What is Subordinated Debt for Commercial Real Estate?

What is Subordinated Debt for Commercial Real Estate?
Commercial Real Estate

What is subordinated debt for commercial real estate?

Well, subordinated debt is any debt that sits behind a first mortgage.

For example, it could be a second mortgage or mezzanine financing.

While subordinated debt is most often used to purchase a property, our loans are exclusively for low-leveraged and seasoned properties that someone already owns.

For example, if someone owns a property worth $20 million with a $10 million first mortgage, they could get a second mortgage or a mezzanine loan from us for up to $5 million. This would take their leverage from a 50% loan-to-value up to 75%.

You might be thinking, why don’t they simply refinance their first mortgage?

Good question! In some cases, a refinance could be their best option.

But for borrowers that have an expensive prepayment penalty, such as defeasance or yield maintenance, it is often too expensive to refinance.

There are also times when a borrower needs quick liquidity, no pun intended, and can’t wait months to refinance their first mortgage. So, instead they’ll turn to us since we can close our loans in as little as 2 weeks.

You can learn more about subordinated debt at https://www.quickliquidity.com/subordinated-debt.php


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