Hi all,
I read this on a headhunter's website for a RE Mezzanine Fund job in London. Any idea what this means?
Our client is a market Leading Financier of Real Estate Assets on a worldwide basis (Focus UK and EU). Currently in massive expansion mode they are keen to bring on several Analysts to support the Origination and Execution team. You will be at the cutting edge of Real Estate Development Projects using Debt but structuring as Equity (therefore returns are a lot higher than pure debt) so a very strong technical background is essential (for your level!).
What does "using Debt but structuring as Equity" mean?
You should look up mezzanine loans and mezzanine debt for more details.
A mezzanine loan is kind of like a 'second mortgage', in that it is financing on top of a senior loan (that is where the term mezzanine comes from). It is a way developers or value add investors get more leverage. They charge higher rates like 8-12% but when blended with a cheaper senior loan, the capital stack isn't that expensive and cheaper than what is given up with equity.
The "debt structured" as equity part typically means it is technically an equity position or lien on the entity (no mortgage security), but the payments and terms are like debt (interest rate, term, etc.)
thank you for that mate. I'll look up mezzanine loans & debt.
For the final part about structuring, any idea why a lender would want to structure their deal in this way? Is it because it is more lucrative for them in some way, tax efficient or do they have an interest in taking control of the asset at some point?
The senior lender requires this structure to prevent the mezz financing counting as additional debt (they aren't stupid, they do know what is going on). The equity liens and structure can make it easier for the mezz lender to take over in default. Some times they are known to have "loan to own" provisions.
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