If your property currently has a senior loan in place that prohibits mezzanine, or other types of subordinate financing, perhaps preferred equity financing would be the right choice to safely maximize property proceeds. If this fits your need, let MidCap use its extensive industry knowledge and connections to find the right provider of the preferred equity.
Preferred equity financing can take many different forms. Typically the lender/investor becomes a direct partner in the ownership entity of a property, but has a preferred return. Also, if there is a capital event, or an event of default, the preferred equity holder has a liquidation preference. As you can see, this form of investment steps away from true equity in that holders obtain a debt-like attribute of payment preference over all other types of equity. However, from the property owner’s perspective, the equity nature of the investment will not violate any secondary financing prohibition erected by the first mortgage holder.
The positive attributes of preferred equity benefit both the preferred equity investor and the property owner, so it is no wonder such structures are increasing in the commercial real estate market. Over the last few years, more and more of the non-institutional private investors who have been in the mezzanine/bridge loan business are discovering preferred equity as a way to create additional upside. If preferred equity sounds like a fit for your project, please feel free to give us a call to discuss further options.