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Preferred Equity 101 with Rob Beardsley

Will Coleman and Mike Taravella Interview Rob Beardsley of Lone Star Capital Group

Key Information:

  • 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.

Expert Pro Tip: “Evaluate deals on a risk adjusted basis”

Contact Information:

Rob@lonestarcapgroup.com

lonestarcapgroup.com

Robbeardsley.me/books

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https://invest.randpartnersllc.com/invexp/accounts/login/

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