Preferred equity allows a sponsor to preserve primary ownership interest and control with a cost-effective alternative to utilizing partners or supplement equity capital. It is typically utilized to increase LTV of acquisition financing, monetize existing equity or otherwise recapitalize/restructure an existing ownership structure.
Preferred Equity
Investment Amount:
$2MM and up
Geography:
Primary and secondary markets
Hold period:
2-7 years
Property Types:
Multifamily, Mobile Home Community, Office, Industrial, Self-Storage, Retail, Hotel
Priority:
Senior to sponsor equity position.
Loan-to-Value:
Up to 95% of appraised value
DSCR:
1.10x
Origination fee:
2% and up
Prepayment:
Subject to deal desirability
Recourse:
Non-recourse, subject to standard carve-outs
Rate:
Typically, 8-12%. (Aggregate IRR may be higher)