Preferred equity is an investment that sits between the senior mortgage and common equity in a real estate deal's capital stack.
Log in to followA sponsor holding fully entitled land asked me to come in with $1.5m of preferred equity at 13 percent, all accruing, since the land produces nothing until it's sold or a construc…
We put $2.4m of pref into a 78-unit value-add through a small group, 11% total return, 4% current pay and the rest accruing, three year redemption. The docs looked fine to me at t…
I'm working out what my first deal really costs and pref equity keeps coming up as the thing that fills the gap between what a bank will lend and what a sponsor has. Every explana…
Working through a recap where the sponsor has offered me a choice on where the pref sits and I want to hear the room argue it before I decide. Option one, I come in as a preferred…
Been comparing four pref structures for a slot in a fund I'm slowly building, and every one of them has a different idea of what protects the investor. What I keep noticing is tha…
I'm looking at a 180-unit garden deal where the senior is sized to a 1.20x coverage on its own and the sponsor needs another 4.5 million to close the refi gap. The old mortgage wa…
I've been reading pref equity summaries for a couple of months and one line keeps stopping me. The pref investor doesn't get a mortgage on the property. You get a membership inter…
A sponsor I follow is raising a preferred equity tranche on a 90-unit deal and the minimum is $250,000. Then I read a piece that said retail investors get into pref for $50,000 or…
I've been building a list of pref opportunities rather than buying anything yet, and I finally have two live term sheets on comparable assets that I can put side by side. Both are…
Working through a pref position on a 140 unit 1980s value-add and I keep landing back on the same problem, which is that the position doesn't cover itself out of operations for th…
Reading an amended LLC agreement for a preferred equity piece on a construction deal and one section stopped me. On a "Preferred Return Default", defined as failing to pay the cur…
I've been reading pref documents rather than doing them, and the same negotiation appears in every one. The sponsor will concede either economic certainty or timing certainty. Rar…
A sponsor's mailing list sent me a preferred equity tranche at 12 percent and I've been staring at it for two days. I've been looking mostly at the lending side, and everything I…
Sponsor I've co-invested with twice is recapitalizing a 190 unit garden complex and asked if I'd take the pref piece. My money is usually in land and long holds, so this is new te…
The offering document for a pref tranche I'm looking at says accredited investors only. Someone in another forum told me preferred equity is debt-like so it isn't really a securit…
$900k into a pref position on a suburban office-to-flex conversion, 12% accruing, no current pay for the first eighteen months, 1.35x minimum multiple at redemption. I read the wh…
Writing this from the sponsor side. Mid-size industrial infill, five buildings, $14.2m purchase. Senior loan was $9.1m fixed for five years with defeasance and a lockout through y…
Everything I read puts pref equity returns in roughly the 10 to 15 percent band. That's a wide band for a single asset class and I don't yet have a feel for what moves you across…