The purpose of mezzanine fund is always to complete the brand new gap for the the main city pile anywhere between guarantee and you can senior financial obligation (i.age., mortgage obligations). Maximum loan-to-value (LTV) ratios to possess commercial home mortgages usually vary from 55% to 65%, definition customers must find almost every other supply to cover 35% so you’re able to forty-five% of the price. Of many customers love to fill the capital gap that have mezzanine debt in place of collateral because it basically includes a lower life expectancy costs out of resource. Mezzanine lenders often enable restrict shared LTV percentages regarding 80% so you’re able to ninety%, leaving only ten% in order to 20% of price to possess security.

Mezzanine lending relates to so much more risk than elderly credit. Regarding a foreclosures or other fee default, elder obligations was paid back earliest, then mezzanine personal debt, lastly collateral. Therefore, mezzanine obligations involves elevated threat of losings. Mezzanine lenders is settled to your even more exposure which have advanced focus prices.

Earliest, at the very least 75% of the value of a great REIT’s complete property must feature a house property, bucks and cash things (like receivables), and you can bodies bonds (this can be also known as this new Asset Specifications)

An excellent REIT try a corporate organization which is nonexempt since a beneficial corporation to possess federal tax objectives and tends to make a legitimate REIT election toward Irs. REITs generally must distributed (thru dividends) at the very least ninety% of the nonexempt money annually, and you will, in place of other C corporations, REITs discover a tax deduction for their dividends paid back. Read more