Commercial Real Estate Mezzanine Financings

Summary

Barring a consensual workout, the commercial real estate mezzanine lender's options are limited due to its structural or contractual subordination, the nonrecourse nature of the loan, and that the sole collateral is the pledge of the mezzanine borrower's equity. Thus, the mezzanine lender's only option may be to foreclose on the equity of the mezzanine borrower. What makes this process more uniquely difficult is that, unlike publicly traded securities, there is neither an established market nor a set of recognized standards for the sale of units in a limited liability company. Most likely, the mezzanine lender is looking to take control over the senior lender's borrower with some turnaround goal in mind.