Preferred Equity up to 80% LTC with Flexible Senior Debt Compatibility

Capital Spotlight – Highlighting featured capital investors. We regularly publish the detailed criteria of our most unique real estate capital sources.

As sponsors continue to navigate volatile credit conditions and high execution hurdles, the ability to access higher leverage solutions from reputable lending teams without sacrificing certainty of closing has never been more critical. Valencia Realty Capital recently connected with a sub-debt provider that offers both a flexible preferred equity product as well as mezzanine debt for value-add real estate deals. They provide a unique blend of sophistication and speed as they are a small and experienced deal team deploying capital through a discretionary fund with a broad mandate across geographies and asset classes.

This group excels at structuring preferred equity and stretch senior solutions that allow leverage up to ~80% for both light and heavy value-add projects. Their willingness to sit behind agency, CMBS, or low-cost private bridge debt, positions them as a valuable partner for sponsors seeking tailored execution. With a focus on strong sponsor track records, sponsor alignment, underwriting discipline, and decisiveness, they’re delivering the kind of non-institutional creativity many deals with strong return profiles need right now.

Preferred Equity Characteristics

• Check Sizes: $7MM to $40MM
• Sub-Debt Pricing: Mid-teens target IRRs (generally 13–15%)
• Payment Type: Current vs accrued payments negotiable ** Prefer current-pay structures; reserves required in most scenarios
• Term: 1-7 years
• Fee Structure: Typically 1 in, 1 out
• Recourse: Non-recourse, standard carve-outs apply
• Closing Timeframe: can close in as soon as 30 days

Product Types

1. Sub-Debt / Preferred Equity (Behind Agency, CMBS, & Bridge Senior Loans):
   This group has the ability to structure 80%+ leverage on transitional assets with strong sponsor net worth and liquidity. They can structure their pref behind both agency and CMBS loans as they can get comfortable with soft-pay structures. They can also be flexible with their current and accrued pay structures having the ability to reduce a current pay to as low as 6% for the right profile deals.

Target Assets and Sponsors

• Asset Types: Primarily; multifamily, industrial, retail, and select hospitality
• Sponsor Profile: Experienced mid-market operators; strong alignment, history of execution
• Geography: Primary and secondary markets nationwide
• Project type: Focused on value-add; no ground-up construction deals

Underwriting and Terms

• Leverage: 80%+ all in LTC **subject to debt yield metrics
• Stabilized LTV: Typically targeting last dollar leverage between 60-70% subject to asset class and market
• Return Targets: 6%–9% current pay, with accruals to mid-teens IRR (generally 13-15%)
• Recourse: Non-recourse across products

Conclusion

In a market where institutional credit remains cautious and constrained, this lender fills a critical void for sponsors seeking flexible, fast-moving capital in special situations. Through sub-debt solutions behind agency loans, CMBS, or banks, their ability to structure around business plan risks makes them a go-to partner for sponsors executing complex value-add strategies.

With a deep understanding of both sponsors’ needs and structural pitfalls, their strong underwriting capabilities allow them to place capital on various deals otherwise overlooked by other firms. VRC looks forward to continued collaboration with capital sources like this — nimble, creative, and laser-focused on delivering certainty in uncertain markets.

If this capital source may be of interest, book a call to discuss a potential capital arrangement.

If this capital source may be of interest, book a call to discuss a potential capital arrangement.

Read our last Capital Spotlight: “Reliable Private Credit Group Offers Experienced Borrowers Max 85% LTC at Competitive Pricing”