine lenders will consider mezzanine loans of less than $3 million, although a handful of expensive hard money lenders may consider mezzanine loans as small as $1 million.
Mezzanine loans are different from mortgages in that the debt is secured not by a mortgage on the property, but rather by a security agreement against the owner’s stock in the company that owns the property. If the borrower doesn’t make his payments, the mezzanine lender will simply foreclose on the stock of the corporation or the membership interests of the LLC that owns the property.
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