Mezzanine Loans in Hawaii

About Mezzanine Loans in Hawaii

Mezzanine financing sits between senior debt and equity in the capital stack. It allows borrowers to increase leverage beyond what a first mortgage provides, reducing the equity needed for a deal. Secured by a pledge of the borrower's ownership interest rather than a lien on the property. In Hawaii, 8 lenders currently offer Mezzanine financing with loan amounts from $1M to $100M and rates typically ranging from 10% - 18%.

Hawaii Market Overview

Hawaii's economy is heavily driven by tourism and military spending, with limited land availability creating some of the highest commercial property values in the nation. The state's geographic isolation impacts construction costs and supply chains.

Hawaii's leasehold land system, where many commercial properties sit on long-term ground leases rather than fee-simple ownership, is a critical factor in CRE valuation and financing. The state's Land Use Commission tightly controls zoning changes, and only about 5% of land is zoned for urban use, creating persistent supply constraints. Construction costs in Hawaii typically run 30% to 50% above the national average due to shipping requirements for materials, making renovation and adaptive reuse often more economical than new development.

Who Should Consider Mezzanine Loans?

• Reducing equity requirement
• Large acquisitions
• Development projects
• Recapitalizations

Key Requirements

• Strong sponsor track record
• Viable business plan
• Senior lender approval for subordinate debt
• Adequate debt service coverage for total debt

Pros and Cons