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Practice guide: Real estate mezzanine financing

Richard Bertini and Philip Spencer consider the emergence of new providers of real estate mezzanine finance and the tax issues this can present

Tax relief for finance costs is always an important issue with commercial real estate acquisition and refinancing. In investment situations apart from rental income the most material figure in the investment profit calculation will be the interest and related costs arising from debt financing. If these are not fully deductible for tax purposes there can be quite an impact on cash flows.

Real estate mezzanine finance which bridges the funding gap between low risk senior debt and full equity investment can add a number of technical complexities to the basic question concerning the availability of tax relief.

An historical perspective

Prior to the onset of the credit crunch real estate mezzanine finance was readily available from a variety of banks as...

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