Preferred equity came in as rescue capital and the GP lost the promote two years before the sale

The permit history point is the one. I have never seen a pad fill schedule hold when it was built on absorption estimates with no contractor LOI behind it. What happens instead is 6 to 9 months of slippage before anyone admits the timeline was fiction, and by then you are having the exact lender conversation this sponsor had.

What was the basis for the 92 percent stabilized occupancy assumption at underwriting, was that the submarket average or a comp set the sponsor cherry-picked from the three best-performing communities in the region?

The pad fill timeline is where this deal was won or lost before a single resident signed a lease. If that 18-month figure came from a comparable absorption study rather than a signed installer agreement and permitted site work, it was a projection dressed as a schedule, and the lender covenant breach was a structural inevitability waiting on market conditions to surface it.

The mechanism worth dissecting is the waterfall position the rescue equity took. A 12 percent preferred return senior to LP equity is standard rescue pricing, and the conversion right subordinating the common promote is also standard. What is not standard is signing that term sheet without running the promote at three exit prices first. At the actual exit number, $54,000 against a $410,000 projection, the GP essentially worked a 26-month deal for fees and a number that will not build a track record investors find compelling. The sale price performing close to projection made the outcome feel survivable. The waterfall restructuring is what actually happened to the economics.

Two risks in this deal structure that the post does not address: first, the debt service covenant at 1.25 with a 1.08 actual leaves almost no execution buffer in a value-add plan that depends on fill rate velocity. A 1.15 DSCR covenant would have bought more room without materially changing senior lender pricing. Whether that was negotiable at origination depends on the lender, but it is worth modeling before the next deal. Second, the GP co-invest amount matters here. If the principals had meaningful co-invested capital sitting behind the rescue equity in the waterfall, the promote loss compounds into a direct capital loss. The post is silent on that.

For utility cap installation specifically, municipal permit timelines in manufactured housing often run two to three times longer than sponsors underwrite. That is a verifiable data point before the deal closes, not after.

What was the GP co-invest as a percentage of total equity, and was it structured as common equity alongside the LPs?

The contractor commitment gap is the one I keep coming back to, but the term sheet mechanics deserve equal attention here. A conversion right that subordinates the promote is not unusual in rescue preferred equity, but "subordinated until fully returned with coupon" can mean two very different things depending on whether that subordination applies only to distributions during the hold or also to proceeds at exit. If it applied to exit proceeds, which this waterfall suggests it did, then the GP needed to model the promote at exit prices below, at, and above projection before signing, not after. Signing under time pressure with a covenant notice outstanding is exactly when that modeling gets skipped.

What was the interest accrual structure on the preferred equity: cash pay monthly, or accruing to exit? Because if it was accruing, the $900,000 at 12 percent compounding over 26 months lands closer to $1.15M drawn from the waterfall, not $900,000, and that gap alone could explain a significant portion of the difference between $410,000 projected promote and $54,000 realized.