What is a common feature of a mezzanine loan's structure?

A mezzanine loan is often used in real estate finance as a way to bridge the gap between senior debt and equity. One of its defining characteristics is its subordination to senior debt. This means that in the event of a default or foreclosure, the mezzanine lender will only receive repayment after the senior debt has been satisfied. This structure creates a higher risk for mezzanine investors compared to senior debt holders, who have the first claim on the property’s assets, but it also allows mezzanine lenders to obtain higher yields due to this increased risk.

In terms of financing structure, mezzanine loans are typically used to provide additional capital above what a senior lender is willing to finance, often at a higher interest rate. The nature of a mezzanine loan being subordinate allows the borrower to leverage their equity further, making these loans attractive for financing larger deals.

The other options do not accurately describe common characteristics of mezzanine loans. For instance, while fixed interest rates can sometimes be part of a loan structure, they are not exclusive to mezzanine loans. Additionally, mezzanine loans are generally not secured by equity in the property itself; instead, they are often secured by an interest in the ownership of the property’s equity. Lastly, there is always a level of