Development Preferred Equity
Development
Preferred Equity
Basic Terms: NYMT’s investment must meet the general requirements as noted in its Investment Focus.
| Investment Amount | +$5.0 million |
| Loan to Cost | 70% - 90% |
| Fixed Rate | 11.0% - 16.0% |
| Current Pay | 6.0% (capitalized in budget to cover distributions through lease-up) |
| Origination Fee | 1.0% |
| Minimum Return Multiple | 1.40x |
| Surplus Cash Flow | Full Sweep |
| Investment Term | Up to 12 years (co-terminus with Senior Lender) |
| Recourse Obligation | Non-recourse completion guaranty & standard carve-outs |
General Characteristics
NYMT’s ‘Development’ Preferred Equity investment structure has the following characteristics:
- The position is ‘non-recourse’, and subordinate to the senior lender and senior to the common equity
- NYMT uses either a preferred equity investment or mezzanine debt structure, depending on the senior lender
- Preferred Equity – NYMT directly invests into an LLC as a member with governing terms provided in an operating agreement
- Mezzanine Financing – NYMT secures a pledge of equity interests of an LLC with governing terms in a mezzanine loan agreement
- Fixed-rate of return with no upside participation
- Sponsor maintains control and their non-diluted share of profits
- Optimize leverage at an affordable cost of capital
- Minimize capital outlay/maximize common equity returns