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Preferred Equity Financing

NetLeaseX Capital is seeking to make passive, preferred equity investments.  We are looking to invest in profitable transactions and will consider non-institutional and even new sponsors who lack financial resources but have deep industry experience.  Our funds can be used to:

  • Fund the ground-up development of real estate projects
  • Acquire profitable real estate investments
  • Acquire land, pay for entitlements and other pre-development expenses
  • Fund an interest reserve with your senior lender
  • Fund any required capital improvements and/or needed renovations
  • Fund a reserve to pay for any future tenant buildouts and/or leasing commissions
  • Acquire mortgage debt at a discount
  • Buy out existing limited partners
  • Cover unfunded capital calls from limited partners

As discussed on the Loan Workouts/Rescue Financing page, our funds can also be used to infuse capital into an existing property to:

  • Cover any operating deficits due to Covid-19 and/or for any other reason
  • Gain leverage to facilitate favorable loan workouts to reduce interest rates, extend maturity dates, and/or release or otherwise reduce personal loan guarantys

The information below provides a general outline of our joint venture/preferred equity program.

1.Investment Amount:$500,000 minimum, no maximum
2.Investment Structure:Preferred membership interest in the ownership entity
3.Preferred Return:10% per annum, cumulative from investment date
4.Common Interests:We receive a 40-50% common membership interest in the development entity for a nominal amount, in consideration for our investing in your project.
5.Sponsor Contribution:Approximately 15% to 20% of the total equity investment for which the sponsor receives the same 10% preferred return as ours, but subordinate to our interest.  If the sponsor is unable to invest 15% to 20% of the required equity, please click here to learn more raising additional equity via a co-GP investment.
6.Leverage:Low cost first mortgage debt from a third party lender is needed.  Ideal leverage is 65 to 75%.  We can arrange the senior debt at a very competitive rate and terms if you need help in doing so.
7.Development Entity Distributions:

Net cash flow from the operation and resale of the project will be applied in the following manner:

  1. Pay debt service on any project-related loans;
  2. Pay 10% per annum cumulative preferred return on our preferred membership interest;
  3. Redeem our firm’s preferred membership interest;
  4. Pay 10% per annum cumulative preferred return on the sponsor’s preferred membership interest;
  5. Redeem the sponsor’s preferred membership interest, and
  6. After all of the preferred membership interests have been redeemed (and all cumulative preferred return have been paid), all remaining cash flow from the operation and resale of the project will be distributed to us and the sponsor as the holders of the common membership interests.
8.Term of Investment:Maximum 5 years
9.Product Types:All real estate types, including land
11.Decision Making:Major decisions (e.g. termination of manager, sale, or refinance) require our approval
12.Senior Loan Recourse:The sponsor will be solely responsible for submitting financial statements and any necessary loan recourse and personal guarantys to the senior lender.
13.Preferred Investment Recourse:Non-recourse, except for standard carve-outs. A completion guaranty may be required on development or rehab projects.
14.Closing:Typically, 4 weeks. However, as fast as 10 days from the date of receipt of all requested due diligence items.

If you have any questions about how preferred equity works and/or would like to discuss a potential financing, please call us at 513-621-1031 or send us an e-mail summarizing your project.