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The Mezzanine Section is the Nose Bleed Section

By Doug Cornelius

The Wall Street Journal has an article in the C Section by Jennifer S. Forsyth and Kemba J. Dunham on real estate mezzanine loans: Real-Estate Investors Like View From Mezzanine Section.If mezzanine investors think that it is a "no-lose bet" they are getting themselves in trouble. There is a higher return on mezzanine debt because it is riskier.The senior mortgage lender will often set limitations on the ability of the mezzanine lender to foreclose on the borrower and take over control of the borrower. Typically this will include the mezzanine lender stepping into the guarantees of the now-wiped out guarantors. Since the collateral is the equity ownership, the mezzanine lender steps into all of the liabilities of the borrower. This may mean that trade debt has piled up and other obligations may be outstanding...continue to full post

Full post as published by Real Estate Space on December 19, 2007 (boomark / email).