Question 1

How common are commercial mezzanine loan accelerations in Dallas compared to other markets?

Accepted Answer

Dallas has significantly fewer mezzanine acceleration situations than New York, LA, or Miami because most DFW commercial transactions in the $10-75M range were financed with senior bridge or bank debt rather than layered senior-plus-mezzanine structures. Mezzanine layers appear more commonly on larger DFW transactions: major suburban office parks, full-service hotels in the Uptown/Galleria corridors, and some retail-anchored development projects. The mezzanine acceleration universe in Dallas is smaller by deal count but individual situations can involve significant dollar amounts on larger assets.

Question 2

What Texas law governs UCC equity pledge foreclosures on Dallas commercial properties?

Accepted Answer

Texas Uniform Commercial Code, Article 9 (Texas Business and Commerce Code Chapter 9) governs UCC secured transactions and foreclosures on personal property, including equity pledges. Texas Article 9 is substantially consistent with the national UCC revision but has some Texas-specific provisions. Texas allows both public and private UCC foreclosure sales, with notice requirements that are generally interpreted similarly to New York - commercially reasonable notice based on the circumstances. Texas does not have anti-deficiency protections for personal property UCC transactions (unlike real property deeds of trust), meaning a mezzanine lender in Texas can pursue a deficiency claim if the UCC sale proceeds do not satisfy the mezzanine debt.

Question 3

What is the relationship between a Dallas first mortgage trustee sale and a mezzanine UCC foreclosure?

Accepted Answer

In Texas, a first mortgage holder (deed of trust beneficiary) who forecloses via trustee sale wipes out junior liens, including the mezzanine lender's equity pledge position. If the first mortgage lender conducts a trustee sale, the mezzanine lender's equity pledge is valueless - the entity that owned the property no longer owns it. This means a Dallas mezzanine lender must act before the first mortgage trustee sale to preserve its position. Mezzanine lenders typically have intercreditor agreements with first mortgage lenders that give the mezzanine holder a cure right (ability to pay down the first mortgage default) before the first mortgage can foreclose. Buyers in Dallas mez situations must understand the intercreditor agreement terms.