8th Bridge Capital on Mezzanine Loans for Multifamily Investors

(Newswire.net — March 6, 2018) Los Angeles, California — Real estate investors developing multifamily buildings have many options when it comes to financing their projects. Mezzanine financing represents one popular way that investors work with private equity firms. This hybrid of debt and equity financing is often used to supplement primary mortgages on a given property development, providing flexibility in moving the project forward. 8^th Bridge Capital, a private equity firm based in the Los Angeles area of California, knows that mezzanine loans can be extremely competitive, especially as other capital sources become harder to secure for multifamily real estate ventures. “Mezzanine financing is characterized by creative lending terms and higher interest rates,” says a spokesperson for the equity firm. “More and more lenders are offering this financing instrument to their investors, helping to ensure that multifamily developments are completed.” To learn more about the private equity firm and their role in helping entrepreneurs secure financing, visit https://newswire.net/newsroom/pr/00100098-8th-bridge-capital-private-equity-for-entrepreneurs.html.

Mezzanine financing provides the capital lender certain rights, such as converting to ownership of a property or accruing equity interest in case the developer defaults on the loan. Lenders do not often require collateral from the borrower and the factors influencing approval are substantially lower than bank-backed capital financing. The only real drawback to mezzanine loans is that borrowers must sacrifice some level of control of the project, and may wind up paying more in interest for long-term loans than they would with traditional bank loans or venture capital funding.

There are several advantages to this financing source. Mezzanine financing offers better risk-adjusted return than plain equity or purchasing apartment developments. Banks have made construction loans smaller and more difficult to get approval for as well; these loans may only cover about 60 percent of new development costs. This has caused developers to seek other avenues for capital to fund projects, and mezzanine loans provide a valid solution. Adding such a loan to the capital for a project can even help improve leverage rates, and can push the envelope when it comes to regulations governing high volatility commercial real estate (HVCRE). Finally, this financing source offers tax benefits to borrowers. The interest on a mezzanine debt is tax-deductible, saving substantial resources that can be put back into the development itself.

Equity firms offering mezzanine financing are highly competitive, driving down interest rates on these loans as a result. Rates as low as 750 basis points over the London Inter-bank Offered Rate (LIBOR), a financial industry benchmark, are not uncommon. Mezzanine lenders may also help fund purchases and market repositioning efforts for commercial multifamily developments. For these types of loans, interest rates of 350 basis points over LIBOR provide developers with impressive incentives. 8^th Bridge Capital has worked with multifamily investors in the United States and abroad, providing financial solutions as one of the most trusted multinational private equity firms in the industry. For more information on the company and their client-oriented financial services, visit https://8thbridgecap.com/.