Mezzanine debt is subordinated financing between senior mortgage debt and equity — higher risk than senior debt, higher yield, typically secured by equity interests rather than real property.
Mezz fills the gap between how much senior debt will lend (typically 60–70% LTV) and how much equity the sponsor can raise. Mezz rates typically run 8–15%. Mezz lenders take priority over equity but are subordinate to senior mortgage.
LA multifamily value-add acquisitions sometimes use mezzanine debt to increase leverage and stretch equity. Less common on core stabilized deals. When senior lender terms tightened post-2023, mezz became more commonly used to fill capital gaps.
From the Sterman LA Multifamily Glossary — defined the way a broker with $1.41 billion across 254 closed transactions actually uses these terms.
Michael Sterman, Senior Managing Director Investments, Marcus & Millichap.
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