Surprising fact: in recent years some regional deals used more than 70% leverage, changing returns and risks dramatically across portfolios.
This piece reviews how local investors built financing mixes for complex real estate projects in the past. You’ll see how debt and equity layers shaped outcomes from acquisition through stabilization.
We define what a pragmatic capital plan contains, why each layer exists, and how term, recourse, and gap size guide choices. The article previews two real transactions: an Alexandria mixed-use multifamily build and the Minneapolis LaSalle Plaza office repositioning.
Readers include CRE owners, developers, sponsors, and lenders seeking to align sources of funding with timing and performance milestones. We analyze total cost, leverage, term, and who bears which risk.
Expect practical insight: successful structures anticipate underwriting friction—lease-up, capex, occupancy shifts, and rate swings—and layer solutions rather than rely on one instrument. For a deeper framework on typical components and ranges, see this strategic guide on capital structure for commercial real estate.
Key Takeaways
- Debt and equity mix drives project resilience and returns.
- Layer purpose matters: senior debt, mezzanine, preferred, and common all play distinct roles.
- Case studies show the “right” solution varies by asset and business plan.
- Analyze leverage, term, recourse, and gap size before execution.
- Design structures to absorb underwriting friction during lease-up and repositioning.
What today’s CRE and multifamily capital stacks look like in Minnesota markets
Recent projects show how layered funding solved timing and risk gaps during complex mixed-use builds. In one notable case, arrangers secured 87% of a $37.0M total cost—$32.5M—before breaking ground. That level of certainty matters when multiple revenue streams and construction phases must align.
Senior debt terms and lender signals
The senior loan provided $21.5M at 78% LTC, SOFR + 425, a 24-month term and non-recourse. These terms signal lender comfort with the sponsor but strict underwriting on value and execution.
Preferred equity bridging the gap
A $6.0M preferred equity tranche closed the funding gap without forcing higher senior leverage or extra sponsor cash. Preferred sits between the first lien and sponsor capital to absorb timing and carry risk during lease-up.
PACE as targeted financing
The $5.0M PACE loan funded energy-efficient design and materials. Tying this financing to the sponsor’s sustainability plan made the project more competitive in the local real estate market.
Uses of proceeds and program mix
Funds covered underground parking, 27,700 SF professional and retail space, and 72 upscale 55+ units. Mixed uses raise build complexity and lengthen lease-up, so reserves and tailored covenants are essential.
Execution takeaways for the project team
- Match each layer to a risk bucket: senior debt for construction, preferred for lease-up, PACE for energy upgrades.
- Coordinate timing: placing dual debt and equity reduced closing risk; senior managing director Beth Mercante led the placement.
- Keep flexibility: a well-structured stack keeps the project moving without overburdening one source.
Case study: Minneapolis LaSalle Plaza office acquisition and repositioning using C-PACE to complete the financing
Financing a large, aging office tower required a creative mix of lenders and targeted efficiency funding to make the repositioning viable.
Acquisition context
LaSalle Plaza is a 30-story Class A office tower with over 620,000 square feet and 60,000 SF of retail. Occupancy sat at 68.9%, so the new owner faced a transitional office profile that raised underwriting sensitivity.
The purchase closed at $46 million. Hempel Real Estate took title in June after acquiring the asset from the prior lender.
The financing package breakdown
The deal closed with coordinated loans that covered purchase and upgrade needs.
| Lender | Amount | Purpose |
|---|---|---|
| Premier Bank (Maplewood) | $21,000,000 | Acquisition senior debt |
| Tradition Capital Bank (Edina) | $25,000,000 | Acquisition & term financing |
| PACE Loan Group (C-PACE) | $3,500,000 | Energy & resiliency upgrades |
How C-PACE supported the business plan
C-PACE financed targeted HVAC and elevator upgrades that are central to tenant retention and building resiliency. Those improvements affect operating costs and tenant comfort more than standard capex.
Why it matters: C-PACE funds are additive—covering eligible efficiency work without displacing primary acquisition debt or forcing extra sponsor equity.
Why C-PACE can be the “last piece”
“We could not have done it without PACE Loan Group,” said Josh Krsnak of Hempel Real Estate.
Execution lesson: when underwriting office acquisitions, treat systems financing as part of the business plan. A mixed lender team and a small, targeted C-PACE loan closed gaps created by leverage limits and lender holdbacks.
Conclusion
The common thread in these cases is a deliberate mix of instruments matched to discrete risks.
Successful deals layered senior debt, preferred equity, and targeted PACE/C-PACE to solve leverage, capex, construction, and timing gaps. This approach reduced execution risk and improved certainty to close.
Apply a simple underwriting framework: identify the gap (cost vs. proceeds), name the risk (construction, lease-up, occupancy, capex), then match the instrument—senior debt, preferred, PACE/C-PACE, or sponsor equity—to that bucket.
Alexandria shows ground-up financing with preferred equity and PACE. The Minneapolis case uses C-PACE for repositioning capex. Energy funding thus becomes a financing strategy, not just a cost line.
Public, nonprofit, and local authority estate resources can augment returns on redevelopment or affordable deals. The best stack is the one that increases certainty to close and execute the project while keeping sponsor dilution and recourse aligned with expected returns.
