Common Equity
Common equity is the residual ownership layer that is generally paid after debt obligations and any preferred equity priorities have been satisfied. It is typically associated with the sponsor or ultimate residual owner and bears the highest risk in the stack.
- Where it applies
- Generally, not specific to New York
- When it comes up
- Sponsorship; acquisition/recapitalization; distributions; exit
- Property types
- All investment real estate
In practice
In institutional underwriting, "common equity" is often evaluated through sponsor liquidity, alignment, and willingness/ability to support the asset through downturns.
Related terms
Capital Stack and Structured Finance
- Capital Stack
- Cure Right
- Intercreditor Agreement
- Mezzanine Debt
- Mezzanine Financing
- Preferred Equity
- Standstill Period
General information, not legal, tax or financial advice.