CRE Down Payment Solutions: Mezzanine, Preferred Equity, JV, and More

Senior lenders want real equity. Typical asks are 25 to 40 percent of cost or value. If your cash at close is short, there are legitimate structures that fill the gap without gimmicks. We structure the capital stack, run a term sheet auction across lenders and investors, and close a deal that a senior lender will sign off on. No side channels. No fantasy money. Just a clean stack with intercreditors that work.

Who this is for

• Qualified sponsors buying or refinancing income producing assets or transitional assets with a defined plan.
• Borrowers with real net worth and liquidity who are light on cash at close.
• Operators who can evidence track record, property management competence, and clean compliance.

Senior lender reality

Banks and senior debt funds size to DSCR, LTC, LTV, and tenant quality. They expect sponsor cash at risk. If the equity check is short, the stack has to make sense on day one and at stabilization. That means clear rights for each capital layer, consented structures, and a covenant package that survives scrutiny.

Down payment solutions that close

Preferred Equity

Capital that sits above common equity and below senior debt. Often fills 5 to 20 percent of total cost. Paid as current plus accrual to a fixed all in return. Comes with distribution controls, budget approval, and cure rights. Usually non recourse at the sponsor level. Requires a recognition or intercreditor with the senior lender.

Mezzanine Debt

Subordinate loan secured by a pledge of the borrowing entity interests. Used to push combined proceeds to about 80 to 85 percent LTC on stabilized or light value add assets. Coupon is higher than senior. Pay structure can be part current and part PIK. Intercreditor is mandatory. Cure mechanics must be clear.

Joint Venture Equity

Institutional LP provides most of the common equity. GP invests 5 to 20 percent and earns a promote above a preferred return. Best when the project is strong and the LP wants scale, governance, and reporting rights. Reduces sponsor cash significantly but adds control provisions that must be understood.

Seller Financing

Note from the seller that is subordinated to senior debt. Commonly 5 to 20 percent of price. Rate and amortization must fit DSCR. Requires senior consent. Can be paired with preferred equity or mezzanine to reduce sponsor cash further.

CPACE

Where eligible by state and asset plan, CPACE funds qualifying energy and building upgrades as a tax assessment. Can replace expensive parts of the stack and shrink the cash equity. Requires senior consent and careful DSCR modeling given the assessment.

Ground Lease and Leasehold Mortgage

Separate the land value and finance the improvements on a leasehold. Increases proceeds at closing but adds ground rent. Works when cap rate impact is offset by higher proceeds and long lease terms with market resets that a lender accepts.

Credit Tenant Lease Financing

For single tenant assets with an investment grade tenant and a long net lease, CTL lenders size primarily to lease cash flows. Often supports higher proceeds which reduces the sponsor equity. Legal and valuation work must match the lease terms precisely.

Bridge to Stabilization

Senior bridge facility at higher LTC with capex and interest reserve sized to get to a refinanceable DSCR. Reduces cash at close but increases carry cost until the plan is executed. Works when the path to stabilization is real and the exit debt is credible.

Tax Credit Equity

For qualifying projects and geographies, historic, low income, or new markets credits can bring in external equity. Heavy documentation. Real dollars if eligible. Align early with advisors so structure and timing are correct.

Cross Collateral and Recapitalization

Pledge additional real estate or free equity from another property through a refinance or sale leaseback. Common fix when the target asset alone cannot carry the full structure.

Which tool fits your deal

Sample capital stacks

These are illustrations. Actual terms depend on asset quality, cash flows, market, and sponsor profile.

Our process

1. Intake. One file with financials, rent roll, TTM, pro forma, budget, and third party reports plan.
2. Underwrite. We size senior debt, map the gap, and define the viable mix of mezz, pref, JV, or other tools.
3. Term sheet auction. We run a controlled process with senior, mezz, pref, and equity sources who actually fund your asset type.
4. Intercreditor alignment. Clean recognition and cure rights so the stack functions across cycles.
5. Close. Documents executed, conditions met, funds disbursed, reporting cadence set.

FAQs

Can mezzanine funding count toward the down payment
Senior lenders count equity as true first loss capital. Mezz is debt. It reduces cash at close but will not be booked as equity. It still solves the gap when the senior accepts the intercreditor.

How much can preferred equity reduce my cash
Often 5 to 20 percent of total cost. Higher only when asset quality, sponsor profile, and business plan justify it.

Will a JV partner let me stay in control
Yes within negotiated governance. Expect major decision rights, budget approval, and reporting. The promote compensates you for execution.

Is seller financing acceptable to the senior
Often yes with consent and terms that fit DSCR. The note sits behind the senior and may be behind mezz or pref depending on the structure.

Does CPACE work for acquisitions
It can, if qualifying improvements are in scope and the jurisdiction allows it. Senior consent is needed and the DSCR model must reflect the assessment.

What is the minimum sponsor cash I should plan for
Case by case, but most institutional stacks expect at least 5 to 10 percent of total cost from the GP even with gap solutions.

How fast can this be executed
Files with complete documents and a clear plan can move to signed term sheets quickly. Closing speed depends on third party reports, intercreditor negotiation, and legal.

All financing is subject to underwriting, lender and investor approvals, intercreditor agreements, and legal documentation. Structures vary by asset, jurisdiction, sponsor profile, and market conditions. No promise of funding is made on this page.