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Real Estate Mezzanine Financing: Structuring and Documentation, Due Diligence, Key Provisions

Drafting the Loan Agreement, Pledge Agreement, and Intercreditor; Entity Considerations

Recording of a 90-minute premium CLE video webinar with Q&A

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Conducted on Tuesday, May 9, 2023

Recorded event now available

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This CLE webinar will examine the structuring and documentation of a mezzanine loan in the real estate context. The panel will discuss the borrower's entity structure, key loan provisions, documentation, including the pledge agreement and the intercreditor agreement, and due diligence issues unique to mezzanine lending. The panel will also discuss special issues associated with construction mezzanine loans.


Mezzanine financing allows borrowers to obtain financing in addition to a mortgage loan, but mezzanine loans add complexity, with additional documents, legal opinions, and third-party reports. Mezzanine lenders require separate consent rights for various actions by the borrower, and restructuring a nonperforming loan is especially problematic given the diverging interests of the mezzanine and mortgage lenders.

Since the mezzanine lender's security interest is in the borrowing entity rather than the property, it must conduct entity-level diligence, including analyzing potential claims and agreements entered into by the property owner. Existing contracts and licenses might contain restrictions on transfer--the pledge securing the mezzanine loan or any foreclosure of the pledge could violate such limits.

The mezzanine loan agreement should track the mortgage loan agreement, with mortgage loan representations recast to refer to the mezzanine borrower and the mortgage borrower. The mezzanine borrower and the mortgage borrower should be required to comply with entity-level covenants and property-related covenants.

The mezzanine borrower's obligations are secured by a UCC pledge of equity interests in the property owner. The pledge can be perfected under Article 8 of the UCC. The mezzanine borrower's ownership interest in the mortgage borrower must be certificated so the mezzanine lender can take physical possession of the membership certificates. The operating agreement should also include Article 8 opting-in language.

Listen as our authoritative panel discusses the nuances of mezzanine financing.



  1. Threshold issues with mezzanine financing
  2. Borrowing entity structure: SPE mortgage borrower/SPE mezzanine borrower
  3. Due diligence of mortgage borrower: claims, contracts, licenses
  4. Loan agreement
  5. Pledge agreement
  6. Intercreditor agreement
  7. Special considerations with construction loans


The panel will review these and other critical issues:

  • How should the mortgage borrower and mezzanine borrower be structured to accommodate both a mortgage and mezzanine loan?
  • What consent rights should the mezzanine lender have regarding the actions of the mortgage borrower?
  • What is the Article 8 opt-in process, and how is certification of the mezz borrower's interest in the mortgage borrower documented?
  • What provisions should be included in the intercreditor agreement to allow the mezzanine lender to protect its position?


Gibbons, Matthew
Matthew A. Gibbons

Gibson Dunn & Crutcher

Mr. Gibbons’ practice focuses on representing major financial institutions, private equity funds and other...  |  Read More

Sarkar, Kirti
Kirti Sarkar

Gibson Dunn & Crutcher

Ms. Sarkar’s practice is principally focused on representing lenders and borrowers in the origination of mortgage...  |  Read More

Shusterman, Victoria
Victoria Shusterman

Gibson Dunn & Crutcher

Ms. Shusterman focuses her practice on commercial real estate finance.  She represents commercial banks, REITs,...  |  Read More

Yearwood, Kahlil
Kahlil T. Yearwood

Gibson Dunn & Crutcher

Mr. Yearwood is a partner in the San Francisco office of Gibson, Dunn & Crutcher, where he serves as a member of...  |  Read More

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