The Promote Podcast The Rise of Pref & Meridian Out of Agency Jail
Apr 23, 2025
Discover the booming trend of preferred equity deals in real estate and their implications for investors. Learn about Meridian Capital Group's recent revival after being sidelined by Fannie Mae and what it means for the brokerage's future. Dive into the repercussions of tariffs shaking up the CMBS market, causing chaos and transaction paralysis. Explore the evolving dynamics of financing and how market uncertainties challenge both investors and smaller tenants in today’s climate.
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Preferred Equity Rise in CRE
- Preferred equity (PREF) is replacing traditional limited partner (LP) equity in many CRE deals.
- It offers hybrid security with downside protection like debt but carries equity-like risks and upside potential.
Be Cautious with Accrued PREF
- Understand that accrued preferred equity payments can outpace asset value declines, posing risks.
- Sponsors must be cautious about outstanding PREF balances exceeding underlying asset values.
Institutional Adoption of PREF
- Large institutional players heavily invest in PREF funds due to higher yield and downside protections.
- Pref has become the main method for firms to deploy equity capital while common equity remains less favored.