Equity Kicker in Commercial Real Estate

Equity Kickers for Mezzanine Loans

If a commercial real estate borrower seeks out a mezzanine loan, but does not want to pay an extremely high interest rate, the lender may agree to reduce the interest rate in exchange for a piece of equity in the project, referred to as an equity kicker. In most cases, an equity kicker will only be triggered when the owner sells the property. In many situations, an equity kicker may also have a hurdle, for instance, the mezzanine lender may get 20% of the returns over and above a 10% IRR.

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