Tag Archives: LeverCapitalPartners

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.

Opportunity Zone Capital Is Becoming More Selective

by: Adam Horowitz

The Old Assumption Is Breaking

For several years, many Opportunity Zone projects benefited from a simple assumption: if the deal qualified, capital would pay attention. The tax benefits created a strong reason for investors to look at projects in designated communities, and that helped bring new interest to markets that may have otherwise been overlooked.

That assumption is weakening.

Opportunity Zone capital is still active, but it is becoming more selective. Investors are no longer underwriting the tax incentive alone. They are underwriting the actual real estate, the sponsor, the market, the basis, the capital stack, and the execution plan.

Being in an Opportunity Zone Is Not a Capital Strategy

In the earlier stages of the market, some projects leaned heavily on the tax story. The pitch was often built around location, eligibility, and the potential investor benefit.

Today, that is not enough.

Capital providers are asking harder questions. Is the basis defensible? Is the submarket actually investable? Does the sponsor have the experience to execute? Is there enough demand for the finished product? Can the project survive higher costs, slower leasing, or a delayed exit?

The tax incentive can improve the investment story, but it cannot fix weak real estate.

Why Investor Behavior Has Changed

This shift is happening because the broader capital market has changed. Debt is more expensive than it was during the low-rate cycle. Construction costs remain difficult to control. Exit assumptions are less forgiving. Investors are more focused on downside protection, liquidity, and whether a project can perform under more conservative assumptions.

That means Opportunity Zone investors are behaving more like disciplined real estate investors, not just tax-motivated capital. They still care about the tax treatment, but they also want to understand the full risk profile of the deal.

What Investors Are Underwriting Now

Sponsor quality matters more. Investors want to know whether the sponsor has relevant experience, local market knowledge, lender relationships, and the ability to manage execution risk.

Market fundamentals matter more. Population growth, employment drivers, tenant demand, absorption, rent support, and competing supply all carry more weight.

Basis matters more. A project may qualify for Opportunity Zone treatment, but if the basis is too high, the return profile may not work.

Capital structure matters more. Investors want to know whether the debt is realistic, whether the sponsor has enough equity, whether preferred equity is needed, and whether the capital stack can survive delays or cost increases.

Exit strategy matters more. A project needs a credible path to stabilization, refinancing, or sale. If the exit depends on aggressive cap rates or a perfect market recovery, investors will push back.

The OZ Label Does Not Remove Execution Risk

This is why some Opportunity Zone deals are harder to capitalize today. The OZ label does not remove execution risk.

Ground-up projects with unclear demand, thin sponsor equity, weak submarkets, or unrealistic refinance assumptions are facing more scrutiny. Investors are less interested in the zip code alone. They want to know whether the project can perform.

What This Means for Sponsors

For sponsors, this creates a more demanding fundraising environment. The opportunity is still there, but the story has to be sharper.

Sponsors need to explain why the project deserves capital now, why the market supports the business plan, how the risks are being managed, and why the Opportunity Zone benefit enhances the investment instead of carrying it.

At Lever Capital Partners, we see Opportunity Zone capital becoming more selective, with investors placing greater weight on sponsor quality, basis, structure, and execution risk.

How Lever Can Help

Lever helps sponsors position Opportunity Zone projects for today’s capital market. That means looking beyond tax eligibility and focusing on what investors are actually underwriting.

For sponsors raising capital for Opportunity Zone real estate, Lever can help identify aligned capital sources, structure the financing strategy, and present the opportunity in a way that speaks to current investor behavior.

The challenge is not just finding investors who understand the tax incentive. It is finding capital that believes in the project itself.

The Bottom Line

Opportunity Zones are not dead. The market is simply more disciplined.

Before, the tax benefit often came first and the real estate came second. Now, the real estate comes first, and the tax benefit supports the story.

The tax incentive still opens the door. But the deal still has to earn the capital.

2026 CRE Refinancing: Why Capital Availability Is No Longer Enough

by: Jack Moskow

Entering 2026, capital has returned to commercial real estate, but it is being deployed much more selectively than in prior cycles. Banks, life insurance companies, agencies, and private credit lenders are still active, yet the market is no longer rewarding broad risk-taking the way it did when rates were near historic lows. Today, lenders are focused on asset quality, sponsorship strength, income durability, and the borrower’s ability to support the capital stack under current underwriting standards. In this environment, the issue is not simply whether liquidity exists. The real question is whether a property’s basis and structure can support a refinance or transaction.

For many owners and developers, this has changed the financing conversation. A few years ago, borrowers could often focus mainly on pricing, proceeds, and execution speed. Now, the conversation is shifting from “What’s the rate?” to “How do we rebuild the capital stack?” Higher borrowing costs, with stabilized assets still seeing rates in roughly the 5.5%–6% range combined with lower valuations and more conservative lender sizing, have made structure just as important as liquidity. Even if capital is available, it may not be available at the leverage level needed to refinance an existing loan or support the original acquisition basis.

Liquidity is available, but it is selective.Stabilized multifamily, industrial, and grocery-anchored retail assets with strong cash flow continue to attract lender interest. Experienced sponsors with proven track records are also better positioned to access capital. However, assets with weaker fundamentals, uncertain leasing, or business plans that depend heavily on future rent growth are facing more scrutiny.

The bigger challenge is the refinancing gap created by loans originated during the low-rate environment. Between 2019 and 2022, many properties were financed at 70–75% loan-to-value, often with interest rates below 4%. As those loans mature, borrowers are now facing a very different lending environment.

Today, lenders are sizing closer to 50–60% loan-to-value placing more weight on debt yield, debt service coverage, and downside protection. As a result, new senior loan proceeds may fall well short of the existing debt balance.

That gap can create serious pressure for owners. A property may still be performing, but if the new senior loan cannot cover the maturing debt, the sponsor must find additional capital. In many cases, senior debt alone is no longer enough. This is where capital stack restructuring becomes essential. Mezzanine debt, preferred equity, joint venture equity, and other structured solutions can help bridge the gap between lender proceeds and the asset’s existing basis.

For owners who still believe in the long-term value of their assets, this type of structuring can be the difference between preserving ownership and being forced to sell at an unfavorable time. Layered capital can provide flexibility, help complete a refinance, and allow sponsors to hold through a difficult part of the cycle. However, these solutions need to be structured carefully. The wrong capital partner or an overly expensive structure can create new problems instead of solving the original one.

Lever Capital Partners helps sponsors navigate this environment by identifying the right financing solution for each asset and situation. In a market where basis increasingly determines liquidity, Lever works with borrowers to assess the gap, evaluate available capital sources, and structure the appropriate mix of senior debt, mezzanine financing, and preferred equity.

By leveraging relationships across banks, life insurance companies, agencies, and private credit lenders, Lever Capital Partners helps clients access capital that fits today’s underwriting standards. The goal is not just to find a loan, but to build a capital stack that can close, support the asset, and preserve long-term value. In 2026, surviving the refinancing cycle will depend less on whether capital exists and more on whether sponsors can structure around today’s reality.