Preferred Equity

Preferred Equity has similar economic traits to Mezzanine Debt with regards to pricing and pay structure. In situations where mezzanine financing is not possible due to; lender prohibition, prior encumbrances of the partnership interest or regulatory requirements, Preferred Equity is a viable alternative.

Unlike a Mezzanine loan, which is secured by the partnership interests of the borrowing entity, a Preferred Equity investment is a direct holding of equity interest in the property-owning entity. Additionally, rather than the Mezzanine lender’s inter-creditor agreement with the senior lender the preferred Equity investor negotiates a recognition agreement with the underlying senior debt lender.

Development Preferred Equity:

Senior Preferred Equity will have an attachment point of 50% LTC +/- and a last dollar exposure of 65% LTC +/-
Junior Preferred Equity will have an attachment point of 65% LTC +/- and a last dollar exposure of 80-85% LTC +/-
Due to the prevelant requirements of a minimum current pay , the amount held back from proceeds to capitalize a reserve will usually reduce the true Max LTC 78-83%.
Pricing will tend to be in the low double to high double digits, with a possible equity kicker depending on first/last dollar exposure.

TRANSITIONAL /LONG-TERM PREFERRED EQUITY:

Senior Preferred Equity will have an attachment point of 55% LTV +/- and a last dollar exposure of 70% LTV +/-
Junior Preferred Equity will have an attachment point of 65% LTV +/- and a last dollar exposure of 80-85% LTV +/-
Pricing will be in the mid-single digits on core and high single digits on lesser-quality assets. Low double digits for lower-quality / high LTC, Preferred Equity investments

We source, structure and help close Preferred Equity investments for the following situations:

Low-leverage Preferred Equity investments for core assets
Full/partial accrual pay options for transitional and development deals that go higher into the capital stack than traditional Mezzanine loans
Long-term, co-terminus preferred equity investments behind CMBS loans, where an intercreditor is challenging to obtain post closing
Participating Preferred Equity structures, where a lower preferred return is given in exchange for an equity kicker on the back end

Preferred Equity

Development Preferred Equity:

TRANSITIONAL /LONG-TERM PREFERRED EQUITY:

We source, structure and help close Preferred Equity investments for the following situations:

$34MM Multifamily Acquisition | Rochester, NY

$80MM MULTIFAMILY RECAPITALIZATION | PORT ORANGE, FL

WE MAINTAIN ONGOING RELATIONSHIPS WITH A LARGE VARIETY OF PREFERRED EQUITY PROVIDERS INCLUDING:

Seth Shumer

MANAGING DIRECTOR

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Alexei Muniak

ORIGINATOR

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