Everyone says pref is safer than common because you're ahead in the stack, but I'm starting to think the stack picture hides more than it shows

The Phoenix deal you're describing - that 36-month window tied to refi or sale rather than a calendar hard date - is exactly what I spent about four months untangling on a 180-unit deal in Tempe in late 2022. Sponsor pitched it the same way, 8.5% current pay, "protected position," nice clean diagram. What I eventually found buried in the operating agreement was that accrued but unpaid distributions didn't compound unless the sponsor formally declared a payment event, and that declaration was entirely discretionary on their end. So you could go 18 months with zero current pay, and the clock on what you were owed didn't actually run the way you'd assumed from reading the term sheet. That's not in any stack diagram ever.

The thing I have genuinely never seen work is the "sponsor relationship" argument as a substitute for hard contractual rights. I have watched people go into deals on a handshake-plus-diagram basis because the GP had a track record and seemed trustworthy, and what happens instead is that when the market goes sideways the sponsor's incentive to protect common equity - which is their own money and their promote - runs directly against the pref investor's interest in early redemption. The removal mechanism you mentioned, 60 days and majority approval from a sponsor-controlled group, that's not a protection, that's theater. I pulled out of the Tempe deal specifically because the cure period for non-payment was 90 days and the enforcement path after that required arbitration the sponsor had the right to delay by contesting jurisdiction. By the time you're through that process you've lost a year minimum.

@faithfarlow the removal mechanism is the part I would be staring at hardest. Sixty days notice plus majority approval from a sponsor-controlled group is not a removal mechanism, it is a formality that exists to make the doc look balanced.

I have seen that same structure where the redemption trigger is event-based rather than calendar-based and the event just never happens because the sponsor has no economic incentive to force one. Rates do not even need to stay high, if the refi proceeds would net the sponsor less than holding, they hold, and your 36 months becomes 54.

The 9% current pay matters more than the multiple in that scenario, but only if it is truly current pay with a default mechanism that has teeth, not accruing to be paid at redemption.

Accrual treatment on unpaid current pay is where it quietly blows up.