In the fast-paced and capital-intensive world of UK property development, bridging funding gaps with speed and flexibility is often the key to success. Preferred equity financing offers developers a unique middle-ground between traditional debt and full equity investment, enabling projects to move forward without ceding excessive control or taking on unsustainable borrowing.
Fraser Bond works with developers across the UK to structure and secure tailored preferred equity solutions that align with both short-term needs and long-term strategic goals.
Preferred equity represents a hybrid form of real estate finance. It typically gives investors priority over common equity holders in terms of return distributions and capital recovery. Unlike debt, it usually does not involve monthly repayments and doesn’t require asset security. But unlike ordinary equity, it may carry covenants or approval rights over key decisions.
As explained by Katten, preferred equity functions much like mezzanine finance—delivering flexible terms, high-yield potential, and an aligned investor-developer relationship.
Preferred equity financing is especially useful in situations where traditional debt is either unavailable or too restrictive. Key benefits include:
Flexible Capital Injection: It fills the funding gap without increasing leverage ratios that may breach senior loan covenants.
Preservation of Ownership: Unlike joint ventures or full equity partnerships, preferred equity typically allows developers to retain operational control.
Tailored Return Structures: Returns can be fixed, cumulative, or participation-based, depending on investor appetite and project profile.
Speed of Execution: As noted by Hunter Finance, preferred equity arrangements can often be arranged faster than conventional lending, which is critical for high-velocity development timelines.
Preferred equity financing has wide application across the UK property market, including:
Ground-Up Development: When senior debt covers only a portion of construction costs, preferred equity can top up the capital stack.
Refurbishment or Value-Add Projects: It allows developers to unlock and scale underutilised properties.
Recapitalisation: Used to refinance completed projects, return equity to shareholders, or rebalance risk exposure.
Bridging to Stabilisation: Helps developers reach milestones that will qualify the project for more traditional or institutional finance.
As outlined by CaliberCo, preferred equity is particularly effective during transitional phases of a project’s life cycle.
Fraser Bond delivers expert guidance and end-to-end support in designing and executing preferred equity deals. Our advisory services include:
Strategic Structuring: We help developers determine the optimal balance of senior debt, mezzanine finance, and preferred equity to meet both liquidity and return requirements.
Investor Sourcing: We work with a wide network of institutional and private equity partners to match projects with appropriate investors.
Term Sheet Negotiation: Our team ensures deal terms are commercially viable and aligned with the project's timeline and risk profile.
Ongoing Monitoring: From funding to exit, we remain actively involved to ensure the financial structure continues to serve the developer’s goals.
As highlighted by Kingswood Associates, matching the right equity partner to the right project is critical—and that’s where Fraser Bond excels.
Preferred equity financing has evolved into one of the most valuable tools in a UK developer’s financial toolkit. It empowers developers to deliver complex, capital-intensive projects with greater flexibility, reduced dilution, and retained control. Fraser Bond stands ready to provide the bespoke structuring and strategic insight needed to make preferred equity work for your next project.
Contact Fraser Bond today to learn how preferred equity can help you unlock the full potential of your development strategy.
