Mezzanine Financing: Subordinate Debt Layer

Mezzanine finance sits between senior loans and equity. It offers higher returns in exchange for increased risk, secured by a pledge of ownership interests.

• Loan-to-Cost: Up to 85–90 percent when combined with senior debt.
• Pricing: Interest rates in the 10–20 percent range, plus arrangement fees.
• Security: Pledge of equity or membership interests via intercreditor agreements.
• Term: Typically 2–5 years, matching project stabilization or sale cycles.

This layer lets sponsors preserve equity while funding construction, lease-up or value-add work.

Bridge Financing: Short-Term Gap Funding

Bridge loans cover the period between acquisition and permanent financing or property stabilization. They deliver capital quickly to close transactions or underwrite renovations.

• Advance Rates: Up to 70–75 percent of property value, depending on asset quality.
• Term: 6–24 months with interest-only payments or payment-in-kind structures.
• Rates: Generally 8–12 percent, reflecting a premium over long-term debt.
• Exit: Refinance with a permanent mortgage or sell upon completion of value-add work.

Bridge finance speeds deal execution and funds critical early-stage improvements.

Structuring Mezzanine & Bridge Deals

Our process begins with cash-flow modelling and project timelines. We then:

1. Assess Funding Gap — Identify shortfall between senior proceeds and total project costs.
2. Negotiate Terms — Set interest, fees, covenants and amortization schedules to match project milestones.
3. Draft Intercreditor Agreements — Define rights and remedies of senior and mezzanine lenders.
4. Coordinate Closings — Align draw schedules, legal documents and funding tranches for seamless execution.

We can arrange both debt layers simultaneously to streamline financing.

FG Capital Advisors as Arrangers

• Tap our network of banks, private debt funds and family offices.
• Prepare offering memoranda and underwriting packages.
• Negotiate pricing and terms with multiple lenders.
• Manage due diligence, legal coordination and funding schedules.
• Co-invest in mezzanine tranches when strategic alignment allows.

Sample Transactions

Office Conversion:$50 million bridge loan closed acquisition; $10 million mezzanine funded tenant improvements; refinanced with a 10-year mortgage upon stabilization.

Hotel Renovation:$20 million mezzanine facility at a 15 percent coupon funded a full refurbishment; intercreditor terms protected the senior lender and tied draws to completion certificates.

Disclaimers & Considerations

FG Capital Advisors provides arrangement and advisory services only. All financings depend on lender underwriting, asset valuations and market conditions.

Sponsors should seek independent legal, tax and financial advice to review loan documents, intercreditor agreements and project risks before proceeding.