Preferred Equity
Preferred equity is an equity investment that provides the investor preferred rights to receive dividends, distributions, payments, or returns relative to other equity owners. In agency multifamily guidance, preferred equity is defined as a direct or indirect equity investment in an entity that grants preferred distribution rights relative to other equity owners.
- Where it applies
- Generally, not specific to New York
- When it comes up
- Structuring; closing; distribution and control governance
- Property types
- Multifamily and commercial; frequently used in recapitalizations and structured leverage
In practice
Preferred equity is legally "equity" but economically can resemble debt; modeling requires explicit distribution rules, accrual mechanics, and control triggers.
Related terms
Capital Stack and Structured Finance
- Capital Stack
- Common Equity
- Cure Right
- Intercreditor Agreement
- Mezzanine Debt
- Mezzanine Financing
- Standstill Period
General information, not legal, tax or financial advice.