An investor seeking a higher return than that available to a
mezzanine lender, and not unduly
concerned about exit strategies, can negotiate a senior equity
position as a "preferred equity" holder.
Preferred equity is most often used when a property is generating
insufficient cash flow to service a junior or mezzanine loan, or
where the senior lender prohibits subordinate financing. In some
cases, a mezzanine lender may choose preferred equity because a debt
position could have adverse tax consequences or in some way does not
qualify under the lender's investment rules.
Similar to Mezzanine Debt in terms of the capital structure position,
this program is best suited for acquisitions, repositions and
recapitalizations.
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