An intercreditor agreement (ICA) involving a construction loan raises a host of complicated and unique issues that are not addressed in the typical ICA. As more fully described in the prior alert on Intercreditor Agreements (ICAs), and by way of a short introduction to mezzanine loans generally, the mezzanine lender in a single mezzanine loan structure makes a mezzanine loan to the mortgage borrower’s owner(s) (the “mezzanine borrower”) and the mezzanine loan is secured by the mezzanine borrower’s equity interest in the mortgage borrower (a single purpose entity that is not the property owner entity). In “Distressed Real Estate During COVID-19: Mezzanine Loans Behind Construction Loans—Special Considerations and Intercreditor Agreement Provisions”, colleagues Caroline A. Harcourt, Paul Shapses and Jacob A. Axelrod discuss that construction loans with companion mezzanine loans raise a host of concerns that are unique to more standard ICAs between a mortgage lender and a mezzanine lender.
