One word in the pref definition is why my $25,000 came back with $6,700 on top

Preferred equity slot in an infill townhome deal on a portal, $25,000 in, 24 month projected term. The pref was written as "10% per annum on unreturned capital, cumulative and compounding annually." I had a second deal open on my desk the same week at a stated 10% pref where the definition read "payable quarterly from available cash flow," with no cumulative language anywhere in the operating agreement and no accrual clause I could find. I passed on that one and put the money here.

The project ran five months long. Vertical was fine, the plat recordation and utility acceptance took longer than the schedule said, and that varies by state and by municipality, so I'm not blaming the sponsor for it. There was no cash to distribute for 14 straight months. Under the second deal's language, 14 months of unpaid pref would have simply not existed, because there was no available cash flow and nothing said it carried forward.

Under mine it accrued and compounded. Payoff at month 30 was $31,700, so roughly $6,700 of accrued pref on the $25,000. Same headline 10%, completely different document.

The part that nearly broke it was the promote calculation, which referenced "invested capital" in one section and "contributed capital net of returns of capital" in another. Those produce different splits after the first return of capital event. I emailed the sponsor for a clarification in writing before wiring and got one. I'd do that again on every deal. If the two definitions had stayed inconsistent I'd have needed a securities attorney to read it, which is where that question belongs anyway.

What I'd keep: read the definitions section before the pitch deck, and treat a missing accrual clause as the answer rather than an omission.