Mezzanine Loans for Office

A mezzanine loan is subordinate debt secured by a pledge of the ownership interests in the property-owning entity rather than by a mortgage on the real estate. It sits between the senior mortgage and the common equity in the capital stack.

Office mezzanine debt is scrutinized for rollover risk because the subordinate position absorbs the first loss if leasing lags. Lease-up reserves and a credible re-tenanting plan are central.

The U.S. office market is stabilizing after years of post-pandemic adjustment. CoStar projects stable national office vacancy through 2026, with select submarkets beginning to see positive absorption as return-to-office mandates take hold and hybrid work patterns settle into predictable demand.

Bifurcation remains the defining theme: trophy and Class A buildings in top markets continue to attract tenants and capital, while older Class B and C product faces persistent vacancy. This creates opportunities for well-capitalized sponsors with clear repositioning or conversion plans.

H Equities evaluates office deals on a case-by-case basis, focusing on tenancy quality, market fundamentals, and viable exit strategies. Our approach emphasizes properties where the sponsor has a clear plan -- whether that is stabilizing existing leases, executing a repositioning, or pursuing a conversion to alternative use. For a mezzanine loan specifically, the request is evaluated against the asset-level factors below and the structural questions that follow.

Sponsors use mezzanine debt to close the gap between what a senior lender will advance and the total capitalization, without bringing in additional common equity partners or giving up ownership.

Mezzanine debt sits behind the first mortgage and ahead of all equity. Where a senior lender prohibits subordinate debt, preferred equity often takes the same place in the stack.

For office, H Equities also publishes bridge loans, preferred equity, and co-gp equity. The right choice depends on the senior lender's requirements, the sponsor's ownership goals, and how much of the plan's value has already been created.

Mezzanine debt increases total leverage, so the equity cushion below it is thinner and a valuation miss reaches the mezzanine position before it reaches the senior lender. Accruing structures relieve current cash flow but grow the balance that the exit has to cover. The intercreditor agreement governs what the mezzanine lender can do in a default, and its terms matter as much as the rate.

Share the deal details including the senior loan terms, the total capitalization, and the gap you need to fill. We evaluate the full capital stack, not just our position. For office, include the rent roll or sales plan, the capital budget, and the exit assumptions. H Equities responds with questions or a view on fit, not an automated decision.