Real Estate Capital Simplified
Preferred Equity & LP Capital for commercial Real Estate
Preferred equity fills the gap between senior debt and your cash
Preferred equity has a priority return typically in the 9–15% range; LP capital funds the rest of the stack, up to 95% of cost on strong deals. I'm Carl Riggins. Through RECAPITAL.ai, I place both for Colorado sponsors — development, acquisitions, and recapitalizations — marketing each request through the Northmarq platform to 500+ capital sources. Typical placements run $5M to $30M+.
Where does preferred equity fit in the stack?
Behind the senior loan and ahead of every other dollar of equity. A typical Colorado structure: senior debt to 60–70% of cost, preferred equity carrying the stack to 85–90%, sponsor and LP common equity above that. The pref investor takes a fixed priority return — current-pay, accrued, or split between the two — and hands the upside beyond it back to you.
Pref investors underwrite your basis, not your dreams. They're modeling the value at which their last dollar is safe, which is why a pref quote comes back fast and closes faster than common equity — there's less to believe. In a market where Colorado deals are repricing to today's basis, that underwriting posture is exactly why pref capital is abundant right now.
When does preferred equity beat raising more LP capital?
When you want to keep the upside you're creating. Pref costs a fixed return; LP capital costs a share of everything above the hurdle, forever.
On a deal where you believe your plan — a lease-up entering Denver's thinnest supply pipeline in five years, a value-add with proven rents — selling common equity is the most expensive money on the page. Pref is also faster to close and lighter on governance: a return to pay, not a partner to manage.
Take LP capital instead when the risk deserves sharing, the hold is long, or the relationship is the point — the LP who funds this deal underwrites the next one in half the time.
Preferred equity for colorado commercial real estate
What does preferred equity cost in Colorado?
Position sets the price. Pref behind conservative senior debt on a stabilizing asset prices at the low end; pref stretching a development stack to 90% prices at the top. Across the market, the range runs roughly 9–15% all-in, structured as current pay, accrual, or a blend. Where your deal lands inside that range is a function of basis, position, and — as with every layer I place — how many capital sources were competing when the term sheet printed.
What do pref and LP investors need to see?
The same three pages of every institutional read: basis versus today's comps, the senior lender's terms and consent posture, and the sponsor's history with this exact business plan. Pref investors will also want inter-creditor terms the senior will actually sign — I structure that consent early, because it's the piece that delays closings, not the capital.