Mortgage Observer

Mezzanine Lending: Rising Prices May Pose a Dilemma for Mezz Shoppers

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Rising mezzanine and preferred equity prices, combined with ever-higher land and real estate prices in New York are causing more borrowers and sellers to rethink deals, according to Kramer Levin Partner Jay Neveloff. In some cases that simply means reevaluating their approach to financing acquisitions and developments, while for other buyers and sellers it means “second thoughts” about closing a deal, he said.

“Over the past two to three months a growing number of people have started to reconsider transactions due to pricing issues,” Mr. Neveloff told Mortgage Observer. “The pricing for mezzanine debt has continued to increase steadily. That’s a result of supply and demand and it’s also result of borrowers seeking greater leverage in transactions.” Read More

Mortgage Observer

Much Ado About Mezzanine Lending

Joshua Stein

Mezzanine lending offers lots of opportunities for nonrecourse carveout guarantors to get into trouble. This month’s column tells the story of how one of those opportunities played out, in a litigation where I acted as an expert witness called by the guarantor.

The story began when a lender closed a nonrecourse mezzanine loan using a set of “boilerplate” documents. After the loan defaulted, an investor bought it; the investor connected a complex series of dots in a creative way that no one ever intended or imagined, and—bingo—the investor claimed the guarantor had become personally liable for the entire loan. Read More

Mortgage Observer

Mezz Lenders: Chasing Yield at Any Cost

Mezz lending may offer too much risk for the reward.

“Failure is not a single, cataclysmic event. You don’t fail overnight. Instead, failure is a few errors in judgment, repeated every day,” American entrepreneur Jim Rohn has often been quoted as saying. These days, many in the mezzanine-lending sphere ought to heed his words.

Some remember the early days of mezzanine financing in the 1980s. Back then, such loans were simply called second mortgages. The terminology changed because most first-mortgage lenders became embattled in lawsuits they didn’t anticipate when properties got into trouble during the savings-and-loan crisis late in the 1980s. Read More

Mortgage Observer

The Return of Mezzanine Financing

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Mezzanine financing, filling the gap between first mortgage lending and the equity that investors have to finance, has returned with a vengeance. As Joshua Stein reported in the April 2013 issue of this magazine, “Today, first mortgage lenders want to lend again, but it’s very much not like 2007 all over again. Proceeds are down, conservatism is up, and many borrowers find themselves with a gap between the equity they’re willing to risk in a deal and the first mortgage financing they’re able to find.” Read More

Mortgage Observer

CBRE Debt and Equity Team Talks Trends

Messrs. Fisher and Braddish.

For CBRE’s Keith Braddish and Mark Fisher—the two elder statesmen in the firm’s capital markets debt and equity finance division—the more fractured lending environment that has arisen out of the collapse of the CMBS market and the concurrent economic malaise has meant the opportunity to dazzle and shine. Read More