PREFERRED EQUITY

Preferred Equity serves as a source of secondary debt financing, which sits in second priority behind the senior loan on the subject collateral property. This type of financing can provide investors and developers with some relief in terms of the size of their equity raise.

Preferred Equity is often utilized on heavy value-add and/or construction projects that expect higher returns and can support the cost of those higher interest rates on a component of the capital stack.

Advantages of Preferred Equity for Borrowers:

• Improve levered returns for investors and developers

• Typically more flexibility in the structure of interest payments, with a current pay component and accrued pay component

• Lower the equity raise amount

What to consider when using Preferred Equity:

• Higher cost of capital

• Impact on project delays – potential need to replenish interest reserves

• Allowance for secondary financing by senior lender, and associated legal cost

With its deep experience in securing preferred equity, Live Oak Funding Group is here for a confidential discussion on your pending project.

Loan Amount - $4M - $50M

Loan Term - Generally, 1 to 5 years

Amortization - Interest only or fixed principal pay downs

Minimum DSCR - 1.10x

Maximum LTV - 85%

Interest Rate - 12% - 15%

Eligible Properties - Well-located existing multifamily and new multifamily construction located in strong markets with positive demographic, population, and employment trends

Eligible Borrower - Single-asset entity

Sponsorship - Good overall credit with sufficient liquidity and demonstrated experience completing similar transactions

Security - Preferred equity position in the borrower’s organizational structure; additional enhancement (recourse, other collateral, letter of credit, or other guarantees) to be determined

Required Reports - Appraisal, Property Condition Assessment, and Phase I Environmental

Prepayment - Generally permitted

Lender Fee - Origination and exit fees to be determined