How Are Mezzanine Loans Structured?

The CEO of Relentless Capital, LLC, Evan Seiden of FL oversees investment activities focused on off-market real estate properties with a focus on developing professionally managed truck parking facilities and truck stops. As testament to his skill in the field of real estate investing, Evan Seiden of FL spoke at a 2016 panel on mezzanine financing and loans and operates one of south Florida's largest truck stops known as Miami Truck Parking.

A non-traditional financing option, mezzanine loans combine equity and debt financing. Due to this unique blend, they are typically structured like subordinated debt loans. These types of loans have less seniority and higher interest rates than traditional loans, but they have more flexible repayment terms and are often available when other lending choices are not.

Most of the time, mezzanine loans support acquisitions or growth projects planned by a company. They provide these businesses with the support they need as they work on increasing their capital. At the same time, companies don’t have to worry about paying back the loan during the debt term. Rather, repayment begins at the end of the term, thus allowing companies to improve their cash flow and use the additional funds they make to pay off existing debts.

Common Real Estate Investment Structures

Commercial real estate investor and FL resident Evan Seiden has served as CEO of Relentless Capital, LLC, for the last three years. Before working in FL, Evan Seiden helped structure numerous debt and equity investments during his time as Chief Executive Officer of a New York based real estate private equity fund as well as holding a prior position as Manager at Lone Star Funds.

Though most people think of real estate ownership through the lens of purchasing a single property and maintaining total control over that asset. In reality, sole ownership is just one of a myriad of real estate investment structures that investors can consider. There are numerous debt and equity structures that are designed to help investors meet their goals.

Tenants-in-Common (TIC), or syndicated equity, is one such structure that gives investors total interest in the properties they own. They can receive up to 100 percent of profits and cash flow from their properties, while leaving daily oversight to third-party managers. Best utilized with commercial properties where anticipated ownership is to include multiple individual investors or family members. TIC structures are generally illiquid and can last for up to 10 years. This equity structure exists on top of either assumed loans or new debt. As such, it is most beneficial to investors when a property increases in market value by the end of term and where multiple individual investors are looking to participate.

Investors seeking shorter-term structures can pursue high leverage private hard-money investments, which can last for between one and three years. These debt structures allow investors to purchase properties with less equity .