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Preferred Equity & Mezzanine

Subordinate debt and structured equity solutions that bridge the gap between senior debt and common equity.

Preferred equity and mezzanine financing occupy the same position in the capital stack — above senior debt and below common equity — but differ in their legal structure and rights. Mezzanine debt is structured as a loan secured by a pledge of the equity interest in the borrowing entity; preferred equity is a preferred ownership interest in that same entity. Both are used to increase total leverage beyond what senior lenders will provide. Both are priced to reflect the subordinate risk — typically 10–16% depending on position, asset, and sponsor.

The demand for preferred equity and mezz has increased sharply as senior lenders have compressed LTV requirements. A sponsor buying a $30M asset with 60% senior debt and 20% equity can close a 20% pref or mezz tranche that fills the gap — often at a blended cost of capital that still makes the deal pencil. LTG accesses structured capital from debt funds, family offices, insurance company sub-debt programs, and dedicated preferred equity platforms.

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When Preferred Equity Makes Sense

Preferred equity is most valuable when: (1) the senior lender won't go above a certain LTV and the sponsor needs more proceeds; (2) the sponsor wants to preserve common equity upside and control; or (3) an existing stabilized deal needs a cash-out recapitalization without triggering a full refinance of the senior debt. LTG evaluates each situation and helps sponsors model the blended cost of capital against alternatives before committing to a structure.

Some senior lenders prohibit mezz or preferred equity behind their loans. LTG identifies which senior lenders are "pref-friendly" and structures the capital stack accordingly — before commitments are signed, not after.

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Typical Deal Parameters

Tranche Size	$3M to $50M+
Position	Above senior debt, below common equity
Rate	10–16% (current pay or accruing)
Structure	Mezzanine loan or preferred equity interest
Maturity	Co-terminus with senior debt (typical)
LTV Range	Senior 55–70% + mezz/pref to 80–85% combined