Preferred

Preferred equity is a form of equity financing that is senior to common equity. It is typically used to reduce the amount of common equity required for a real estate project. It functions like a mezzanine loan but it is usually unsecured. Preferred equity investors usually receive a preferred return on their capital prior to common equity investors receiving any distributions of cash flow. Often times, the preferred return shall accrue on the preferred equity investment so that payments are not due to the preferred equity investor until the property generates enough cash flow to pay the return.