The need for mezzanine capital continues to grow quickly. Restrict LTV percentages getting industrial mortgage loans is actually reduced, and you will older lenders has actually tightened up their underwriting standards. [28 ] So, elderly credit is during short have whenever you are an estimated $1.2 trillion of existing financing are set in order to adult inside 2024 and you may 2025. People borrowers need to re-finance or deal with receiverships and you can bankruptcy proceeding. Mezzanine financing will have a key part to avoid a cards drama, and you may REITs might be a significant way to obtain mezzanine funding. not, of numerous REITs continues to ignore mezzanine lending as long as the fresh new available secure harbor remains incompatible with standard mezzanine lending methods.
The fresh Internal revenue service enjoys the opportunity to assist end a card drama by updating the new Cash Process so you can line-up it which have prominent mezzanine lending practices. An officially feasible safer harbor create mark even more REITs on mezzanine financing, and thus bringing more financing to meet the newest broadening interest in under capital. An updated secure harbor could help standardize and streamline mezzanine lending strategies certainly one of REITs, that are currently balkanized due to different practices and you will standards certainly income tax advisors in the lack of Internal revenue service information in sync with industrial practice. As such, the Internal revenue service want to make the second standing into Funds Process. Continue reading “The lender decades otherwise go after most other financial remedies individually against the borrower”
