Mezzanine Debt for DFW Capital Stacks
Subordinated capital between senior debt and sponsor equity, bridging the gap on acquisitions, recaps, and ground-up.
- Deals where senior maxes at 65%–70% and sponsor needs more leverage
- Recapitalizations and partial equity buy-outs
- Ground-up construction with thin sponsor equity
- Institutional CRE acquisitions at 80%+ LTC
Mezzanine Financing, at a glance
- Loan size
- $1M – $75M
- Amortization
- Interest-only
- Term
- Coterminous with senior (or shorter on bridge deals)
- LTV
- Slots behind senior up to 85%–90% combined LTC
- Rate
- 10%–14% (current pay + PIK)
- Typical close
- 30–60 days
Mezzanine capital sits between the senior mortgage and the borrower's equity in the capital stack. It takes more risk than the senior (it is second in line for repayment) and demands a higher return, but it allows a sponsor to push combined leverage to 85% or even 90% of cost on the right deal. In DFW mezz is most commonly used on mid- to large-cap institutional acquisitions and ground-up construction where the sponsor has conviction on the business plan but limited equity check capacity.
Structurally, mezzanine in commercial real estate is usually a pledge of the borrowing entity's equity interests (not a second mortgage on the real estate itself) because most senior lenders will not permit a second lien. That structural detail matters legally, foreclosing on a mezz position is a UCC exercise against the LP/LLC interests, not a mortgage foreclosure, and it shapes which lenders will participate. The lender universe is smaller than senior debt, but the handful of real players in DFW are all relationships we actively run deals through.
How mezz pricing works
Mezzanine is typically priced as a combination of current-pay interest (the portion paid monthly in cash) and accrued/PIK interest (payment-in-kind, added to the loan balance). A 12% mezz coupon might be 9% current-pay and 3% PIK, which reduces the immediate cash-flow burden on the deal and leaves the PIK to be paid off at exit. The IRR to the mezz lender still lands at ~12%.
Like bridge debt, most mezz carries an exit fee or minimum interest provision. Early payoff protection is particularly important to mezz lenders because of the relatively small absolute dollars on each deal, they need the minimum term to justify the origination work.
When mezz makes sense vs. preferred equity
Mezzanine debt and preferred equity are functionally similar, both are subordinated capital that pushes leverage on the deal. The legal distinction is that mezz is a debt instrument (with a lien against the equity interests) and pref equity is an equity instrument (holds a priority return but is still equity for legal purposes). The choice affects intercreditor rights, bankruptcy treatment, and tax treatment.
For DFW sponsors, mezz is usually the right answer when the senior lender will permit it in the intercreditor agreement and when the borrower wants the lower cost of capital that debt provides. Pref equity is the fallback when the senior lender will not allow subordinated debt in the stack.
Ready to explore Mezzanine options?
Get a QuoteMezzanine Financing, FAQ
What is the minimum deal size for mezzanine in DFW?
Most institutional mezz lenders have a $1M–$2M minimum check size. Some opportunistic debt funds will go smaller on strong deals, but below $1M the economics generally do not work for either side. Larger deals (above $10M) have access to a deeper lender pool.
Can you layer mezz behind an agency multifamily loan?
Freddie Mac permits a specific mezz product in a limited set of circumstances (known as soft pay/supplemental). Fannie Mae supplemental loans provide additional leverage without technically being mezz. HUD does not permit true mezz behind 221(d)(4) or 223(f). We know the rules by product and can advise what is actually permitted.
What is an intercreditor agreement?
The contract between the senior lender and the mezz lender (or pref equity provider) that spells out each party's rights if the deal defaults. It addresses notice, cure rights, foreclosure, and the order of payments. No mezz deal closes without a signed intercreditor, and negotiating favorable terms is a material part of the transaction.
Is mezzanine financing non-recourse?
Typically non-recourse with standard bad-boy carve-outs, mirroring the senior loan. Recourse mezz exists but is rare in DFW commercial real estate outside of construction and heavy-value-add scenarios.
How long does mezzanine take to close?
30–60 days once the senior loan is in documentation. The mezz closes contemporaneously with the senior, never before. A delayed senior loan will always delay the mezz. We coordinate both sides of the capital stack to keep timelines aligned.
Other loan programs
SBA
SBA Loans
Government-guaranteed financing for owner-users buying, building, or expanding commercial property across North Texas.
- Loan size
- $150K → $15M
- Close
- 45–75 days
SBA 504
SBA 504 Loans
The only commercial loan product in the country that gives owner-occupiers a 20- or 25-year fixed rate on 40% of their purchase.
- Loan size
- $500K → $15M
- Close
- 60–90 days
SBA 7(a)
SBA 7(a) Loans
The most flexible small-business loan in the country, real estate, acquisition, equipment, and working capital in a single package.
- Loan size
- $50K → $5M
- Close
- 45–60 days with Preferred Lender
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