Unlock Complex Capital Structures: Archer Launches Preferred Equity Analysis
The world of commercial real estate (CRE) finance is constantly evolving, and today's market often demands more sophisticated capital structures to optimize returns and attract investment. Over the past 12 months, we've seen many groups looking to make their deals work by adding structure, and we've had multiple clients requesting this functionality.
That's why Archer is thrilled to announce the launch of our new Preferred Equity Analysis functionality, designed to empower acquisition and capital advisory teams with the tools they need to navigate complex equity arrangements.
What is Preferred Equity?
Preferred equity is a type of financing that sits between debt and common equity in the capital stack. It offers investors a fixed rate of return, making it a less risky investment than common equity but generally more risky than debt.
Here's a breakdown of key characteristics:
- Subordinate to Debt: Preferred equity holders are paid after debt holders in a bankruptcy or liquidation.
- Senior to Common Equity: Preferred equity holders have priority over common equity holders in terms of distributions and claims on assets.
- Fixed Rate of Return: Preferred equity investors typically receive a predetermined return on their investment.
- Flexibility: Preferred equity can be structured in various ways, making it a versatile tool for financing CRE projects.
Why Preferred Equity Matters in Today's Market
In an environment where traditional financing may be more challenging to secure, preferred equity can be a crucial tool for:
- Bridging the Gap: Filling the funding gap between debt and common equity.
- Increasing Leverage: Allowing sponsors to increase leverage without taking on more debt.
- Enhancing Returns: Potentially boosting returns for limited partners (LPs) and general partners (GPs).
- Attracting Investors: Offering investors a more predictable return profile.
Archer's New Preferred Equity Analysis Functionality
Archer's new functionality empowers users to analyze deals with preferred equity components seamlessly. Key features include:
- Flexible Inputs: Easily enter preferred equity as a percentage of the equity stack.
- Customizable Returns: Model both current and accrued pay, with adjustable settings.
- Interest Calculation Options: Customize for compounding or non-compounding interest on the principal balance.
- Cash Flow Integration: Preferred equity flows seamlessly through cash flows and into equity return tabs.
- Return Impact Analysis: Quickly analyze the impact of preferred equity on overall IRR and cash yields to investors.
Benefits for CRE Professionals
- Enhanced Deal Structuring: Analyze more dynamic and complex equity structures.
- Improved Decision-Making: Evaluate the impact of preferred equity on investment returns and risk.
- Attract More Capital: Model structures that appeal to a wider range of investors.
- Streamlined Analysis: Integrate preferred equity analysis seamlessly into your existing Archer workflow.
A Powerful Addition to Archer's Underwriting Capabilities
The addition of preferred equity analysis further enhances Archer's already robust underwriting platform, providing CRE professionals with the tools they need to analyze deals with greater precision and sophistication.
By providing this new functionality, Archer continues to demonstrate its commitment to empowering CRE professionals with the most advanced and comprehensive tools for success in today's dynamic market.