Loan program
Mezzanine debt and preferred equity
Subordinate capital that fills the gap between senior debt and sponsor equity.
When senior debt leaves a gap, sponsors can fill part of it with mezzanine debt or preferred equity instead of additional common equity.
Mezzanine debt
A loan secured by a pledge of the ownership interests in the property-owning entity rather than a mortgage on the real estate. Governed by an intercreditor agreement with the senior lender; remedies are typically a UCC foreclosure on the pledged interests.
Preferred equity
An equity investment with priority returns ahead of common equity, often with control rights if performance lags. Senior lenders may view it more favorably than mezzanine debt because it is not a loan.
Considerations
- Higher cost than senior debt; lower than most common equity
- Senior lender consent and intercreditor/recognition agreements are required
- Watch combined leverage, coverage and maturity alignment
Educational only. This page explains how mezzanine debt and preferred equity work. Globus Capital Advisors does not arrange, place or offer mezzanine debt or preferred equity, and nothing here is an offer of securities or investment advice.
Educational information only. Not legal, tax, municipal-advisory, investment or lending advice, and not an offer or commitment to lend or to issue bonds. District rules, thresholds and timelines vary by state and municipality; consult bond counsel and qualified advisors. Calculator outputs are illustrative estimates, not quotes or approvals.