Mezzanine liens, also called Subordinate Liens can be a huge leverage advantage for Real Estate Investors who are preserving equity for multiple transactions, or for whom are just short of equity requirements to secure a senior loan that tops out at 65-70% LTV. Mezzanine loans usually span the gap between senior loans and the equity required and usually take the spot in the capital stack between 60-85% LTV. These mezzanine loans usually carry a point or two upfront, carry anactive interest rates in the neighborhood of 8-11% and a point or two exit, to yield a combined 9-13% to their investors.
Often used in larger value-add, or stabilized property acquisitions, Mezzanine loans can allow Property owners to extend the power of their equity through more leverage. For example, on a $50 million acquisition, a senior loan from a bank or insurance company may cover only 60-65% LTV, or $30-35 million at a rate of 4-6%. A mezzanine lender would then come in and supply an additional $15 million at 8-10%, and then the buyer would be responsible for the down payment of $5 -$10 million.
Used properly and prudently mezzanine loans can allow developers and investors to reach higher leveraged returns on their equity, and leave some equity available for their next transaction.
Choosing the right mezzanine financing partner in Colorado can be a bit challenging. For your mezzanine loan needs in Colorado, you can trust Braco Realty Capital to find the right one for you. Our company, with decades of expertise in real estate financing, help owners seeking capital beyond equity and bank debt. When you connect with us, we make sure the process of getting finance is without hassles.