Pref Equity

If you are looking for a way to finance your commercial real estate project, you should consider preferred equity. Preferred equity is a flexible, low-risk, and high-return investment that can help you achieve your goals. Unlike mezzanine debt, preferred equity does not require any personal guarantees or recourse obligations, and it does not expose you to the risk of foreclosure. Unlike finding new partners, preferred equity does not dilute your control or ownership of the property, and it allows you to retain the decision-making authority. Preferred equity also offers you the opportunity to share in the upside potential of the property, as it may have a variable return based on the property’s performance and a catch-up or a promote feature. Preferred equity is the ideal solution for sponsors who want to maximize their leverage, minimize their risk, and optimize their returns.

– Preferred equity is more flexible and negotiable than mezzanine debt, which has fairly standard terms and documents. Preferred equity can be tailored to the specific needs and preferences of the sponsor and the investor.

– Preferred equity is less risky than mezzanine debt for the sponsor, as it does not require any personal guarantees or recourse obligations. Mezzanine debt is secured by the equity interest in the property-owning entity, and the lender can foreclose on that interest in case of default. Preferred equity, on the other hand, is an investment in the entity itself, and the investor has limited remedies in case of default.