Can a newly formed foreign-owned LLC actually get mezz financing or is that a dead end before it starts

The pledge-of-equity-interest mechanic is the core problem, and it compounds every other issue here.

Mezz works by giving the lender a UCC-1 security interest in the LLC membership interest, so if the borrower defaults the lender can foreclose on that interest and step into ownership without going through a court foreclosure on the real property. With a foreign sole member, the lender's counsel has to trace what happens to that pledge if the member dies, becomes incapacitated, or contests enforcement from outside U.S. jurisdiction. Delaware LLC law governs the pledge itself, but collecting on a judgment or enforcing a guarantee against a Canadian national with no U.S. assets is a separate problem, and most mezz counsel bill that uncertainty as unquantified risk, which means it either kills the deal or adds weeks to closing.

The checklist a careful operator runs before presenting this to a mezz lender: confirm the LLC agreement explicitly permits a pledge of the membership interest and does not require member consent to transfer on foreclosure, obtain an ITIN immediately because without it the lender cannot file required withholding documentation under FIRPTA mechanics that touch the eventual sale, get a U.S. tax opinion letter addressing the LLC's treatment as a disregarded entity or partnership for purposes of the lender's FIRPTA exposure, pull the Ontario property records and have them translated and summarized by a U.S.-licensed appraiser or analyst so the sponsor's track record exists on paper in a form the credit committee can read, confirm the senior lender's intercreditor agreement template in advance because some agency and bank senior lenders will not execute an intercreditor with a mezz lender when the borrower entity has a foreign national member, and get OFAC clearance documentation prepared before the lender asks.

The lender who said they would look at

This is a genuinely hard structure, and the lenders you spoke with are reacting predictably. Mezz underwriters almost always credit-qualify the sponsor because the security is a pledge of the ownership interest in the LLC, not a lien on the property. If the borrower defaults and the lender has to foreclose on that pledge, they are stepping into an LLC owned by a foreign national. That raises questions about FIRPTA (the Foreign Investment in Real Property Tax Act, a U.S. tax withholding rule triggered on disposition), beneficial ownership reporting under FinCEN rules, and how Canadian courts treat a U.S. lender's enforcement rights if anything goes sideways. Those are not deal-killers by definition, but they do explain why the lender who has never closed one with a foreign sole member could not quote you a timeline. Their legal team is mapping territory they have not walked.

The asset-only path the second lender described is the more realistic lane here, and a 1.30 DSCR on a 24-unit at $3.1M is achievable if the rents support it. I would model that first before anything else. If the senior debt at 65 percent leaves you a coupon of 11.5 to 12 percent on $1.085M in mezz plus two origination points, confirm whether the net operating income (revenue minus operating expenses, before debt service) covers both layers of debt at 1.0x, then see what headroom is left.

The ITIN gap is solvable but takes time. A tax professional who works with cross-border clients can tell you how long, and that timeline matters against your close date.

One thing worth raising with the buyer: some mezz providers will not touch a single-member LLC on a deal this size because there is no co-member to step in operationally. Has the buyer considered bringing in a U.S. co-member to the LLC, even a passive one with a clean credit file?

What does the rent roll look like on that 24-unit?