Tag Archives: LeverCapitalPartners

Construction Loans + C-PACE

Construction Loans + C-PACE: When Does It Actually Make Sense?

by: Adam Horowitz

Many developers understand construction loans. Many have also heard of C-PACE financing. The harder question is whether combining the two actually creates a better capital stack.

In today’s market, construction lenders are more selective, proceeds are tighter, and sponsor equity is expensive. That has pushed more developers to evaluate alternative financing layers that can reduce the amount of common equity required to close. C-PACE can be one of those options, but it is not automatically the right fit for every project.

The key question is not simply whether C-PACE is available. The better question is whether C-PACE improves the construction capital stack without creating new execution, refinance, or sale issues later.

What Is C-PACE in a Construction Financing Context?

C-PACE stands for Commercial Property Assessed Clean Energy. It can finance eligible improvements related to energy efficiency, water efficiency, resiliency, renewable energy, seismic upgrades, or other qualifying project costs, depending on the state and local program.

In a new construction project, C-PACE may apply to eligible components already included in the development budget. These can include HVAC systems, lighting, building envelope improvements, water systems, renewable energy features, or resiliency-related work.

Unlike a traditional loan, C-PACE is typically repaid through a property tax assessment. Because of that repayment structure, the senior construction lender usually needs to be comfortable with the C-PACE layer before it is added to the capital stack.

That is why C-PACE should not be viewed only as an incentive or add-on product. In the right project, it can become a meaningful part of the construction financing strategy.

Why Developers Consider Pairing C-PACE With Construction Loans

Developers are usually not looking at C-PACE because they want another financing product. They are looking at C-PACE because the construction capital stack has a gap.

Senior construction loan proceeds may not cover as much of the project cost as expected. Common equity may be expensive or dilutive. Preferred equity and mezzanine debt may be available, but at a higher cost. If the project has meaningful eligible improvements, C-PACE may help finance part of the budget with a potentially more efficient capital source.

For example, if a project has $50 million of total cost and $8 million of eligible C-PACE improvements, the developer may be able to finance a portion of those costs through C-PACE instead of raising the same amount as additional equity or more expensive gap capital.

This is where C-PACE becomes most relevant. It is not just about whether the project qualifies. It is about whether the financing helps the deal pencil.

Where C-PACE Fits in the Capital Stack

A construction capital stack may include a senior construction loan, C-PACE financing for eligible costs, sponsor equity, and in some cases preferred equity, mezzanine debt, or joint venture equity.

C-PACE does not replace the need for a senior construction lender. Instead, it may sit alongside the senior loan and reduce the amount of equity or other gap capital needed.

However, its position in the capital stack matters. Because C-PACE is repaid through a property tax assessment, senior lenders will want to understand how it affects their collateral, repayment priority, debt service coverage, and future takeout strategy.

That is why C-PACE should be evaluated as part of the full capital stack, not as a separate financing decision.

When Construction Loans + C-PACE Actually Makes Sense

C-PACE can make sense when the project has meaningful eligible costs. If the eligible amount is too small, the benefit may not outweigh the added complexity.

It can also make sense when the senior construction lender is aligned early. This is one of the most important factors. Not all construction lenders are comfortable with C-PACE, especially because the repayment is tied to a property tax assessment. If lender consent is uncertain, the structure should be tested before the deal is too far along.

C-PACE is most useful when it reduces the need for more expensive capital. If it can replace a portion of common equity, preferred equity, mezzanine debt, or other gap capital, it may improve the weighted average cost of capital.

The repayment structure also needs to match the business plan. Developers should understand how the assessment affects cash flow, debt service, refinancing, and sale options. A structure that helps at closing but creates issues at stabilization may not be worth it.

The timeline matters as well. C-PACE may require documentation, eligibility review, program approval, and coordination with the senior lender. It works best when there is enough time to structure it properly before the construction loan closes.

When C-PACE May Not Be the Right Fit

C-PACE should solve a real financing problem. It should not be added just because it is available.

It may not be the right fit if eligible costs are limited, the senior lender will not consent, or the project timeline is too compressed. It may also create issues if the assessment complicates takeout financing, future sale negotiations, or buyer assumptions.

Developers also need to be careful when the project is already highly leveraged. Adding another capital layer may help close the immediate gap, but it should not create a capital stack that becomes difficult to refinance or support after stabilization.

C-PACE may also be less useful if it does not meaningfully reduce the sponsor’s equity need. If the cost savings are limited or the approval process adds too much execution risk, another source of capital may be more practical.

How Developers Should Evaluate the Decision

Before adding C-PACE to a construction financing strategy, developers should ask several practical questions.

How much of the project budget is actually C-PACE eligible? Will the senior construction lender allow it? What is the all-in cost compared with preferred equity, mezzanine debt, or additional sponsor equity? Does it reduce the common equity requirement enough to justify the process?

Developers should also evaluate how the assessment affects cash flow during and after stabilization. They should consider whether the takeout lender or future buyer will accept the structure. They should also confirm whether the timeline allows for proper approval, underwriting, and documentation.

The right answer depends on cost, speed, lender consent, repayment structure, and the project’s exit plan.

Construction Loan + C-PACE vs. Other Gap Capital Options

C-PACE should also be compared against other financing options.

Compared with preferred equity, C-PACE may offer a more efficient cost of capital in certain cases. However, preferred equity may provide more flexibility, especially if the project has limited eligible costs or if the senior lender is not comfortable with C-PACE.

Compared with mezzanine debt, C-PACE may be attractive because it is tied to eligible improvements and may offer longer-term repayment. But mezzanine debt may be faster or more familiar to certain lenders and sponsors.

Compared with additional sponsor equity, C-PACE may reduce dilution and preserve sponsor returns. But sponsor equity is usually simpler and does not require the same level of program approval or lender consent.

The point is not that C-PACE is always better. The point is that developers should compare each option based on the full project economics.

Why Early Capital Stack Planning Matters

The best time to evaluate C-PACE is not when the capital stack is already broken. It is when the developer still has flexibility.

Senior lender consent should be tested early. Eligible costs should be reviewed before the budget is finalized. C-PACE providers need time to underwrite the opportunity. The assessment should also be modeled into refinance and sale scenarios before the developer commits to the structure.

If C-PACE is introduced too late, it may create friction with the senior lender or delay closing. If it is evaluated early, it can be compared properly against other capital sources and incorporated into the project’s financing strategy.

How Lever Helps Developers Evaluate C-PACE Financing

Lever helps developers evaluate whether C-PACE belongs in the capital stack, compare it against other sources of gap capital, and identify providers that understand construction-stage execution.

For some projects, C-PACE can be a useful financing layer that reduces equity pressure and improves the overall capital stack. For others, preferred equity, mezzanine debt, or additional sponsor equity may be more appropriate.

Lever can help developers review the capital stack, test lender appetite, compare financing options, and determine whether C-PACE creates a stronger path to closing.

Conclusion

Construction loans and C-PACE can work well together, but only when the structure solves a real capital stack problem.

C-PACE may make sense when the project has meaningful eligible costs, the senior lender is aligned, the cost of capital is competitive, and the repayment structure supports the developer’s business plan.

It may not make sense when the eligible amount is too small, the lender will not consent, the project timeline is too compressed, or the assessment creates future refinance or sale issues.

For developers evaluating construction financing, the key is not simply asking whether C-PACE is available. The better question is whether C-PACE creates a stronger, more financeable capital stack.

If you are evaluating a construction loan and want to understand whether C-PACE belongs in the capital stack, Lever can help compare the options and identify capital providers that understand construction-stage execution.

Opportunity Zone Project Stabilizes

What Happens After an Opportunity Zone Project Stabilizes?

by: Adam Horowitz

Stabilization Is Not the Finish Line

Many Opportunity Zone developers treat stabilization as the main goal.

Construction is complete. Leasing is established. The asset begins producing income. From the outside, the project may look like it has reached the finish line.

But for many sponsors, stabilization creates the next major decision point.

The sponsor now has to determine how the asset should be capitalized, who should remain in the ownership structure, whether permanent financing is available, and whether investors need liquidity.

For Opportunity Zone projects, stabilization is not the end of the strategy. It is the moment when the next capital decision begins.

A Stabilized Asset Does Not Automatically Have a Solved Capital Stack

Stabilization reduces development risk, but it does not automatically solve the capital structure.

A project may still have construction debt, bridge debt, or other short-term financing that needs to be replaced. The asset may need permanent financing, capital improvements, debt paydown, reserves, or a recapitalization. Investors may also have different goals after the project is complete.

Some investors may want to remain in the asset for the long-term Opportunity Zone strategy. Others may want liquidity. The developer may want to exit, stay involved, or reduce exposure while preserving some upside.

That means stabilization does not only mark the end of construction. It can also expose the next capital structure question.

Why Post-Stabilization Planning Matters More for OZ Projects

Opportunity Zone projects are different from ordinary multifamily developments because the ownership structure may be tied to tax timing, investor requirements, and long-term hold goals.

A sponsor may need to consider whether OZ investors remain in the asset, whether non-OZ investors need to be bought out, whether the developer stays in the deal, and whether the capital stack supports the intended hold strategy.

A simple refinance or sale may not always solve the problem.

The right answer depends on the asset, the investors, the debt position, and the long-term strategy. For OZ sponsors, the post-stabilization decision is not only about the real estate. It is also about the structure around the real estate.

Permanent Financing May Be the First Step

After stabilization, many sponsors look to permanent financing as the next step.

Permanent financing may help replace construction debt, lower risk, extend the hold period, and create a more stable capital structure. It can be an important part of moving the asset from development to long-term ownership.

But permanent financing may not solve every need.

The new loan may not be large enough to fully pay off existing debt. The asset may need more operating history. The lender may size proceeds conservatively. The sponsor may still need capital for improvements, reserves, investor liquidity, or debt paydown.

In those situations, refinancing may be part of the answer, but not the whole answer.

Stabilization Can Create an Investor Liquidity Moment

Once an Opportunity Zone project stabilizes, the ownership group may need to be reorganized.

Some investors may want to continue holding the asset. Others may want to exit. Non-OZ investors may have different timing needs than OZ investors. The developer may want to remain involved, but not necessarily in the same position as during construction.

This can create several possible paths.

The sponsor may pursue a full sale, partial sale, preferred equity, structured equity, recapitalization, investor buyout, developer buyout, or long-term hold with permanent financing.

The important point is that stabilization gives the sponsor a clearer basis for making those decisions. The asset has operating performance. The value is easier to underwrite. The capital needs are more visible.

Where Forward Purchase Structures Can Fit

A forward purchase structure can help define what happens after the asset stabilizes before the project reaches that point.

Instead of waiting until completion to find a buyer or capital partner, the sponsor can create a future transaction framework earlier in the process.

At stabilization, the asset can be valued based on stabilized fair market value. The forward structure can then allow for different outcomes, such as a full purchase by a long-term capital partner, a partial purchase where the developer remains involved, a buyout of non-OZ investors, or a transition into a longer-term stabilized ownership structure.

The value of a forward purchase is not only the future acquisition. It is the certainty it can create before stabilization.

For developers, that certainty can support planning, investor conversations, and the transition from construction to long-term ownership.

The Right Solution Depends on the Asset

Forward purchase structures are one possible solution, but they are not the only one.

Depending on the project, the sponsor may consider permanent refinancing, preferred equity, structured equity, mezzanine capital, debt paydown capital, recapitalization, partial sale, full sale, developer buyout, or investor buyout.

The right capital solution should match the asset’s operating profile, the investor base, the debt position, and the long-term Opportunity Zone strategy.

For some projects, the best path may be a refinance. For others, it may be a forward purchase structure. For others, it may be preferred equity or a broader recapitalization.

The key is to build the plan before the sponsor is forced into a narrow set of options.

How Lever Can Help

Lever Capital Partners helps Opportunity Zone sponsors evaluate what happens after stabilization.

That includes reviewing permanent financing options, debt paydown needs, preferred equity, recapitalization strategies, forward purchase structures, and investor liquidity considerations.

Lever can help sponsors compare available paths, prepare the capital story, and connect with capital providers that understand Opportunity Zone multifamily, stabilized assets, and the transition from development to long-term ownership.

For sponsors, the goal is not just to reach stabilization. The goal is to make sure the capital structure is ready for what comes next.

The Bottom Line

An Opportunity Zone project may be built, leased, and operating, but that does not mean the capital strategy is complete.

After stabilization, sponsors still need to decide how the asset will be financed, who will remain in the deal, whether investors need liquidity, and whether the ownership structure supports the long-term OZ strategy.

For OZ sponsors, stabilization is not just the end of development. It is the beginning of the next capital decision.

The Missing Capital Layer Between OZ Construction and Stabilization

by: Adam Horowitz

The Hardest Gap May Come Before Stabilization

Many Opportunity Zone developers focus on raising enough capital to begin construction. That is an important milestone, but it does not always solve the full capital need.

The more difficult challenge may come between construction and stabilization.

A project may have a strong location, a qualified Opportunity Zone structure, senior construction financing, and a clear multifamily development plan. But the developer may still need additional capital before the asset reaches certificate of occupancy, lease-up, permanent financing, or full stabilization.

This is the missing capital layer in many OZ development projects.

That layer does not have to be one single type of capital. Depending on the project, it may include additional equity, structured equity, mezzanine capital, bridge capital, preferred equity, forward sale capital, or another flexible source. The point is not that one structure solves every deal. The point is that senior construction debt and long-term permanent financing often leave a gap in the middle.

For certain projects, pref equity Opportunity Zone capital can be one useful part of that solution.

Construction Financing Does Not Always Solve the Whole Plan

There is a common assumption that once construction financing is in place, the capital stack is complete.

That is not always true.

Senior construction debt may fund a major part of the project, but it may not address every need before stabilization. A developer may still face timing gaps, remaining equity needs, pre-TCO funding requirements, cost overrun pressure, lease-up support, or investor planning issues.

The project may be too advanced to be treated like an early-stage concept, but not yet stabilized enough for traditional permanent capital.

That middle period can be difficult to finance.

The asset is no longer just an idea. Entitlements may be complete. Construction may be underway. The site may have real value. But until the asset has operating income, permanent financing, and stabilized valuation support, many long-term capital sources may still wait on the sidelines.

Why This Matters for Opportunity Zone Developers

Opportunity Zone projects have more complexity than a typical development deal.

The capital structure may need to account for Qualified Opportunity Fund requirements, investor timing, tax-sensitive ownership decisions, and the long-term hold plan after stabilization.

Developers also need to think about who stays in the deal after completion, who exits, how non-OZ investors are treated, whether OZ investors remain in the structure, and whether the developer continues as an owner or partner.

That means stabilization is not only a real estate milestone. It is also a capital structure milestone.

For Opportunity Zone developers, the question is not only how to finish construction. The question is how to move from construction risk to stabilized ownership without losing flexibility.

Where Preferred Equity Can Fit

Preferred equity should not be treated as the only possible missing capital layer. It is one structure that may fit certain projects depending on the senior debt, equity already raised, timeline, cost of capital, and long-term ownership plan.

In an Opportunity Zone development, preferred equity may help fill part of the gap between senior construction debt and stabilized ownership capital. It can sit behind senior debt while supporting the project’s path toward completion, lease-up, permanent financing, or a future ownership transition.

Pref equity Opportunity Zone capital may help a qualified developer start construction sooner, reduce pressure on the remaining equity raise, support pre-TCO capital needs, or create more certainty around the stabilization event.

It may also work alongside other structures, including a forward sale, investor buyout, developer exit, or continued developer partnership.

The value is not that preferred equity solves every issue. The value is that it can be placed at a point in the timeline where the project has real momentum, but still needs flexible capital before it reaches stabilized ownership.

This Is Not Just Rescue Capital

The missing capital layer is not always about distress.

In many cases, the developer may have a strong project, a credible plan, and a qualified Opportunity Zone location. The issue may be timing. Capital may be needed before all equity is raised, before permanent financing is available, or before the asset has reached the income profile needed for long-term capital.

The goal is not to rescue a weak deal. The goal is to help a strong project move through one of the most difficult parts of the development timeline.

That is why the structure matters.

The right capital partner can give the developer more certainty before stabilization, while still allowing the final ownership structure to be determined when the asset is complete, leased, and valued.

What Capital Providers Will Want to See

Flexible capital is not available for every project.

Capital providers will still underwrite the fundamentals. They will want to understand the location, unit count, development budget, construction timeline, senior financing, equity raised to date, lease-up assumptions, permanent financing strategy, sponsor track record, and Opportunity Zone compliance plan.

They will also want to know what happens at stabilization.

Is there a forward sale? Does the developer stay in? Do certain investors exit? Is the final value based on stabilized fair market value? Is there a clear path to agency financing?

The stronger the project and the clearer the structure, the easier it is for capital providers to evaluate the opportunity.

How Lever Can Help

Lever Capital Partners helps OZ developers evaluate the capital layer between construction and stabilization.

That includes reviewing the construction timeline, senior debt, equity gap, pre-TCO needs, stabilization plan, permanent financing path, and potential forward sale structure.

Lever can help developers compare available capital options, including preferred equity when it fits the project, and connect with capital sources that understand Opportunity Zone development and the transition from construction to stabilized ownership.

For developers, the goal is not just to find more capital. The goal is to place the right capital layer at the right point in the project timeline.

The Bottom Line

Opportunity Zone developers may have a strong project and a clear long-term plan, but still face a difficult capital gap between construction and stabilization.

Senior debt may fund the build. Permanent financing may support the stabilized asset. But the bridge between those two points can still require a flexible capital solution.

That solution is not always preferred equity. It can take different forms depending on the project. But for some OZ developments, pref equity Opportunity Zone capital may be one useful way to help move the project from construction risk to stabilized ownership.

Why Opportunity Zone Multifamily Owners Are Using Preferred Equity to Pay Down Debt

by: Adam Horowitz

Debt Paydown Has Become a Capital Strategy

For many Opportunity Zone multifamily owners, the issue is not whether the asset has value.

The issue is whether the current debt load still works.

A property may be stabilized, occupied, and generating income, but the existing loan may be too large, too expensive, or too difficult to refinance under today’s lending standards. In that situation, the sponsor may not need more debt. The sponsor may need capital that helps reduce debt pressure.

That is why preferred equity Opportunity Zone capital is becoming relevant for some existing multifamily assets.

In this context, preferred equity is not being used to push leverage higher. It is being used to pay down debt, improve the capital structure, and give the asset more room to move into its next phase.

Preferred Equity Is Not Always About Adding Leverage

Preferred equity is often thought of as a way to fill a gap or increase total capitalization. But for existing Opportunity Zone multifamily assets, the use case can be different.

Some sponsors are using preferred equity to reduce the senior loan balance.

That may sound counterintuitive, but it can make sense when the existing debt is creating pressure. A refinance may not provide enough proceeds. A lender may require a lower loan balance. The asset may need a cleaner capital stack before it can secure more stable long-term financing.

In that case, Opportunity Zone preferred equity can become debt paydown capital.

The goal is not to add unnecessary risk. The goal is to create a more durable structure.

The Loan May No Longer Fit the Asset

Many Opportunity Zone multifamily assets were financed under market conditions that have changed.

A loan that made sense during construction, lease-up, or early stabilization may not be the right loan for long-term ownership. Interest rates may be higher. Debt service coverage requirements may be harder to meet. Permanent lenders may be sizing proceeds more conservatively. Refinance proceeds may not fully cover the existing payoff.

The asset may be ready for its next phase, but the debt may still reflect the prior phase.

That mismatch can create real pressure for sponsors. The property may be performing, but the capital stack may be too tight. There may not be enough room for reserves, improvements, or a longer hold strategy.

Debt paydown can help reset that structure.

Why This Matters for Opportunity Zone Owners

Opportunity Zone multifamily ownership is often tied to a longer-term plan.

Sponsors and investors may be focused on preserving the Opportunity Zone structure, maintaining the hold period, and avoiding a poorly timed sale. If the asset is performing, selling early may not be the best outcome. But if the debt is too heavy, holding may also be difficult.

That is why debt paydown can be important.

By reducing leverage, sponsors may be able to create more flexibility, improve refinanceability, and support the long-term ownership plan. The capital decision is not only about today’s loan. It is about whether the asset can remain positioned for the full strategy.

For Opportunity Zone multifamily owners, debt paydown is not just a balance sheet move. It can be part of protecting the long-term investment plan.

Debt Paydown Does Not Always Mean Distress

A sponsor seeking debt paydown capital is not always dealing with a failing asset.

In many cases, the asset may be strong. The issue may be that the market changed between the original financing and today’s refinancing environment.

Debt paydown can be defensive, but it can also be strategic.

It can help reduce maturity risk, improve lender confidence, preserve investor value, and avoid a forced sale. It can also give the sponsor more time to complete improvements, optimize operations, and move toward a more stable permanent financing structure.

For the right asset, preferred equity for Opportunity Zone multifamily can be a way to reduce pressure without forcing a sale or relying only on additional senior debt.

How Lever Can Help

Lever Capital Partners helps Opportunity Zone multifamily owners evaluate whether preferred equity can be used to pay down existing debt and support the next phase of ownership.

That includes reviewing the current loan, estimating refinance capacity, identifying the paydown amount, evaluating preferred equity options, and positioning the asset for capital providers that understand stabilized multifamily and Opportunity Zone structures.

For sponsors, the goal is not just to raise capital. The goal is to use capital in a way that improves the strength and flexibility of the overall structure.

Lever can help sponsors prepare the capital story, compare financing options, and connect with aligned preferred equity Opportunity Zone capital sources.

The Bottom Line

For Opportunity Zone multifamily owners, preferred equity may be useful when the asset is strong but the debt is creating pressure.

By using preferred equity to pay down existing debt, sponsors may be able to reduce leverage, improve refinanceability, avoid a forced sale, and support a longer-term ownership plan.

In today’s market, the right preferred equity capital may not be about adding more risk. It may be about giving an existing Opportunity Zone multifamily asset the room it needs to move forward.

When Existing OZ Multifamily Assets Need More Than a Refinance

by: Adam Horowitz

A Refinance Is Not Always Enough

For many Opportunity Zone multifamily owners, stabilization creates a natural next step: refinance the asset, pay off the existing debt, and move into a longer-term ownership plan.

But in today’s market, that next step is not always simple.

An asset may be occupied, income-producing, and performing well, but the refinance may still fall short. The new loan may not generate enough proceeds to fully pay off existing debt. It may not leave room for capital improvements. It may not create the flexibility needed to support a long-term hold.

That is the issue facing some existing OZ multifamily assets today.

The question is not always whether the property can refinance. The better question is whether the refinance is enough.

Stabilized Does Not Mean Refinance-Ready

Stabilization reduces risk, but it does not guarantee a clean refinance.

A lender may still size the loan conservatively based on current income, debt service coverage, appraised value, market conditions, and interest rate assumptions. Even if the property is performing, the lender may not offer enough proceeds to solve the full capital need.

This can be frustrating for sponsors because the asset may have done what it was supposed to do. Construction is complete. Lease-up is in place. The property has operating history. But the capital markets may have changed since the original financing was put in place.

Higher rates, tighter underwriting, and lower leverage can make the new loan smaller than expected.

In that situation, the asset may be stable, but the capital stack may still be under pressure.

The Debt Market May Not Match the Sponsor’s Need

A refinance usually has to solve several problems at once.

The sponsor may need to retire existing debt, reduce financing costs, extend the hold period, fund remaining improvements, build reserves, and preserve the Opportunity Zone ownership strategy.

But the lender is usually focused on a narrower question: how much senior debt can the asset support today?

That difference matters.

The sponsor may need a broader capital solution than senior debt alone can provide. If the refinance proceeds are not enough, the remaining gap still has to be addressed. The sponsor may need to bring in additional capital, negotiate with the existing lender, restructure the capital stack, or consider a more flexible financing solution.

A refinance problem can quickly become a capital stack problem.

Why OZ Ownership Makes the Decision More Complex

Opportunity Zone multifamily assets are different from ordinary refinance situations because timing and ownership structure matter.

A sponsor may not want to sell too early. Investors may be focused on preserving long-term OZ benefits. The ownership group may want to hold the asset through the required period, but the existing capital stack may not fully support that plan.

That can make the lowest-cost capital solution less important than the best-fit capital solution.

For an OZ asset, the goal is not only to replace one loan with another. The goal is to create a structure that supports the asset, the investors, and the long-term strategy.

If a refinance does not provide enough proceeds, the sponsor needs to evaluate what capital can solve the shortfall without disrupting the broader plan.

When Preferred Equity Becomes Relevant

Preferred equity can become relevant when senior debt does not stretch far enough.

It may help pay down existing debt, reduce leverage pressure, fund capital improvements, support operational needs, or create more flexibility for the sponsor. It can also provide an alternative to selling the asset or raising more dilutive common equity.

This does not mean preferred equity is the right answer for every deal.

The asset still needs to support the cost of the capital. The sponsor still needs a clear use of proceeds. The ownership group still needs a realistic plan for the next phase of the investment.

But when the refinance alone cannot solve the problem, preferred equity can help fill the space between what the lender will provide and what the asset actually needs.

How Lever Can Help

Lever Capital Partners helps sponsors evaluate whether an existing OZ multifamily asset needs more than a refinance.

That includes reviewing the current debt, estimating refinance capacity, identifying the shortfall, evaluating preferred equity or recapitalization options, and positioning the opportunity for capital providers that understand stabilized multifamily and Opportunity Zone structures.

For sponsors, the goal is not just to replace one loan with another. The goal is to build a capital structure that supports the asset’s next phase.

Lever can help sponsors compare options, prepare the capital story, and connect with capital sources aligned with the asset, timeline, and ownership strategy.

The Bottom Line

Existing OZ multifamily assets may still be strong investments, but today’s lending market can limit what a refinance can accomplish.

If senior debt proceeds do not fully address the payoff, improvements, reserves, or long-term ownership plan, sponsors may need a broader capital solution.

For OZ multifamily owners, the question is not only whether the asset can refinance. It is whether the refinance gives the asset enough room to move forward.

Class B Multifamily

Workforce Housing’s Moment: Why Class B Multifamily Is the Smartest Bet in Today’s Market

by: Jiho Kim

Affordable rental housing is facing a supply crisis and for commercial real estate investors paying attention, Class B workforce housing may be the most resilient and underappreciated opportunity in today’s market. While capital keeps chasing Class A luxury products and ground-up development grabs the headlines, the fundamentals quietly stacking up in the workforce housing tier tell a very different story.

Renters Are Stuck and That’s Not Changing Soon

The math on homeownership has simply stopped working for a wide swath of American households. By Q4 2024, the gap between the median monthly mortgage payment and average effective apartment rent had grown to $1,120, a spread that effectively locks millions of would-be buyers in the rental market indefinitely. It gets worse: purchasing a median-priced starter home now requires a minimum recommended income of roughly $86,000, a threshold many younger households aren’t hitting, and saving for a typical down payment takes the median-income household around seven years.

The result is a durable, captive renter base. Class B properties serve “renters by necessity”, low- to middle-income households that need affordable housing near employment centers with few other viable options. This isn’t a cyclical renter profile. It’s structural.

The Supply Picture Is Even Thinner Than It Looks

Multifamily construction is pulling back broadly. Starts totaled 416,000 units in 2025, down from the 30-year record high of 547,000 set in 2022, with fourth-quarter starts falling 36% year over year. But the more telling detail is where new supply is and isn’t going. In Q3 2025, workforce housing represented just 3% of all multifamily development nationally.

The national housing deficit now stands at an estimated 4.03 million homes, a gap analysts say would take seven years to close even under optimistic construction assumptions. The vacancy data tells the same story. In major metros like Los Angeles, Class B and C vacancy sits at around 3.5%, compared to 5.5% for Class A, showing exactly where real demand lives.

Operational Upside Without the Development Risk

This is where experienced sponsors are finding their edge. Class B occupancies are running in the mid-90% range across many markets, often outpacing Class A, while rent growth has been steady and positive, outperforming luxury products in select metros. The play here isn’t speculative. It’s operational.

Acquiring existing Class B assets at reset pricing lets sponsors underwrite real, in-place cash flows rather than lease-up projections that may never materialize. In the current rate environment, where lenders are scrutinizing pro forma assumptions more carefully than ever, that distinction matters a lot.

Institutional capital is already moving. TruAmerica Multifamily recently closed a $708 million fund with roughly $2 billion in purchasing power, targeting up to 30 Class B properties across 25 major U.S. cities, focused on preserving affordability, not pushing assets upmarket. When funds of that scale are making concentrated bets on workforce housing, it’s worth paying attention.

How Lever Capital Partners Can Help

The opportunity is real but structuring it correctly is what separates a good deal from a great one. At Lever Capital Partners, we work across the full capital stack to evaluate workforce housing opportunities and structure financing that reflects the true risk profile of these assets. Whether that means bridge, agency, or mezzanine financing for a value-add play, we help sponsors find the right solution for where the deal actually is not where they hope it will be.

Our established network of lending partners means sponsors aren’t starting from scratch at execution. If you’re looking at workforce housing and want a capital advisor who understands the nuance, reach out to Lever Capital Partners today.

The Capital Gap Facing Stabilized Opportunity Zone Multifamily Assets

The Capital Gap Facing Stabilized Opportunity Zone Multifamily Assets

by: Adam Horowitz

Stabilization Can Reveal a New Problem

For many Opportunity Zone multifamily projects, stabilization is treated as the finish line. Construction is complete, leasing has progressed, and the asset begins to look more like an operating property than a development project.

But stabilization can also reveal a different problem.

The property may be finished, occupied, and generating income, but the capital stack may not match the asset’s next phase. The sponsor may still have construction debt, bridge debt, expensive financing, delayed improvements, or investor obligations that need to be addressed.

This is the capital gap many stabilized Opportunity Zone multifamily assets are facing.

It is not always a question of whether the property works. Often, the question is whether the financing still works.

The Gap Is Not Always Obvious From the Outside

A stabilized asset can look healthy from the outside. Occupancy may be strong. The building may be open. Rents may be coming in. The sponsor may have executed the development plan.

But the balance sheet can tell a more complicated story.

A loan may need to be paid down before the asset can secure better permanent financing. A refinance may produce less capital than expected. A lender may underwrite more conservatively than the sponsor assumed. Capital improvements may still be needed to protect rents or improve operations. Existing investors may need liquidity, but the sponsor may not want to sell.

That is why stabilization does not always mean the deal is fully capitalized.

It only means the asset has moved into a new phase.

Why the Gap Appears After Completion

Many Opportunity Zone projects were planned under assumptions that may have changed by the time the asset stabilized.

A sponsor may have started the project when rates were lower, valuations were stronger, debt proceeds were more available, or exit assumptions were easier to defend. By the time the project is completed and leased, the market may require a different capital structure.

That creates a mismatch between the original plan and the current market.

The existing loan balance may be too high for today’s refinance proceeds. The property may need more operating history before a lender gives full value. The sponsor may need to fund improvements before the asset reaches its full income potential. The ownership group may want to hold long term, but the current capital structure may be too short-term or too expensive.

The asset may have succeeded operationally, but the capital stack may still need to be reset.

Why This Matters More for OZ Assets

Opportunity Zone assets have an added layer of complexity because ownership timing matters.

In a typical multifamily project, a sponsor may choose to sell, refinance, or recapitalize based mainly on market conditions. In an Opportunity Zone project, the decision may also involve tax timing, Qualified Opportunity Fund structures, investor hold periods, and the desire to preserve long-term OZ benefits.

That can make a forced sale less attractive.

If the property is stabilized but the capital stack is under pressure, the sponsor may need a solution that creates liquidity or reduces debt without disrupting the broader OZ strategy.

The wrong capital decision can affect more than the balance sheet. It can affect the long-term ownership plan.

The Real Question Is the Size of the Gap

Before choosing a solution, sponsors need to understand the gap clearly.

That means comparing the current debt balance against realistic refinance proceeds. It means reviewing current NOI, occupancy, valuation, lender requirements, and any remaining capital needs. It also means separating short-term pressure from long-term asset quality.

A sponsor may not need a full recapitalization. They may need a smaller amount of capital to pay down debt, complete improvements, or create enough flexibility to reach a better permanent financing outcome.

The capital gap should be measured before it is solved.

How Lever Can Help

Lever Capital Partners helps sponsors evaluate the capital gap facing stabilized Opportunity Zone multifamily assets.

That can include reviewing the current debt position, estimating refinance capacity, identifying paydown needs, evaluating capital improvement requirements, and determining which capital sources may fit the situation.

For sponsors, the goal is not simply to raise more money. The goal is to understand the exact problem inside the capital stack and match it with the right capital solution.

Lever can help sponsors prepare the capital story, compare available options, and connect with capital providers that understand stabilized multifamily assets and Opportunity Zone structures.

The Bottom Line

A stabilized Opportunity Zone multifamily asset may have moved beyond development risk, but that does not mean the capital structure is complete.

The project may be built. The units may be leased. The income may be real. But if the debt, equity, and long-term ownership strategy do not align, the sponsor may still face a capital gap.

For OZ sponsors, stabilization is not only the end of construction. It is the moment when the capital stack needs to be tested again.

How OZ Developers Can Use Forward Sale Structures Before Stabilization

by: Adam Horowitz

Developers Need Capital Before the Asset Is Finished

Many Opportunity Zone developers think about the capital event after the project is complete. The common path is simple: build the asset, lease it, stabilize it, then look for a buyer, long-term capital partner, or refinance.

But in today’s market, waiting until stabilization can create unnecessary risk.

A developer may have a strong Opportunity Zone project, a clear development plan, and a quality multifamily asset in progress. But the capital stack may still need support before the asset reaches stabilization. Construction starts may be delayed. Equity may still be coming together. Senior lenders may want more certainty. Investors may want a clearer exit path.

That is where a forward sale or pre-stabilization acquisition structure can become valuable.

Instead of waiting until the asset is complete to solve the next capital event, the developer can create a framework earlier. The future sale, partnership, or buyout can become part of the capital plan before the project is fully stabilized.

A Sale Does Not Always Need to Wait Until Stabilization

The traditional assumption is that a developer builds the project first, then searches for a buyer after the property is complete and leased.

That approach can work, but it also leaves the developer exposed to market conditions at the end of the project. If rates move, valuations shift, buyer demand slows, or permanent financing becomes harder to secure, the exit may not look the way the developer originally expected.

A forward sale structure helps address that uncertainty.

In a forward sale structure, the developer and capital partner agree on a future transaction framework before the asset is stabilized. The project still needs to be built, leased, and moved toward permanent financing. But the developer has a clearer path for what can happen once the asset reaches the stabilization milestone.

The benefit is not just having a future buyer. The benefit is creating more certainty around the transition from development to stabilized ownership.

Why This Matters for Opportunity Zone Projects

Opportunity Zone projects are not always simple merchant-build developments.

The tax structure, investor requirements, and long-term hold period can make the capital plan more complex. Some investors may want to remain in the asset for the full Opportunity Zone holding period. Others may want liquidity at stabilization. The developer may want to exit, stay in the deal, or continue as a partner after construction is complete.

That creates a structural question, not just a financing question.

Who stays in the deal after stabilization? Who exits? How is the asset valued? What happens to OZ investors? Can non-OZ investors receive liquidity? Does the developer remain involved?

A forward sale structure can help answer these questions before the project reaches the point where time pressure becomes a problem.

Earlier Capital Can Change the Timeline

For qualified OZ developers, pre-stabilization capital can help move a project forward earlier.

A capital partner may provide common equity or other structured capital at the construction start or pre-TCO stage. That capital can help the developer begin construction sooner, support the capital stack, and create more confidence for senior lenders and investors.

The final purchase price can then be determined later, based on the appraised stabilized fair market value of the asset.

This gives both sides a more objective framework. The developer gets a clearer path to capital and exit planning. The capital partner gets a defined opportunity to acquire or participate in a stabilized asset after construction and lease-up risk have been reduced.

The Stabilization Event Becomes the Trigger

The key moment in a forward sale structure is stabilization.

By that point, the property has typically completed construction, achieved lease-up, established operating income, and secured or qualified for permanent financing. The asset can then be valued based on stabilized fair market value, often through an independent appraisal process.

This creates a cleaner transaction framework than trying to negotiate everything from scratch after the asset is finished.

The forward structure gives the parties a path. The stabilized appraisal gives the transaction a value.

Developers Can Preserve Optionality

One of the advantages of a forward sale structure is that it can be designed with multiple outcomes.

In some cases, the capital partner may buy out all equity at stabilization. In other cases, the developer may remain in the deal as a partner or co-manager. In another structure, certain investors may exit while others remain in the ownership structure for the long-term Opportunity Zone hold.

That optionality matters.

The developer does not always need to choose between a full sale and no sale. A forward structure can create a more flexible set of outcomes based on the asset, investor needs, and market conditions at stabilization.

How Lever Can Help

Lever Capital Partners helps OZ developers evaluate whether a forward sale or pre-TCO acquisition structure may fit their project.

That includes reviewing the development timeline, capital stack, construction financing, equity needs, stabilization plan, and long-term ownership goals. Lever can help developers prepare the capital story, identify the right capital partner, and position the opportunity around what forward sale capital providers are actually underwriting.

For developers, the goal is not just to find capital before stabilization. The goal is to create a structure that supports construction, stabilization, permanent financing, and the next ownership phase.

The Bottom Line

For OZ developers, a forward sale structure can turn the future capital event into part of the development strategy.

Instead of waiting until the project is complete to find a buyer or capital partner, the developer can create a framework earlier, bring in capital sooner, and preserve optionality at stabilization.

In today’s market, the most valuable capital partner may not be the one who shows up after stabilization. It may be the one who helps define the path before the project gets there.

Why Stabilized Opportunity Zone Assets Are Attracting Preferred Equity

by: Adam Horowitz

Stabilization Does Not Always End the Capital Need

For many Opportunity Zone multifamily projects, the development story gets most of the attention. Sponsors focus on site control, entitlement, construction financing, lease-up, and eventually stabilization.

But stabilization does not always mean the capital stack is finished.

A sponsor may complete construction, lease the asset, and create a performing multifamily property, only to find that the balance sheet still needs work. Existing debt may need to be paid down. Capital improvements may still be required. Operations may need additional investment. Ownership may want more flexibility. The sponsor may want to hold the asset longer, but the existing capital structure may not fully support that plan.

That is where preferred equity can become relevant.

For some stabilized Opportunity Zone multifamily assets, the next challenge is not development risk. It is recapitalization.

A Stabilized Asset Can Still Need Capital

There is a common assumption that once an Opportunity Zone asset stabilizes, the hardest part is over. In many ways, that is true. Construction is complete, leasing has been established, and the asset may now have operating income.

But a stabilized property can still have a capital problem.

The original construction or bridge financing may be too expensive. The senior debt may need to be reduced. The asset may need additional capital for improvements or operational optimization. The sponsor may want to avoid a forced sale while still creating liquidity or resetting the capital stack.

In today’s market, this issue is becoming more common. Higher rates, tighter underwriting, and lower refinance proceeds can create pressure even when the property itself is performing.

The asset may be working, but the debt stack may still need to be fixed.

Why Preferred Equity Fits the Post-Stabilization Moment

Preferred equity can be attractive after stabilization because the asset has already moved through some of the riskiest parts of the business plan.

Construction is complete. Lease-up is further along. The property has a clearer valuation. Operating performance is easier to measure. The capital provider is no longer underwriting only a future development plan. They are looking at a real multifamily asset with a more established income profile.

That makes preferred equity a useful option for certain Opportunity Zone owners.

Preferred equity can help pay down existing debt, fund capital improvements, support operational improvements, and create a more flexible capital structure. It can also help sponsors avoid a full sale or a more dilutive common equity recapitalization.

This is especially important for Opportunity Zone assets, where the long-term hold period and tax structure can make ownership decisions more complicated. Sponsors may not want to sell too early. Investors may want to preserve the OZ strategy. The capital solution needs to fit the real estate and the structure.

Debt Paydown Is Becoming a Real Need

Many sponsors are not looking for capital because the asset is distressed. They are looking for capital because the capital stack was created in a different market.

A loan that made sense during development may not be the right long-term structure after stabilization. A refinance may not provide enough proceeds to fully solve the existing debt. A lender may require lower leverage. A sponsor may need to reduce pressure on the asset before moving into the next phase of ownership.

Preferred equity can help address that problem.

Instead of relying only on a larger senior loan, the sponsor can bring in preferred equity to reduce debt, improve the capital structure, and create more breathing room for the asset.

The purpose is not just to add capital. The purpose is to add capital in a position that supports the long-term strategy.

What Sponsors Should Be Prepared to Show

Preferred equity can be flexible, but it is not automatic. Capital providers still need a clear story.

Sponsors should be prepared to explain the current debt balance, stabilized occupancy, net operating income, valuation, use of proceeds, capital improvement plan, existing lender terms, and long-term ownership strategy.

They should also be able to explain why preferred equity is the right fit instead of a traditional refinance, mezzanine debt, common equity, or a sale.

The best candidates are usually assets where the real estate fundamentals are strong, the sponsor has a credible plan, and the preferred equity solves a specific capital need.

How Lever Can Help

Lever Capital Partners helps sponsors evaluate whether preferred equity is the right solution for an existing stabilized Opportunity Zone multifamily asset.

That includes reviewing the capital stack, identifying the debt paydown need, evaluating use of proceeds, and positioning the opportunity for capital providers that understand both stabilized multifamily and Opportunity Zone structures.

For sponsors, the goal is not simply to find capital. The goal is to find capital that fits the asset’s stage, risk profile, ownership goals, and long-term OZ strategy.

Lever can help sponsors determine whether the asset is a fit for preferred equity, prepare the capital story, and connect with aligned capital sources.

The Bottom Line

A stabilized Opportunity Zone multifamily asset may have passed through the riskiest phase of development, but that does not mean the capital stack is complete.

Sponsors may still need capital to pay down debt, fund improvements, create flexibility, or support long-term ownership.

For OZ sponsors, stabilization may not be the end of the story. It may be the moment when preferred equity becomes the right capital solution.

When a CRE Loan Matures and the Refinance Doesn’t Clear the Existing Debt

by: Adam Horowitz

A Loan Can Mature Before the Capital Stack Is Ready

Many CRE owners are not dealing with a broken property. They are dealing with a broken capital structure.

A property may still be occupied, generating income, and performing close to plan. But when the loan matures, the refinance may not produce enough proceeds to pay off the existing debt. That creates a difficult situation for sponsors: the asset may still be working, but the capital stack no longer clears.

This is becoming a common issue in today’s commercial real estate market. Higher rates, tighter underwriting, lower valuations, and more conservative lender assumptions are reducing refinance proceeds across many deals.

The problem is simple: the loan is due, but the new loan is not large enough to take it out.

A Performing Property Does Not Guarantee a Full Refinance

In the past, many sponsors assumed that if a property was performing, the loan would refinance. That assumption is no longer safe.

Performance still matters, but lender proceeds are based on today’s underwriting, not yesterday’s loan terms. A property that supported a certain loan amount three or five years ago may not support the same amount today.

Lenders are looking closely at debt service coverage, interest rates, valuation, cash flow stability, asset class risk, and market conditions. Even if the property is not distressed, the refinance may still come in short.

This is especially true for loans originated during a lower-rate environment. Many of those loans were sized when debt was cheaper, values were higher, and exit assumptions were more forgiving. Today, the same property may support less debt, even if operations have not materially declined.

The Refinance Math Has Changed

The refinance shortfall is often a math problem.

If interest rates are higher, the property’s income may not support the same loan amount. If cap rates have moved, the appraised value may be lower. If lenders are more cautious, they may reduce leverage or require more cushion.

For example, a sponsor may have a $40 million loan maturing, but the best refinance option only produces $33 million. That creates a $7 million gap.

That gap does not disappear just because the property is performing. It has to be solved.

The sponsor may need to bring in fresh equity, negotiate an extension, add preferred equity, consider mezzanine debt, restructure the deal, or explore a sale. In some cases, the existing lender may be willing to work with the sponsor. In other cases, the lender may expect the borrower to solve the shortfall before maturity.

The Asset May Be Fine, But the Payoff Still Has to Clear

This is one of the most important distinctions in the current market.

A refinance problem is not always a property problem. Sometimes the asset is doing what it was supposed to do, but the original capital stack was built for a different market.

A deal may have assumed cheaper permanent debt. It may have expected stronger valuations. It may have relied on a sale or refinance that no longer pencils under current conditions.

That is why performing assets can still face pressure at maturity. The issue is not always occupancy, rent collection, or asset quality. The issue is whether the deal can support enough new debt to repay the old debt.

Sponsors Should Address the Gap Early

Sponsors should not wait until the final months before maturity to understand the problem.

The earlier the refinance gap is identified, the more options the sponsor has. That means reviewing the current payoff, estimating likely refinance proceeds, testing debt service coverage under current rates, reviewing extension rights, evaluating lender flexibility, and identifying whether gap capital may be needed.

Waiting too long can reduce negotiating leverage and limit available capital options.

How Lever Can Help

Lever Capital Partners helps sponsors evaluate refinance risk before maturity and identify solutions when new loan proceeds do not fully clear the existing debt.

That can include sourcing refinance options, identifying preferred equity or mezzanine capital, negotiating with lenders, or structuring fresh equity to bridge the gap.

For sponsors facing a maturity issue, the question is not just, “Can we refinance?”

The better question is: what capital structure gives the deal the highest probability of surviving the maturity and moving forward?

Lever can help sponsors pressure-test the refinance, understand the size of the gap, and connect with capital providers aligned with the asset, timeline, and risk profile.

The Bottom Line

A maturing CRE loan is no longer just a debt event. It is a capital structure test.

The property may still be performing, but if refinance proceeds do not clear the existing payoff, the sponsor needs a plan. That plan may involve new debt, gap equity, preferred equity, lender negotiation, or a broader restructuring.

The asset may still be working. But if the capital stack does not refinance, the deal needs a new structure.