Editorial. For U.S. CRE sponsors & developers. Informational guide—not a commitment to lend. Prepared September 2025.
What Is Mezzanine & Unitranche Financing in U.S. Commercial Real Estate?
Senior lenders have pulled back significantly. Equity is costly in both dilution and timing. If you’re a sponsor with financing deadlines or acquisition windows, that combination can stall your deal. Mezzanine and unitranche financing stand ready to bridge those gaps—fast, efficiently, and with fewer layers of negotiation.
In this guide: we explain what mezzanine and unitranche are, when they make sense, the terms that matter most, risks you need to watch, and exactly what to prepare so you’re lender-ready.
Mezzanine vs Unitranche: What’s the Difference?
Mezzanine Debt
sits subordinate to senior debt, often secured by the sponsor’s equity. Typically higher cost, may include profit participation. Good for stretching leverage when senior debt isn’t enough.
Unitranche Loan
packages senior + mezzanine into one facility—one lender group, one document set. Closes faster, simpler structure, though cost is higher than pure senior.
When These Structures Make Most Sense
Acquisition Gaps
When senior lenders cap leverage too low or require too much equity, mezzanine or unitranche can fill the shortfall.
Development Projects
You need capital before income. Mezzanine helps you start construction without over-equity or delay.
Recapitalization & Bridge Financing
Replace equity or senior + mezz stack, restructure debt, or bridge to longer-term financing.
Lease-Up or Repositioning Deals
Cash flow is in motion but not yet stable. Flex on covenants and interest structure becomes key.
Terms & Mechanics You Must Understand
| Term | Typical for Mezzanine | Typical for Unitranche | Why It Matters to You |
|---|---|---|---|
| Leverage (LTC / LTV) | ~ 80-90% | 80-95% | This determines how much equity you need and your return assumptions. |
| All-in Cost / Spread + Fees | SOFR + ~6-12% | SOFR + ~4.5-9% | Impacts cash flow during lease-up or repositioning. |
| Term Length | 3-7 years | 3-7 years | Should match your exit or stabilization horizon. |
| Interest / Amortization | Often interest-only, sometimes with exit or equity kicker | Similar, often simpler | You’ll need cash during early phases. |
| Security & Control | Pledge of Sponsor equity, intercreditor docs | Evangelized senior + mezz mechanics in one set | Structure that doesn’t break senior lender relationships. |
| Prepayment / Exit Fees | Typically yes | Varies | You want flexibility without punitive costs. |
Actual terms vary by region, asset class, sponsor track record, and debt market conditions.
Risks & Things to Check Before You Pull the Trigger
Cost & Dilution
Mezz or unitranche interest & fees cut into your return. Make sure your exit assumes that.
Intercreditor Headaches
If senior debt exists, alignment of covenants & control events is vital.
Ensure your project’s cashflow, lease-up, or sale timing syncs with debt tenure.
Market & Exit Risk
Property value drops, lease rates decline. Always stress test; build in reserves.
Sponsor Checklist: What Lenders Want to See
Foundational Materials
- Project summary & business plan
- Projected pro forma (with downside)
- Appraisal underway or recent
- Budget & cost schedule
Sponsor & Asset Signals
- Sponsor track record & financials
- Lease comparables & tenant quality
- Draft intercreditor and debt stack documents
- Cash flow modeling & reserve plan
Choosing the Right Tool: Mezzanine or Unitranche?
You Value Simplicity and Speed
Unitranche. One facility, one closing, fewer negotiating parties.
You Need Flexibility and Stretch
Mezzanine. Allows senior debt alignment, stretch leverage and better sponsor upside.
Looking to Structure a Deal?
If you’re a U.S. CRE sponsor and you're evaluating mezzanine or unitranche financing, we can help get you to a term sheet fast. Check our service page below.
View Our Mezzanine & Unitranche Service PageNote. This guide is informational only. All financing is contingent on underwriting, appraisal, and legal documentation. Terms vary by asset, sponsor, and market.
