Development Preferred Equity


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 Cost70% - 90%
Fixed Rate11.0% - 16.0%
Current Pay6.0% (capitalized in budget to cover distributions through lease-up)
Origination Fee1.0%
Minimum Return Multiple1.40x
Surplus Cash FlowFull Sweep
Investment TermUp to 12 years (co-terminus with Senior Lender)
Recourse ObligationNon-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