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Capability 08 · Capital-Stack Optimisation

Preferred equity, to preserve sponsor equity.

Mezzanine and preferred equity solutions to optimise the capital stack, accelerate IRR and preserve sponsor equity. We arrange the pref-equity layer alongside the senior facility so the entire stack is mandated, structured and closed under one roof.

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$95M+
Pref equity arranged
14–18%IRR
Target returns to capital
85%
Combined senior + pref LVR
4–6wks
Median capital lock
Why Evcorp

The same deal, a better outcome.

Sponsors who engage Evcorp before approaching lenders consistently achieve higher approval rates, tighter pricing and better terms. Here is why.

01.

Stack-level structuring

Pref-equity that conflicts with the senior facility is worse than no pref-equity. We design the senior facility and the pref layer together so intercreditor, drawdown sequencing and exit waterfall all align.

02.

Family-office and fund relationships

Active relationships with sophisticated family offices, special-situations funds and dedicated pref-equity managers who underwrite Australian property at scale. Not a generic intro service.

03.

Sponsor-equity preservation

Sponsors typically reduce their equity contribution by 30–50% with a properly structured pref layer — letting them deploy capital across more projects without giving up control.

04.

Direct senior dealings throughout

Capital providers at this end of the market expect to deal with principals, not associates. You meet decision-makers from first conversation.

How it works

From brief to settlement in four steps.

01

Brief

Project, sponsor track record, current capital plan (senior + sponsor equity), exit horizon, IRR ambition.

02

Indicative

Indicative pref terms within one week from 2–3 capital providers. Combined-stack model returned to you.

03

Mandate

Term sheet executed. Formal investor memorandum prepared alongside senior credit submission.

04

Close

Pref-equity drawdown sequenced with senior facility. Intercreditor agreements pre-negotiated.

What we finance

Built for the deal in front of you.

We arrange preferred equity and mezzanine debt for development projects, value-add acquisitions, and capital-stack optimisations on existing assets. Typical tickets $5M to $50M of pref capital sitting behind a $30M to $300M senior facility.

Capital providers include family offices, special-situations funds, dedicated property pref-equity managers and private investment vehicles. All have different appetites for sector, sponsor profile and exit horizon.

Typical structure
Pref ticket$5M – $50M+
Senior + pref LVRUp to 85%
Target IRR14% – 18%
CouponCash + accrual / accrual only
Term12 – 36 months
PositionBehind senior, ahead of sponsor
ExitSale, refi, or sponsor takeout
FAQs

Frequently Asked Questions — Preferred Equity

What is preferred equity in property development?
Preferred equity is a capital-stack layer that sits between senior debt and common equity. It provides additional leverage beyond the senior LVR cap in exchange for a preferred return to the capital provider. Unlike mezzanine debt, preferred equity is structured as an equity instrument rather than a second mortgage.
What is the difference between preferred equity and mezzanine finance?
Mezzanine finance is a second mortgage secured against the property, ranking behind senior debt. Preferred equity is an equity-layer instrument with a preferred return but no mortgage. Preferred equity typically allows higher combined leverage up to 90–92% of total development cost and is used when a second mortgage is prohibited under senior facility covenants.
What returns do preferred equity investors expect?
Preferred equity investors in Australian property development typically target IRRs of 14–22% depending on project risk, leverage and term. Returns are structured as a preferred return plus a profit participation component in some structures. Evcorp arranges the capital alongside the senior facility under a single mandate.
When should a developer use preferred equity?
Preferred equity is most useful when senior debt LVR caps leave a funding gap the developer cannot fill with their own equity, when a second mortgage is prohibited under senior covenants, or when the developer wants to maximise return on equity across multiple projects simultaneously.
Who provides preferred equity in Australia?
Preferred equity for Australian property development is provided by private credit funds, institutional real estate debt funds, family offices and high-net-worth investors. It is not a bank product. Evcorp structures preferred equity alongside senior debt so that combined leverage can reach 90–92% of total development cost.
What is the difference between preferred equity and a joint venture?
Preferred equity provides capital for a fixed preferred return — typically a 14–22% target IRR — and ranks ahead of the developer's own equity, but the developer keeps control and the upside above that return. A joint venture partner shares both control and the profit outcome. Preferred equity is used when a developer wants leverage without giving up the project's upside or decision-making.
Related

Other capabilities.

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Development Finance

Senior and stretch senior funding to pair with the pref-equity layer.

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Mezzanine Finance

Bridge the gap between senior debt and equity, up to 85–90% LTC.

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Acquisitions

Pre-settlement acquisition structuring across the capital stack.

Sponsor equity is the most expensive capital.

If you're contributing more equity than you'd like to a live project, we should model a pref-equity layer. Send the senior term sheet and capital plan.

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