Mezzanine financing is a unique financing instrument which doesn’t cleanly fall into a specific category of the capital markets financing quadrant. It’s a general term that refers to any financing vehicle (debt or equity but typically issued by private sector participants) that bridges the gap between senior debt and sponsor equity. It can be structured as preferred equity or as debt. In general, traditional mezzanine financiers are not entitled to receive returns on their investments until senior debt holders are fully compensated. Because of its subordinate position, the mezzanine loan assumes a higher risk profile than senior debt but retains a less risky position than preferred equity. With this understanding, Mezzanine debt investors seek returns between senior debt lenders and preferred equity investors but this will largely depend on how the deal is structured. Debt or equity to enable borrower to obtain close to 100% financing for existing properties as well as property acquisitions.
Mezzanine loans are generally provided by private equity lenders. The Cohen Organization has reliable and strong relationships throughout the Private Equity Real Estate community.