Preferred Equity for Commercial Real Estate | Nationwide Placement

Preferred equity is capital that sits behind the senior mortgage and ahead of common equity in the capital stack. It is structured as an equity investment in the property-owning entity with a fixed priority return rather than as a mortgage loan, which is why it does not require a mortgage lien and can often be placed without recourse to the sponsor.

Rad Capital Group places preferred equity from $2 million to $100 million on hotels, multifamily, industrial, retail, and mixed-use assets. Typical structures carry a 10% to 15% total return — often split between a current pay component of 7% to 10% and an accrual — with combined leverage reaching 85% to 90% of cost.

Sponsors use preferred equity to close an acquisition funding gap, recapitalize an over-levered asset at maturity, fund a PIP or capital improvement program without diluting common equity, or buy out a partner. Because pref providers underwrite the business plan rather than only the collateral, execution speed depends on sponsor track record and the credibility of the exit.

Senior lender consent is nearly always required. We negotiate the recognition agreement, change-of-control rights, and cure rights alongside the senior lender so the structure closes simultaneously rather than in sequence.