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Rescue capital steps in to save stalled developments

With debt markets frozen, preferred equity investors are emerging as a lifeline

As the multifamily boom ran into pandemic delays, cost overruns and now a brutal refinancing environment, developers with new projects have fires to put out.

Many have looked to raise money through capital calls or attempted to renegotiate with their lenders. With those options exhausted, some have turned to investors for a lifeline in the form of preferred equity.

This so-called rescue capital — often provided by other developers or lenders moving up the capital stack — is stepping in to get stalled projects delivered to safety.

Brian Cornell, who runs deals for the investment arm of brokerage Walker & Dunlop, said he’s seeing projects where construction is complete and leasing needs to get done, but the borrowers are having trouble refinancing their loans.

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