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Guarantee (Personal Guarantee)

Guarantee (Personal Guarantee)
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In real estate finance, a guarantee (often a personal guarantee) is a legal commitment by an individual or entity to take responsibility for a debt or obligation if the primary borrower fails to meet it. When a loan to a property-holding entity (like an LLC) is personally guaranteed by a sponsor or investor, it means that person’s personal assets can be used to repay the loan if the property venture cannot. Essentially, the guarantor acts as a cosigner, giving the lender recourse beyond the collateral. Personal guarantees are common in commercial real estate loans, especially if the borrower is a new entity with no credit history – the lender wants the safeguard of an individual’s credit behind the loan. For high-net-worth investors, the presence or absence of personal guarantee is an important risk factor. A non-recourse loan is one where the lender’s recovery is limited to the property collateral (the investor’s other assets are protected), whereas a recourse loan involves personal guarantees and thus additional liability.

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Lightstone’s investment structures are typically LP-style investments where individual investors are not asked to personally guarantee loans – the borrowing is done at the property or fund level. Lightstone itself, or its affiliates, may provide guarantees to. When it does, it’s demonstrating confidence in the project and aligning interests: the firm stands behind the project’s performance, absorbing certain risks so that investors don’t have to. This practice ties into Lightstone’s value of alignment of interests – by putting its own balance sheet on the line when necessary, Lightstone underscores its commitment to the success of the investment. For investors, this means they can enjoy the upside of real estate equity without personal balance-sheet risk, relying on Lightstone’s corporate strength and integrity to handle any guarantees required by financing partners.

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