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Preferred Equity
Our experience over the past 23 years in preferred equity and construction loan funding provides you with an edge in the market by achieving funding objectives, quickly and effectively. We will provide you with the best preferred equity interest rates and terms available at the time of applying.
A property developer’s ability to acquire new projects directly relates to the amount of equity/cash the developer is required to contribute to the project. Through prudent financial structuring Prudential Finance can maximise a developer’s debt gearing to free up capital for the next project.
See a related finance structure Mezzanine Finance.
Q&A
Preferred equity is a form of capital that sits between mezzanine debt and common equity in the capital stack. The preferred equity investor takes an equity interest in the development entity and receives priority returns ahead of common equity.
Mezzanine finance is debt secured by a second mortgage with fixed interest. Preferred equity is an equity position with priority distribution rights, typically used when senior lenders do not allow additional second-mortgage debt.
Preferred equity is typically used when total gearing is already high, when senior lenders restrict additional debt, or when the developer wants to reduce cash equity contribution without adding registered security.
Preferred equity returns vary based on project risk, LVR stack and timing, and are typically structured as a fixed coupon plus a profit share. Returns are quoted per transaction and are generally higher than mezzanine debt.
Preferred equity is usually unsecured at the property level but is structured with shareholder-level protections, reserve matters and contractual priorities over the developer's common equity.
Preferred equity is provided by Prudential Finance's network of mortgage funds, family offices, professional investors and high net worth individuals seeking property-linked equity returns.
Preferred equity allocations typically range from $1 million to $50 million or more depending on project scale and capital stack composition.
Preferred equity is repaid from project cash flow on completion, typically after senior debt and mezzanine debt, with the preferred return and profit share distributed ahead of common equity.
Yes, depending on senior lender consent. Some projects use a three-tier stack of senior debt, mezzanine debt and preferred equity to maximise leverage and minimise developer cash contribution.
Indicative terms can typically be issued within one to two weeks, with formal settlement taking four to six weeks subject to due diligence, legal structuring and alignment with senior and mezzanine financiers.