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Looking for a mezzanine loan? Ocean Pacific Capital is a leader in providing all types of mezzanine programs. Whether mezzanine purchase, mezzanine refinance, or mezzanine construction, our mezzanine department offers a wide variety of options. Particularly in today's tight senior debt market, mezzanine is an increasingly important capital option for growing companies. We provide mezzanine financing from $500,000.00 to $1,300,000,000.00. If you are looking for a commercial mezzanine conduit, or construction mezzanine financing in California, or any other state, with good or bad credit, we can help you find the mezzanine program that meets your unique and individual needs.

A mezzanine loan is a relatively large, unsecured loan (a loan that is not backed by a pledging of assets) with a maturity of at least five years. The loan carries a detachable warrant (the right to purchase a certain number of shares of stock or bonds at a given price for a certain period of time) or a similar mechanism to allow the lender to share in the future success of the business. Mezzanine loans are dependent on cash flow for repayment.

Mezzanine loans are similar to commercial second mortgages, except that mezzanine loans are secured by a percentage of ownership of the project, a 2nd T.D. that owns the property, as opposed to the real estate. If the company fails to make the payments, the mezzanine lender can foreclose on the stock in a matter of a few weeks. If you own the company that owns the property, you control the property. Therefore, a mezzanine loan is secured by the stock of a company, which is personal property and can be seized much faster. Mezzanine loans are large. It is hard to find a mezzanine lender who will thoroughly read through all of the required paperwork for a loan of less than $5 million. Typically, mezzanine lenders typically prefer big projects.

Furthermore, a mezzanine loan, as John C. Murray explains in his article entitled "The Mezzanine Financing Endorsement," is "a result of the increased securitization of real estate and the packaging of pools of loans for sale into the secondary market, mezzanine financing has become very popular in recent years. Mezzanine financing (or, perhaps more appropriately, mezzanine capital) fills the gap between the first mortgage financing, which usually has a loan-to-value ratio of forty to seventy-five percent, and the equity participation of the principals of the borrower, which is usually no more than ten percent of the cost of the project. Mezzanine financing commonly supplies financing of ten percent to fifty percent of the project's capital structure cost. This type of financing can take several forms. Most commonly, it involves extending credit to the partners or other equity holders of a borrower and taking a pledge of such parties' equity interests (including the right to distributions of income). Alternatively, the lender may take a preferred equity position, which is entitled to distributions of excess cash flow after debt service, ahead of the borrower's principals. A "combination" loan structure may also be used to combine a first mortgage loan with mezzanine financing at an aggregate loan-to-value ratio of ninety to ninety-five percent. This type of structure may contain a shared appreciation or contingent feature, an exit fee paid by the borrower, or sometimes, both. The borrower in a mezzanine loan is often an LLC, and the equity participant in the borrowing entity is frequently itself an LLC. In those situations where the mezzanine lender is taking a pledge of some or all of the equity interests in one or more of these entities in connection with the mezzanine loan, the lender may look to the title insurer for special forms of title-insurance coverage. The lender may seek some form of non- imputation coverage, i.e., assurance that the title insurer will not deny coverage under the owner's policy based on matters known to the borrowing entity (or its members) being imputed to the lender. Copies of endorsements offering this type of coverage are attached hereto. Title underwriters may require an affidavit and an indemnity agreement from the existing LLC members, and from the mezzanine lender when it exercises its foreclosure rights under the pledge and succeeds to an ownership interest in the mezzanine borrower. These affidavits and indemnity agreements will state that the respective parties have no knowledge of any fact that will affect the coverage under the policy, and will hold the title insurer harmless for losses resulting from its reliance on such affidavits and indemnities. The title insurer may also require, and review, financial statements from all relevant parties in order to achieve a comfort level for relying on the aforementioned indemnity. The attached endorsements state that (as agreed to by the insured and its equity members) all payments for loss under the policy will go directly to the mezzanine lender, and that there will be no denial of coverage as the result of the transfer of any of the LLC membership interests to the mezzanine lender. The endorsements further provide that the title insurer waives its right of subrogation and indemnity against any of the insured owner's equity owners until the mezzanine loan is paid in full. If a loss occurs under the policy, the amount paid by the title insurer is limited to the actual loss less a percentage thereof equal to the percentage of LLC membership interests not owned by the mezzanine lender at such time. If the loss occurs before the mezzanine lender's acquisition of the insured owner's membership interests, the mezzanine lender is not required first to pursue its remedies against other collateral. However, the title insurer's liability in any event is limited to the amount of the mezzanine loan, and the title insurer is entitled to credit for any amount paid out under a simultaneous loan policy. The title insurer is also entitled to reimbursement from payments received by the mezzanine lender from other security. The term "mezzanine lender" can be defined to include the owner of the mezzanine loan and each successor in interest in ownership of the mezzanine loan, and include any subsidiary or affiliate entity of the owner of the mezzanine loan. The availability and content of the attached endorsements will vary depending on factual and underwriting considerations, as well as statutory and regulatory restraints in certain states." Mezzanine lenders and commercial mezzanine construction lenders await our clients' application for a mezzanine loan, a multifamily or apartment construction loan, a commercial construction loan, a condo, or residential subdivision construction loan, or a land development loan.

Click here to apply now or for more information, and our recent closings, please visit our commercial loans page.

Whatever your financing needs,
we will tailor a loan that's right for you.

 


Daily Oil & Gas and Wall Street Journal News
5/31/20

ANPG provides data package for oil exploration onshore Angola
Posted on Friday May 29, 2020

The Angola National Agency of Oil, Gas, and Biofuels has provided more onshore data for oil exploration in the Lower Congo and Kwanza onshore basins ahead of an official announcement to begin new bidding rounds.

APT identifies lower Jurassic source rocks offshore Canada
Posted on Friday May 29, 2020

Applied Petroleum Technology (APT), Oslo, has identified lower Jurassic source rocks and a genetically related set of oil shows in the Southern Grand Banks petroleum system offshore Canada.

Jersey gains operatorship of UKCS license P2170
Posted on Wednesday May 20, 2020

NOCs to slash 2020 exploration budgets over a quarter on average
Posted on Wednesday May 20, 2020

National oil companies (NOCs) globally are estimated to cut exploration budgets by over a quarter on average in 2020, says Wood Mackenzie.

Emperor Energy begins pre-FEED for Judith gas field
Posted on Tuesday May 19, 2020

Emperor Energy entered a binding agreement with APA Group for pre-front end engineering and design work on Judith gas field in Gippsland basin permit Vic/P47 off eastern Victoria to the north and east of ExxonMobil-BHP’s producing Bass Strait fields.

Wall Street Journal
Commercial News

5/31/20

WSJ.com: US Business

Retailers and Restaurants Grapple With Damage, Just as Many Were Starting to Reopen
Target, Walmart, Nike and small family businesses, already crippled by the coronavirus pandemic, have collectively closed hundreds of locations or are recovering from looting and physical damage related to protests.

SpaceX Craft Docks With Space Station, Ushering in New Era
Elon Musk?s SpaceX on Sunday successfully docked a company-owned capsule carrying a pair of NASA astronauts with the International Space Station, opening a new chapter in commercial space endeavors.

Chip Industry Seeks Billions to Expand U.S. Manufacturing
Federal funds will be sought for factory building and research to keep the U.S. ahead of China and others generous in subsidizing their companies.

Plexiglass Is the New Hot Commodity as Businesses Try to Reopen
Manufacturers are racing to crank out the hand sanitizer, masks and clear plastic dividers that are seen as key to reopening the U.S. economy amid the pandemic. Stepped-up production has sent materials prices soaring.

Meat Plants Reopen, but Burgers Stay Pricey
A national meat-supply crunch driven by the coronavirus pandemic is beginning to ease, though meat and grocery suppliers expect the effects to linger for months. Meanwhile, consumers are paying more for ground beef and other staples across the country.

Economy Week Ahead: Manufacturing and Unemployment Data
Friday?s U.S. jobs report anchors another week of data that will reflect fallout from efforts to contain the new coronavirus.

Consumers Spent a Lot Less, Saved More During April Lockdowns
U.S. consumer spending, the U.S. economy?s main engine, fell by a record 13.6% in April during coronavirus lockdowns, but there are signs suggesting damage from the crisis is starting to ease.

BRE #:00619059
Charles Elfsten, President
Charles A. Elfsten
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