Bridge Funding That Accelerates Growth
Flexible Mezzanine Capital Between Debt and Equity, Fueling Growth Without Full Control Dilution.
Building Generational Assets Through Disciplined Execution
Red Leaf Investments offers mezzanine financing for sophisticated investors seeking higher returns than senior debt with less risk than pure equity. Mezzanine sits between first-lien debt and common equity in the capital stack, providing a hybrid structure that combines elements of both.
If you want upside participation without taking full development risk, or you need returns that senior debt can't deliver, mezzanine gives you the best of both worlds.
What is Mezzanine Financing?
Mezzanine financing is subordinated debt that sits below senior debt but above equity in the capital structure. It typically includes both a fixed interest component and equity participation through warrants, profit splits, or conversion rights.
Position in Capital Stack
Mezzanine investors get paid after senior debt is satisfied but before equity holders receive distributions. In exchange for taking subordinated risk, mezzanine investors receive higher interest rates and participate in upside through equity kickers.
How Mezzanine Works at Red Leaf Investments
We use mezzanine financing to bridge the gap between conservative senior debt and the equity capital needed to execute our development plans. This allows us to preserve sponsor equity while delivering attractive, risk-adjusted returns to investors.
Current Pay Interest: 10-12% annually paid in cash
PIK Interest
3-5% payment-in-kind (accrued and paid at maturity)
Terms
24-36 months with extension options
Equity Kicker
Warrants for 5-15% equity ownership or participation in profits above certain hurdles
Security
Second lien position on the property, subordinated to senior debt.
Why Invest in Mezzanine
Higher Returns Than Senior Debt
Mezzanine typically targets 15-20% total returns (cash interest + PIK + equity kicker), significantly higher than the 8-10% returns on senior debt positions.
Better Protection Than Equity
You have a secured position (even if subordinated) and get paid before equity holders. If the project underperforms, you still collect interest and have security backing your investment.
Upside Participation
Through warrants or profit participation, you benefit if the development exceeds base case projections. If we sell for 2x what we projected, you participate in that upside.
Current Income
Unlike pure equity, mezzanine pays current cash interest (typically 10-12% annually). You're not waiting years for a liquidity event to see returns.
Flexible Terms
Mezzanine structures can be customized based on investor preferences and project needs. Want more current pay and less equity kicker? We can structure that. Prefer PIK interest and more upside? That works too.
Ideal Mezzanine Use Cases
Bridge to Next Phase Financing
We use mezzanine to fund planning, entitlement, and preliminary infrastructure when senior debt won't cover the full capital needed. Once entitlements are approved and infrastructure is in place, we refinance with traditional construction debt and repay mezzanine investors.
Property Acquisition with Light Development
For acquisitions where we plan light development (minimal infrastructure, basic planning) before selling to a master developer, mezzanine financing provides the capital to acquire and position the asset with minimal equity requirements.
Mezzanine is ideal for Accredited Investors Who:
- Want returns higher than senior debt but with more protection than equity
- Appreciate current cash income plus upside participation
- Understand subordinated debt structures and accept moderate risk
- Have longer investment horizons (24-36 months typical)
- Can commit $250K-$500K+ (minimums vary by opportunity)
- Value creative structures tailored to specific deal dynamics
Current Investment Highlights
Invest In Brazos Riverfront Opportunity
RLI’s flagship Brazos Riverfront holding comprises approximately 275 acres with one mile of boatable Brazos River frontage in Parker County, Texas, planned as a premium master‑planned community. The property’s scale, water access, and proximity to major DFW growth corridors create a rare opportunity for long‑term value creation.
- Approx. 275 acres in a North Texas growth corridor
- One mile of Brazos River frontage with exceptional recreation and lifestyle appeal
- Multi‑phase development strategy designed for builders, residents, and investors seeking Tier‑1 communities
Important Disclosures
Red Leaf Investments, LLC does not provide tax, legal, or accounting advice. Consult your professional advisors before making investment decisions. This information is for educational purposes only and does not constitute an offer to sell or a solicitation to buy securities. Detailed offering documents will be provided to qualified investors. Past performance does not guarantee future results. Projected returns are targets only and may not be achieved.
Stay informed on new opportunities, development milestones, and market insights from the Red Leaf Investments team.
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FAQ's
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Why would I choose mezzanine instead of just doing equity?
Red Leaf Investments is the real estate development arm of the Johnson Family Office, specializing in master-planned communities built on exceptional land assets. We combine institutional expertise with long-term family office thinking to create premier developments across the United States.
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What happens to my mezzanine position if senior debt forecloses?
Irreplaceable assets. You can build more subdivisions, but you can't create more riverfront land. The Brazos River corridor in North Texas has limited available frontage, strong demographic growth, and proven demand from both luxury homebuyers and builders. We've already validated the market with River Ranch on the Brazos, where we've sold lots in a challenging market. That gives us the expertise and track record to execute larger riverfront developments with confidence. Plus, our hydrology team understands water rights, floodplains, and environmental considerations better than anyone in the region.
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Can I convert my mezzanine debt into equity if the project is doing really well?
We started in 2020 with our first acquisition—80 acres in Midland's Greenwood area, which we developed and sold ahead of schedule. That same year, we acquired River Ranch on the Brazos and invested over $5 million in infrastructure to transform it into a premium master-planned community. While our real estate platform is relatively new, the Johnson Family has nearly a decade of experience building large-scale ventures in energy infrastructure and renewable development. We apply that same institutional rigor and operational discipline to every real estate project we pursue.
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How do you determine the equity kicker percentage?
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Is mezzanine safer than preferred equity?
Usually, because you have a secured position (even if subordinated). Preferred equity is just equity with priority over common equity, but it's still unsecured. Mezzanine has a lien on the property. In a downside scenario, secured debt (even subordinated) generally recovers more than unsecured equity.
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What's the typical hold period for mezzanine?
24-36 months. Shorter than equity, longer than bridge loans. We use mezzanine to get through planning, entitlement, and early development phases, then refinance with construction debt and pay you off. If the project sells faster, you get paid early. If it extends, we negotiate extensions or find another exit.
