Preferred Equity (series 4 of 4)

How can you Invest in it?

1.- Deal-by-deal case (solo mode)

For those investors who have the capabilities to analyze and invest in multiple projects at once, have a good deal-flow, and have the time and experience to manage their loans, it is worth to consider this option.

2.- Private Rael Estate Funds

For those looking into passive investing, private real estate equity funds are a great option.

Since funds can come in different shapes and forms, they can offer multiple options. Some funds specialize in design, development, construction and management of a particular asset class. Some others in acquisition, rehab, managing and stabilizing before selling the projects. In this type of funds, the investors will have a lockup period to give the manager the necessary time to complete their cycle.

Private lending funds are a great option as well. One of the benefits of investing in private lending funds is diversification. The investments in a private fund are diversified across multiple assets and spread across a broad geographic area, which can lower risk compared with just investing in a single asset. The effects of a poorly performing asset are muted by the other better performing ones and If the market for a specific asset-type tanks, the other asset classes may hold up better.

Private lending/equity funds can participate as equity partners with developers, builders and sponsors. private lending funds participating in Equity deals will usually offer a prefer return to its investors of 16% plus the possibility of upside.

To summarize, investors find preferred equity CRE investments attractive for the following reasons:

  • Payment priority over common equity holders

  • More upside than senior debt-based

  • Downside protection (common equity is subordinated to PE investors)

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