Preferred Equity Finance Solutions in Australia
Preferred equity finance can help you spread capital across multiple projects, start earlier on a project and/or potentially increase your return on cost.
Preferred equity is a form of financing that effectively takes a direct stake in a project and is paid back before common equity but behind any debt positions. Typically, a preferred equity facility will come with a coupon rate of annual return rather than a profit share arrangement.
How does preferred equity finance work?
Like mezzanine funding, taking a preferred equity facility may enable a developer to spread capital across projects, start earlier on a project and potentially increase their return on cost. This financing can be used for funding every stage of the project; including research, feasibility, pre-construction, construction, marketing costs and property sales.
Preferred equity differs from mezzanine finance, however, as rather than take a second mortgage position on the property with a defined interest rate, a provider will take an equity stake in the development entity (usually with a fixed coupon rate). While the end result is very similar, this structuring can be more suitable than mezzanine finance in certain situations – for instance, where the senior debt provider does not allow a mezzanine finance facility to go in behind them.
Preferred equity finance with MFEG
As a business that is focused on delivering the most optimal outcomes possible and with a flexible model of funding, MFEG has the ability to structure the most appropriate financing model for a particular project. This includes the arrangement of preferred equity finance solutions where it is appropriate and workable to do so.
If you are involved in a property development project where preferred equity finance could help your position, don’t hesitate to arrange a consultation with one of our qualified and experienced MFEG professionals today.
We will work closely alongside you to create a tailored funding solution, either as a direct lender or via our strong network of trusted funding partners. MFEG also specialises in mezzanine property finance, land finance, residual stock finance, short term lending solutions and more.
377 Hectares of Land
Lending Amount: $76m
Solution Provided: Settlement of land purchase based on long term contract. Funding provided against valuation with all capital returned to the purchaser.
23 Apartments & 1 Retail Space
Lending Amount: $23.4m
Solution Provided: Low interest rate loan provided with flexibility around pre-sale requirements
Lending Amount: $21.6m
Solution Provided: funding for the acquisition of a commercial office acquisition at major bank rates for a not-for-profit organisation with no recourse to directors.