RCRE - Preferred Equity 101 with Rob Beardsley

Preferred Equity is a hybrid product which is subordinate to the senior loan but has payment priority over common equity positions.

Benefits of Preferred Equity include: Sponsors and developers are provided with a higher degree of leverage at lower cost than common equity. For real estate investors it also provides opportunity to capture a fixed rate of return prior to payment and can sometimes include upside.

Preferred Equity offers a hybrid risk/return profile. In addition to payment priority over common equity, it provides some recourse provisions in the case of borrower default.

Recourse provisions can include force of sale of the property and even take over of the property when certain triggers are hit.

Investors can be attracted to the preferred equity dues to its predictable annual returns and regular distributions of debt investments.