30 Years of Experience in Income Producing Property
Preferred Equity Investmentsare of particular interest topgf ^in terms of being the preferred equity investor in a real estate investment vehicle. With preferred equity deals, the preferred equity investor receives a true equity stake (i.e., an ownership interest) and is usually paid both a preferred return and a piece of the backend. These investments are appealing because they provide diversification, minimized management with increased yield.
These structures further afford benefits to both the property owner and the preferred equity investor.
First, the preferred equity investor acquires direct involvement with the property owner and the management of the property. This enables the preferred equity investor to better protect their initial investment and potentially share in the projects growth over time, thereby increasing the return on investment.
Second, the preferred equity investor typically shares in property management and or asset management fees.
Third, the preferred equity can be a source of liquidity for the property owner.
Fourth, from the property owners perspective, the equity nature of the investment may not violate any secondary financing prohibition instituted by the first mortgage holder. A preferred equity structure may potentially violate the ownership transfer restrictions often contained in first mortgage documents however many mortgages permit borrowers to make limited transfers of ownership interests in the property owner without the consent of the existing lender predicated upon certain individuals or entities retaining either a minimum level of ownership and/or managerial control over the asset. In these instances, so long as the ownership requirements are not violated or the preferred equity holder is assuming managerial control, the preferred equity structure may be instituted without obtaining the consent of the first mortgage holder.
Preferred equity investments are similar to joint venture partnerships because they require the property owner and the preferred equity investor to share the same vision and strategy while relying upon mutual cooperation for the successful execution of the business plan and divestiture of the property at the optimal value. However, these investments also provide a solution for a niche that has become more prevalent and is certain to become even more commonplace in the near future. In the interim these transactions can be extremely challenging to consummate especially without a well-educated and seasoned team of professionals.pgf ^has engaged in such transactions and has such experience and continues to seek preferred equity investment opportunities.