We Offer Preferred Equity Real Estate Financing
Preferred equity real estate financing is a close cousin to mezzanine lending with one big difference: the lender generally has no foreclosure rights and there’s no inter-credit agreement with the first lien financier. The preferred equity lender (most often a private equity firm) instead establishes contract remedies written into the operating agreement with the partnership, trust, corporation, LLC, Delaware Corporation, estate, or foreign national entity borrowing the money. This gives it the right to step into managing control of the business and exercise their remedies if and when certain stated eventualities arise.
Clopton’s Preferred Equity Guidelines
- Starting at $1 million going up to loans of $40 million PLUS
- Up to 10 years term
- Interest only payments
- Real estate asset classes to include commercial, industrial, and mixed-use
- It excludes residential properties
- Nationwide geography
- Acquisitions, refinances, value-add, construction loans all considered
- Restructuring, value-added, recapitalization, leveraged buyouts possible
- No amortization interest payment for increased cash flow
- Alternative to a mezzanine loan, secured by preferred stock
- Compared to the equity investor alternative – lower cost-of-capital
- Diverse categories like offices, self-storage, mobile parks etc., qualify
Preferred Equity Funding is one option amongst many that Clopton Capital, a nationwide commercial mortgage broker, can arrange from a menu that also covers commercial mortgages, construction loans, cash out leveraging, refinancing loan vehicles, CMBS, bridge lending, and real estate private equity. If you are looking to raise anything from $1 million to $40 million and trust the fact that we have multi $ billion of closed deals to show over 10years, Clopton is the advisor to call. We have a well-earned reputation for giving private investors, small/middle market real estate entities, and family offices direct access to the most competitive preferred equity funders and private equity firms in the USA. This is a direct path to negotiating the easiest preferred equity terms and lowest interest rates possible. We reach every city, town, and rural area from coast to coast, in every state throughout the USA carried along by close relationships with the most important commercial real estate lenders in the business.
Case Studies of Preferred Equity Financing with Clopton Capital
Case Study 1: A real estate corporation and borrower came to us looking to acquire a $37 million apartment building in Washington State. The sponsor had a value-add acquisition plan that they intended to execute and was looking for a piece of preferred equity to round out their capital stack. We were able to structure an $8 million preferred equity piece from a private equity fund, that gave them a 75/25 equity funding split with a 4-year investment term. This allowed them to execute their business plan and conserve their own capital for other projects.
Case Study 2: A developer representing a partnership wanted to get a higher cap stack position for a development venture that he was implementing in New York. His bank debt financing disallowed secondary financing secured by the project collateral, so he needed an alternative solution. We were able to structure a preferred equity piece with a private equity fund, getting him an 80% loan-to-cost arrangement without triggering any problem with his first mortgage lender. The deal allowed the developer to construct the project and conserve his own capital for other potential projects. Once the new real estate investment was completed, the partnership would be positioned to repay the subordination piece based on the higher property valuation.
Asset-backed preferred equity financing is a potently versatile funding tool that can assist investors in all kinds of property transactions. To learn more contact one of Clopton Capital’s commercial mortgage lenders by calling 866-647-1650 or using the Contact Us form available from the menu. You’re always welcome to work with us to find the right preferred equity-funding terms to suit your every possibility. And with low closing costs attached to a straightforward documentation and underwriting process, your commercial loan process will be stress-free.