Larger commercial real estate mortgage loans are often originated by a group or “syndicate” of lending institutions that each contribute a portion of the overall loan proceeds and have been brought into the syndicate to share the benefits and risks of the loan. The loan is administered by an agent on behalf of the lender group, which agent generally has the relationship with the borrower and/or the largest stake in the loan. Sometimes the structure is a “loan syndication” and sometimes, instead, the lead lender sells “participation interests” in the loan. This two-part series describes several significant features of and distinctions between the “syndicated” and “participated” real estate loan that are not commonly known or understood.

This first installment is a primer on the acquisition and sale of a syndication interest in a commercial real estate loan. The second installment will focus on key features of participation interests and will include a summary of the key differences between these two structures. This series will highlight notable considerations for lenders and borrowers alike as they seek creative solutions to finance projects that lenders otherwise might not be able to originate independently.