Underwrite the opportunity
We review sponsorship, property performance, business plan, and priorities before approaching the market.
Preferred Equity financing
Preferred Equity and JV Financing for CRE Capital Stacks
Quick answer: Preferred equity provides subordinate capital behind senior debt in commercial real estate capital stacks, offering investors higher returns than senior debt while giving sponsors access to leverage beyond what first mortgage lenders provide. Commercial Lending Solutions sources preferred equity from institutional debt funds, private equity firms, and family offices for value-add acquisitions, developments, and recapitalizations. Minimum investment size is $2 million.
NationwideMarket coverage
1,000+Capital relationships
$2MM+CLS engagement floor
24 hoursInitial response
When it fits
When Preferred Equity financing fits.
Preferred equity occupies the gap between senior debt and common equity in the CRE capital stack. Unlike mezzanine debt which is structured as a loan secured by a pledge of ownership interests, preferred equity is an actual equity position with a preferred return, typically 8 to 15 percent current or accruing, and priority in distributions before common equity receives any return. Preferred equity providers often have consent rights over major decisions and conversion rights to common equity if performance triggers are not met. This structure is common in development and value-add transactions where senior lenders cap at 55 to 65 percent LTV and sponsors want to reduce common equity requirements to improve IRR. Commercial Lending Solutions matches each deal with the right preferred equity provider based on deal size, business plan, and required return profile.
Structure before pricing: leverage, recourse, reserves, prepayment, and closing certainty can matter as much as the headline coupon. We test those trade-offs before recommending a path.
01
Development projects needing capital above senior construction loan proceeds
02
Value-add acquisitions where senior LTV cap creates equity gap
03
Recapitalizations unlocking equity for portfolio expansion
04
Joint venture structures where institutional capital partners need preferred return protection
05
Ground-up multifamily and mixed-use projects requiring 80 to 90 percent capitalization
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Sponsors seeking to minimize common equity while maintaining full deal control
Lender selection
How We Source Preferred Equity Capital
We do not treat the lender list as a directory. We target the desks whose current appetite fits the asset, sponsorship, market, and business plan, then compare the full execution, not only the rate.
| Capital source | Where it may fit |
|---|---|
| Institutional Debt Funds | Flexible capital for transitional, complex, leveraged, or time-sensitive executions where conventional credit boxes may not fit. |
| Private Equity Firms | Flexible capital for transitional, complex, leveraged, or time-sensitive executions where conventional credit boxes may not fit. |
| Family Offices | Program-specific capital evaluated for current appetite, proceeds, pricing, recourse, flexibility, and certainty of close. |
| Insurance Company Structured Finance | Long-duration fixed-rate capital for high-quality assets and experienced sponsors, generally with conservative leverage. |
| High-Net-Worth Investors | Program-specific capital evaluated for current appetite, proceeds, pricing, recourse, flexibility, and certainty of close. |
How we work
One process. Multiple capital sources.
We position the transaction, identify the lenders most likely to compete, and compare proposals on economics and execution risk, not just headline rate.
A well-structured financing process should create real choices for the borrower, not simply deliver the first term sheet.
Target the right lender desks
The transaction is matched to lenders whose current appetite fits the property, market, and structure.
Create a comparable field
Proposals are evaluated across rate, proceeds, recourse, reserves, prepayment, and closing certainty.
Manage execution through closing
We coordinate lender diligence, third-party reports, and issue resolution until the loan funds.
National reach
Market knowledge where the deal requires it.
We arrange preferred equity financing nationwide while matching each transaction to capital sources active in that market and property type.
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Questions
Preferred Equity financing, clarified.
The final structure depends on the asset, sponsorship, and market. These are the starting parameters we discuss most often.
Working out equity? Our commercial property down payment guide covers typical requirements by loan type: 20% to 30% conventional, 10% for SBA owner occupied.
Preferred equity is an equity position that sits behind senior debt and ahead of common equity. It earns a stated preferred return before common equity receives any distribution, and the provider generally holds consent rights over major decisions. Investments start around $2 million and run to $50 million and above, with terms of 1 to 5 years.
Current market is a 10% to 16% preferred return, structured as current pay, fully accruing, or a blend of the two. Development deals with no interim cash flow usually accrue and settle at a capital event, while stabilized recapitalizations pay currently. Deal size, business plan risk, and the attachment point set the number within that range.
Combined with a senior loan, preferred equity commonly takes total capitalization to 85% to 90%. That matters when a senior lender caps at 55% to 65% of value or cost and the sponsor would otherwise have to write a much larger common equity check. The tradeoff is a higher blended cost of capital and a partner with approval rights.
Mezzanine debt is a loan secured by a pledge of the ownership interests in the property-owning entity. Preferred equity is an actual equity interest with a priority return. The difference shows up in remedies: a mezzanine lender forecloses on the pledged interests under the UCC, while a preferred holder exercises contractual control rights and steps into management. Senior lenders often dictate which structure they permit.
The control and remedy provisions rather than the rate. Underperformance triggers, forced-sale rights, and conversion to a larger common position can move control of the deal on a single missed milestone. Read the trigger definitions and cure periods as closely as the preferred return. Expect 30 to 60 days to place and close, running parallel to the senior loan.
Let's evaluate the right preferred equity structure.
Share the property and financing request. We will respond within 24 hours with an initial view.