mezzanine-loan-cre

A mezzanine loan is a form of CRE debt that sits between senior debt and equity in the capital stack, typically secured by an equity pledge in the borrowing entity rather than a direct property mortgage.

Structuring an intercreditor agreement involves defining the priority of debt repayment, establishing standstill periods, and outlining remedies for the mezzanine lender while protecting the senior mortgage lender's primary collateral position.

UCC foreclosure for a mezzanine loan occurs when the lender enforces its equity pledge by selling the borrowing entity's ownership interest under Article 9 of the Uniform Commercial Code, bypassing judicial property foreclosure.

Drafting an equity pledge agreement requires detailing the collateral assignment of ownership interests, establishing default triggers, and specifying the lender's rights to execute a UCC foreclosure on the pledged equity.

A loan-to-own strategy is used when a mezzanine lender intends to acquire the underlying commercial property by foreclosing on the pledged equity upon borrower default, bypassing the senior mortgage holder.

Due diligence for a mezzanine borrower entity involves evaluating the property's financial performance, verifying the capital stack structure, and ensuring the entity setup properly isolates the pledged equity from other liabilities.