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Loans vs Buildings:  


  • Entrepreneurs and HNW individuals often buy buildings in connection with their business, or merely for investment purposes. These properties cover a wide range of possibilities including office space, retail space, restaurants, hotels, and even industrial  buildings. 

  • Owner-Occupied Buildings.  This is  a common situation among entrepreneurs whereby the business is occupying more than 50 percent of the space. The company is underwritten to ensure that the business is producing enough cash flow to cover the loan. 

  • Mezzanine Loans.  Sometimes a HNW individual owns a property with an existing loan that can not be refinanced.  One tool to release unrealized value in an appreciated property is through a mezzanine loan.  On the capital stack, Mezzanine loans fall between the first lien position and equity. 

  • Loan Structure. Typical first lien loan structures might be in the form of bridge loans which are between 3 months and 24 months, and term loans which are typically between 5 and 20 years.  Interest rates may be fixed or floating.  

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