WASHINGTON, DC-There has been an increase in mezzanine finance lenders targeting the DC-area market, with better pricing to boot, David Webb, senior managing director at Cassidy Turley, tells GlobeSt.com. “This is for all types of assets, from ground-up construction, stabilized and transitional properties,” Webb says. This observation comes as two deals for the area have just been announced, both of which with a strong mezzanine component.

One was America’s Square, a 461,484-square-foot office complex in the District’s CBD that was recapitalized with a first mortgage provided by MetLife and a mezzanine loan provided by First Potomac Realty Trust. First Potomac’s founder and CEO Douglas Donatelli told GlobeSt.com that the REIT was beginning to expand into this space on a deal-by-deal basis.

The other recent mezzanine transaction is a construction finance package secured by DSF Group to build the second phase of Halstead Square at the Dunn Loring Metro. PNC Bank provided a $70.6 million senior loan and Federal Capital Partners provided the $11 million in mezzanine debt. This is the third mezzanine deal FCP has done in the last five months, Lacy Rice, FCP managing partner, tells GlobeSt.com. It is an area of growing interest for the firm, he says.

“As the market comes back to life, ground-up development projects and other non-core value-added investments are requiring mezzanine finance,” Rice says. “We hope to play an active role in both the mezzanine and equity space." DSF did not return calls to GlobeSt.com in time for publication. Construction on the 436-unit luxury multifamily project began in February and the first units are set to be delivered in the second half of 2012.

Such announcements will pick up as more lenders angle for DC-area projects, Webb predicts, and will offer ever more favorable price points for borrowers as they do so. “DC tends to get the best pricing in the country because our market is perceived as lower risk,” Webb says, pointing out that, over the past several months, construction mezzanine for multifamily has fallen from 18% to 12% in some cases. On existing properties, he says, he has seen some deals that are as low as the single digits.

Webb thinks it all points to mezzanine lenders having become more sanguine about pricing. “With so many more investors putting money out as mezz, they are willing to look for returns that are less in the range of hitting the ball out of the park,” he says. “They seem to be more content with safer mezz positions at lower returns, than a higher risk equity position for a higher return.”