Diversify with private credit and equity real estate investment funds that make non-concessionary impact investments to expand access for America’s working families to affordable, safe communities.
Senior Secured Mortgage Fund that makes private credit investments to experienced real estate sponsors. Targets monthly passive income and annual returns of up to 10% for accredited investors.
Private Real Estate Investment Fund that invests in income-producing, attainable rental communities. Targets monthly passive income and annual returns of up to 12% for accredited investors.
Private Preferred Credit Fund that makes primarily equity (debt for tax purposes) and debt investments to preserve attainable rental housing. Targets monthly passive income and annual returns of up to 11% for accredited investors.
Private Real Estate Investment Fund that invests in all stages of development to build, improve, and manage attainable rental housing. Targets quarterly passive income and annual returns of up to 13% for accredited investors.
See how DLP Capital’s lending fuels real estate projects that transform communities. These stories highlight the creativity, determination, and results of the talented sponsors we work with.
Explore a selection of our recent transactions across lending, acquisitions, and investments — demonstrating our commitment to delivering momentum, certainty, and impact for real estate projects nationwide.
Our core value of Driven for Greatness is about adopting a growth mindset and consistently seeking out opportunities to learn. The Twenty is our way of helping you do just that, named after the core value that sets the tone for all we do: the Twenty-Mile March. Learn from our latest webinars, articles, podcast episodes, and more.
In his blog, Founder and CEO Don Wenner shares insights from the lessons he’s learned as a faith-driven CEO who has grown DLP Capital to be an Inc. 5000 Fastest-Growing Company for 13 consecutive years at just 40 years old. Learn not just from his own experiences as an entrepreneur, father, and husband, but the most important lessons he has learned from friends and mentors like John C. Maxwell, Lloyd Reeb and others.
From impact investing to building an extraordinary organization while being equally focused on an extraordinary family, Don Wenner’s Elite Impact Podcast covers it all. Learn valuable insights and hear incredible stories of leadership, impact, and more from Don and his guests.
Experience DLP Capital events anytime. Watch keynotes, panel discussions, and training sessions featuring industry leaders and experts driving innovation and impact.
Access DLP Capital’s complete webinar library, featuring quarterly fund updates, educational sessions, and special presentations designed to keep investors informed and inspired.
Read the latest DLP Capital quarterly report for the most recent performance of DLP Capital-sponsored funds, updates on current investments within the funds, stories of our impact in action, company insights, and more.
CEO Don Wenner has built a life—and a company—dedicated to transforming lives through access to safe and attainable housing. Today, DLP Capital is creating solutions to the affordable housing crisis, redefining community, and helping investors discover success with significance.
DLP Capital’s purpose-driven, non-concessionary impact investments create housing, jobs, connection, and opportunity for families across America. Discover more about how DLP invests with purpose.
Meet the visionary leaders committed to executing DLP’s vision of transforming the lives of both residents and investors through the building of Thriving Communities.
Stay inspired by the latest updates from DLP Capital. Explore how we’re driving meaningful change, earning recognition, and celebrating milestones as we continue building thriving communities across America.
At DLP Capital, work is more than a job—it’s a mission. Join a team dedicated to solving America’s housing crisis, building thriving communities, and creating opportunities for families across the country.
Our mission starts with connection. Reach out to our team or visit one of our locations to learn more about how DLP Capital is creating impact where it matters most.
Multifamily Borrowers Turn to “Blended” Capital Stacks Given Tight Financings
April 1, 2024
Market Updates
The Mortgage Bankers Association projected total 2023 commercial real estate lending volume finishing the year 41% lower compared to 2022.
If you’re an owner, no doubt you feel the pain—especially if seeking a construction loan. Multifamily borrowers have been confronted with loan-to-cost (LTC) offerings as low as 55-60%. But with challenges come new solutions, and in today’s tight financing environment, one of those prevailing solutions is in the form of adding preferred equity to the capital stack.
Bridging the LTV Gap
What exactly is preferred equity? Preferred equity is sometimes considered a hybrid of debt and equity. The preferred equity is subordinate to senior debt and is typically paid off only after the senior debt is repaid—but prior to cash distributions to the sponsor. In this way, preferred equity serves to bridge the gap between a senior loan and the common equity portion of the capital stack. Given its added risk component versus senior debt, it typically has a “preferred” rate of return, i.e. a priority return of distributions from a borrower’s income and capital proceeds. With that preferred return, the investor usually has limited upside in the profits of a development project compared to straight equity in a project.
So, how is preferred equity coming into play as a solution in today’s multifamily markets? When it comes to multifamily construction, sponsors today are often faced with large shortfalls in their financing needs, given low loan-to-cost ratios. An alternative to a low-leverage loan is to add in preferred equity to cover the shortfall. The result is a blended cost of capital that may differ slightly from a combination of just bank financing and common equity—but it’s an availability of capital that can more readily fulfill development requirements.
A capital stack, for example, might include a 55% LTC bank senior loan carrying a 9% interest rate and 30% in preferred equity at a 17% cost, together providing a blended cost of capital of 10.05%. Granted that aggregate cost would be higher than straight bank debt, but if that bank debt is not to be had in excess of 55% LTC, then a blended rate to achieve development is better than no development at all. The preferred equity is also usually relatively straightforward for the borrower to redeem and exit —typically involving a payoff of the original investment plus any accrued return as well as any required redemption premium (an incentive to the original provider). When considering the cost of common limited partner (LP) equity that preferred equity tends to replace—with LP equity often expecting returns of 20+%—preferred equity is a more cost-efficient alternative. In today’s investment environment, it also eases the burden on a sponsor to raise or bring additional capital into the equation themselves.
Adds Nick Lanni, Senior Director of Credit, Risk and Investments at DLP Capital, “It’s very often a question of moving forward with development construction by filling the financing gap with preferred equity—or not moving forward at all.”
Plan Ahead
Prospective borrowers need to consider the prospects of preferred equity when negotiating loan commitments and/or senior loan term sheets, since loan covenants can influence capital stack options. Also to be considered is the preferred equity provider’s perspective: preferred equity lenders may have a say in material matters involving a property and/or the ability to manage the property in the event of default. In addition, preferred equity capital is also often reserved for the strongest of borrowers who have excellent track records.
DLP Capital Preferred Equity Program
DLP Capital provides preferred equity investments, on a case-by-case basis, related to single-family rental portfolios, multifamily communities, development of Build-For-Rent housing communities, and RV and manufactured home parks.
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