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What is Preferred Equity?

Preferred Equity is equity, which is senior to common equity in the capital stack, but junior to debt. The preferred equity investment is paid back after your lender’s debt, but before the GP or any other investors.

How much will you invest?

Our preferred equity investments range from $100k - $2m+.

How are your preferred equity investments structured?

Our preferred equity investment is not debt, and is not structured as a traditional loan/mortgage. We structure our investment in an operating agreement for the LLC that owns the property. We have a standard form operating agreement that replaces or amends your current OA, and stipulates our rights and protections, and the terms of the investment.

Are you compatible with other lenders?

Yes, since we do not require a traditional junior lien, we are very compatible with most lenders.

Do you have preferred lenders that I can work with?

Yes we can recommend various local and regional lenders that are familiar and comfortable with our structure.

Do you provide the debt if we don’t have a lender?

Yes, in most cases we can also provide the debt for your project, and in fact prefer to do so. We do this in partnership with local lenders. This is the EVO Origin Funding business and is separate but in addition to our investment from the EOF Funds. This allows us to be a “one-stop shop” for both your debt and equity. In these instances, we are often providing a personal guarantee on your behalf, and charge a fee for this service. In return, we’ll bring an excellent lender to the table, and will facilitate and handle most aspects of the loan. This provides the developer with excellent overall capital terms, and easy execution. These loans come with standard covenants.

Will you invest up to 100% of cost?

Yes, in certain instances we will invest up to 100% of cost (e.g., in these cases we invest all of the equity required, and often provide the debt as well). We value projects based on as-is and as-complete values. Our investments are limited by these value ratios. However, on strong deals we can invest 100% of proceeds. In many cases, developers also invest their own capital (or bring in other smaller investors).

How are you a partner?

We are not a lender. We are a development company with a financial arm, which invests equity into real estate projects. We are developers ourselves. Once we are invested, our incentive is to make you and the project successful. Our main goal is to help you grow your business and become more profitable. We can help with underwriting support, project review, sub-contractor contacts, sales support, etc.

What are typical uses of Preferred Equity?

Developers use our preferred equity investments for many purposes, but here are some of the most common uses:

  • ● Reducing your initial down payment / cash requirement to close
  • ● Additional equity investment to cover a construction budget overrun (without having to restructure your current loan)
  • ● Tap equity that you have created in a project, before it sells, which can allow you to buy another deal
  • ● Complement your existing capital/investor base, allowing you to build larger projects
  • ● To have a more reliable / consistent source of capital
Do you only invest at the beginning of a project?

It’s most common that we come in at the purchase closing. However we can also invest mid-project, if capital is needed because of a cost overrun or other reason. In these instances we would need to underwrite the project as it currently stands, and then upon completion.

How quickly can you close?

Our equity investments are a much lighter lift than a loan. If your project is in order, we can close in just a few days.

Do you require tax returns?

We generally do not, as we are basing our investment on the project itself.

What size projects do you prefer?

We love projects from 1 unit (i.e., a single family) up through 20 units but are open to reviewing any project. Our partners have invested in projects up to 175 units.

Are you limited by geography?

Yes, with rare exception, we only invest in the Greater Boston Area (I-95 loop).

Do you invest in both new construction and renovations?


Do you do requisitions/draws?

Some of our investments are structured as a single investment at closing, and some are structured with requisitions based on construction progress. This is primarily driven by the situation and how much construction is being done.

Do you invest in rental projects?

All of our projects in the EOF Funds require a clean exit. For this reason, most of our investments are into projects that are designed for sale. However we are willing to underwrite certain rental projects if they have a clear refinancing opportunity upon completion, which will allow us to exit.

Do you invest in multiple projects per developer?

Yes, once we grow more confident with the developer.

Are your Preferred Equity investments more expensive than debt?

Yes, the preferred equity can be more expensive than debt because equity carries a higher risk. We are paid back after the lender. That said, the preferred equity investment is typically much smaller in size than your loan, so it has a smaller impact on the project P&L.

What do you typically charge for your preferred equity?

Each deal varies, however we typically charge a minimum annualized return, plus a small share of back-end profits, plus an admin / commitment fee.

Do I need to be working with an EVO agent to get an investment?

No, we are a separate company from the EVO Real Estate Group. You do not need to be working with an EVO agent to get an investment. If you come in with your own broker, we are very careful to respect that broker and avoid any conflict of interest with EVO Brokerage. If you need a brokerage referral, we will often refer you to an EVO agent, as we know they will deliver quality execution. We do rely on EVO for certain valuation support. One of our principals is an owner of EVO Real Estate Group.

Do you pay referral fees to brokers who bring in business for EVO Origin Funding?

Yes, we do pay referral fees to brokers/agents who bring in business.

Does a preferred equity investment your investment incur large legal costs to close?

The legal costs for a preferred equity investment are usually much less than when closing a loan.

Reach out to us to discuss financing your project
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