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12-14-2022, 05:54 AM #1
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Mezzanine financing
I have a couple of lenders currently but I am seeking some feedback on our forum on what lenders you currently use for mezzanine financing and why?
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12-15-2022, 09:52 AM #2
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I don't use them. I work with private lenders that fund 80% LTC.
Not hard money instead tailor-made capital, creative financing, custom fit-terms and conditions. (Debt/equity, JV, SPV or unique deal structuring depending on the deal.)
Sponsor, Mezz, Sn Lender is tough to stack for groups for them all to line up, especially in new developments and more risk-adverse projects.
Plus, they're all gonna demand at least interest only and cookie-cutter terms, that don't help the group, esp with what we're heading into. And mezz rates right now, along with CRE is insane.
So they're taking the money they get to pay back the money immediately, which is why these groups are always trying to swap one lender for another, as times up and they need to get another lender in if project isn't completed yet before they can balloon it out or sell off the units/etc.
What type of deals are these?
Happy to share how my private lenders fund projects to see if there's a fit for some of your clients.
We're way outside-the-box not cookie cutter, 95% of clients with my private lender continue to work with them. Paid on every deal they ever do.
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Kristina Gilbertson
CEO, Prosperity Financing
Website: https://prosperityfi.com
Office: (800) 516-9082
• Tailor-Made Capital & Creative Financing, JV, Debt/Equity
• Off-Market Luxury Properties - Condos, Developments, CRE
• Unique Cash Injection Opportunities
Serving // CRE • Construction • Developments • Commodities • All Business Sectors • Start-Ups • Cannabis
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12-21-2022, 10:07 PM #3
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- Apr 2022
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There are many scenarios where you'd use a structured capital component like mezz or pref equity. Plain english, its a subordinate (2nd position) debt piece used to maximize your leverage. Contrary to the above, the blended rate on fixed rate + mezz or pref is substantially cheaper in the aggregate when you compare it to taking on floating rate debt (which invariably forces you to purchase int. rate caps that are extraordinarily expensive today). Mezzanine debt is a bit different from pref in that it creates an intercreditor relationship that both parties must agree to. Pref is different in that the capital provider takes an ownership stake in the real estate holding company should there be any default (whereas Mezz has first right to remedy). As to specific scenarios/when & where/and how to layer it into the stack: The term of the structured piece should be co-terminous to the senior loan across most scenarios (not uncommon however is stacking pref over Agency debt and refi out with supplemental at the senior rate). Today its most commonly used in value add deals (bridge scenario) and recapitalizations. Developments are doable if you're building to a high enough exit. Reach me if you have any commercial real estate deals, as a RECA firm we just hit our $4 billion mark in transactions for the 2nd year in a row, AND we pay a referral fee. You can reference our transactions on our website https://eyzenberg.com/case-studies/
Last edited by MaxAEP; 12-21-2022 at 10:09 PM.
Maxim Yanovich
Eyzenberg & Co.
E: myanovich@eyzenberg.com
C: 305-710-9870
1200 Brickell Ave, unit 640
Miami, FL.
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12-27-2022, 05:56 PM #4
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The reason people need mezz/preferred equity - is because they don't have a sr. lender that has as high LTC -loan-to-cost of the entire project - not just LTV - loan-to-value of the RE deal.
It's not that Mezz doesn't work for groups - its' b/c they can't find a sr lender like what I shared with higher LTC/LTV or don't have enough equity to qualify for a sr lender or don't want to give up equity to more people to get their deal done.
All legit reasons.
There are plus and minuses to all deals depending on the deal.
The difference my lenders bring is custom-fit terms and conditions - mezz is high rates, debt/equity (sometimes) and immediate payments. They'll extend payment terms out like 7-9 years depends on each mezz lender; however, you still have to get your outtake done. My lender will go 2-3-year out no payemtns (not even interest only) saving the client major stress and not just taking capital to have to make payments back on that capital - it's why groups are looking to swap out lenders as project not done, something happened in the workd, etc. etc.
And then they need multiple lenders in the deal, which can create problems to get the deal done, seen this a ton were lenders won't come together., mezz/sr, etc.
Maxim has a great product.
Just there are other options in the market versus just this. And FYI - my lender funds over $4B++ a year.
Commissions paid on all deals and On all going deals
95% of my privates lenders continue to work with them - you'll get paid consistently on them all.
Cheers,
Kristina
CEO, Prosperity Financing
www.prosperityfi.com
hello@prosperityfi.com
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12-27-2022, 07:00 PM #5
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FYI - I can fund all States and Worldwide.
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05-01-2023, 04:49 PM #6
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- Jan 2023
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I have a deal where the client needs a $1.75B 3rd party loan (12mos @ 3%), as my direct lender will lend him $8,802,500.00 to repay the 3rd party lender $1,802,500.00 over 12 mos. The client will agree to reasonable back-end commissions.
Nknowvative@gmail.com
(209)881-4410
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05-01-2023, 04:54 PM #7
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- Jan 2023
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Hi Kristina,
Will your lender go up to $1.75B for 12mos @ 3%?
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