Mezzanine & Preferred Equity
Subordinate capital that bridges the gap between senior debt and sponsor equity, pushing combined leverage to 85–90% of the capital stack.
- Capital Size: $2M–$100M+
- Combined Leverage: Up to 85–90%
- Term: 1–5 Years
- Structure: Mezz & Pref Equity
When senior debt stops short of the capital a project needs, mezzanine debt and preferred equity fill the gap without diluting sponsor control the way common equity does. FOCAL arranges subordinate capital from $2 million to over $100 million, taking combined leverage up to 85–90%, on terms from 1 to 5 years.
The two instruments solve the same problem with different mechanics: mezzanine sits as debt behind the senior loan, while preferred equity sits in the ownership structure with a priority return. The right choice turns on the senior lender’s intercreditor requirements, the tax and control positions of the sponsor, and the exit timeline. FOCAL structures both, negotiates the intercreditor and recognition agreements they depend on, and has retired existing mezzanine positions inside larger refinancing structures.
The firm arranges mezzanine and preferred equity nationwide from Beverly Hills, California, typically alongside the senior financing so the stack prices and closes as one.
Mezzanine & Preferred Equity: Common Questions
How much leverage can mezzanine or preferred equity add?
Combined leverage up to 85% to 90% of the capital stack, with subordinate capital from $2 million to over $100 million on terms from 1 to 5 years, arranged nationwide from Beverly Hills, California.
What is the difference between mezzanine debt and preferred equity?
Mezzanine sits as debt behind the senior loan and depends on an intercreditor agreement; preferred equity sits in the ownership structure with a priority return. The right choice turns on the senior lender's requirements, the sponsor's tax and control positions, and the exit timeline. FOCAL structures both.
Is subordinate capital arranged separately from the senior loan?
It can be, but FOCAL typically arranges mezzanine and preferred equity alongside the senior financing so the stack prices and closes as one, negotiating the intercreditor and recognition agreements the structure depends on.
Related insights: Mezz Debt vs Pref Equity: Term Sheet Checklist · SOFR Cap vs Swap: CRE Hedge Checklist for Sponsors · CRE Loan Covenant Reporting Checklist for Sponsors
Capital Markets & Debt Advisory · Closed Transactions