Thinking about adding mezzanine debt to your capital stack? Some considerations are listed below:
- Will the senior lender allow it?
- How high does putting mezzanine debt in place bring your overall Loan-to-Cost on the property? Are you comfortable with the new amount of leverage?
- What front-end fees/points are there? Can these be built into the loan principal amount instead of being cash costs at the point of funding?
- If for a development, will the debt service be paid current during development, or will it accrue? If it accrues, what event will trigger its repayment?
- What is your anticipated source of repayment of the mezzanine loan?
I’m sure I’ve left out many. Add to the list below!