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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 $1,000,000.00 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 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
7/15/20

Otakikpo JV advances Otakikpo drilling plans with service agreements
Posted on Monday July 13, 2020

Otakikpo JV, a joint venture of Green Energy International Ltd., Abuja, and Lekoil Ltd., London, signed definitive agreements to advance Otakikpo marginal field development in OML 11 in Nigeria’s Niger Delta.

Beach, Bridgeport awarded offshore Otway permits
Posted on Monday July 13, 2020

Beach Energy Ltd., Adelaide, and Bridgeport Energy Ltd., Sydney, were awarded two new exploration permits in the inshore sector of Otway basin of southwest Victoria.

Talos, Block 7 partners have 120 days to submit unitization plans for Zama field
Posted on Friday July 10, 2020

Talos Energy along with Block 7 partners and PetrĂ³leos Mexicanos (Pemex) have 120 working days to submit a Unitization and Unit Operating Agreement to Mexico's Ministry of Energy for Zama field development.

ReconAfrica subsurface evaluation to aid Kavango basin exploration
Posted on Thursday July 09, 2020

Reconnaissance Energy Africa Ltd. (ReconAfrica) completed a subsurface evaluation delineating large prospective conventional hydrocarbon bearing structures throughout the entire Kavango basin.

Equinor awards portfolio agreement for Oseberg upgrade project
Posted on Wednesday July 08, 2020

Equinor has awarded Aibel a portfolio agreement for modification tasks at Oseberg fields in the Norwegian North Sea.

Wall Street Journal
Commercial News

7/15/20

WSJ.com: US Business

Apple Wins Major Victory in Battle With EU Over Tax
The bloc?s second-highest court sided with the U.S. company over a $14.8 billion tax bill that EU antitrust officials had said the company owed to Ireland.

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U.K. to Ban Huawei From 5G Networks Amid China Tensions
The British government said it would bar telecom companies from purchasing new equipment made by China?s Huawei and gave them until 2027 to remove its technology from their 5G wireless networks, a sharp about-face that marks a significant victory for the U.S.

Auto Makers Grapple With Worker No-Shows as Covid-19 Cases Surge
General Motors and Ford are struggling to keep workers on the job as coronavirus cases increase, forcing the companies to cut shifts, hire new workers and transfer others to fill vacant roles.

Searching for Video? Google Pushes YouTube Over Rivals
Facebook and other competitors host the same videos, but engineers have made changes that effectively preference YouTube?owned by Google?over other video sources. Journal tests show YouTube usually ends up first and takes most of the slots in Google Search video carousels, prime results real estate.

U.S. June Consumer Prices Rose Sharply
U.S. consumer prices rose sharply in June while states were broadening efforts to reopen, with costs snapping back for products and services that were hit hard by the coronavirus pandemic.

Sobering Economic Data From Europe, Asia Dash Hopes for Swift Recovery
Early data suggest the recovery from the economic crisis precipitated by the coronavirus pandemic could take longer than originally hoped, with countries facing a long slog to recover lost jobs and income.

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