Finance
What is 'mezzanine financing' in Illinois commercial real estate?
AFinancing for mezzanine floors between the first and second levels of a building
BA layer of financing between senior debt and equity, often secured by a pledge of ownership interests rather than a property mortgage✓ Correct
CFinancing provided by the mezzanine level of a parking structure
DA federal financing program for mid-size Illinois commercial developments
Explanation
Mezzanine financing sits between senior mortgage debt and equity in the capital stack. Rather than being secured by a mortgage on the property, mezzanine loans are secured by a pledge of the borrower's ownership interest in the property-owning entity. Mezzanine loans have higher interest rates than senior debt, and mezzanine lenders can acquire the property by foreclosing on the pledged equity interests. This structure is common in large Illinois commercial transactions.
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