RPP - Preferred Equity vs. Common Equity

Jake & Gino: Real Estate Investing & Multifamily

Jake & Gino

Commercialrealestateinvesting, Realestateinvesting, Cashflow, Smartinvesting, Apartmentinvesting, Investingsmart, Management, Buyingrealestate, Entrepreneurship, Business, Realestateinvestment, Multifamilyrealestateinvesting, Makingmoney, Buyingapartmentbuildings, Jakeandgino, Investing

4.9 • 842 Ratings

🗓️ 18 September 2019

⏱️ 13 minutes

🔗️ Recording | iTunes | RSS

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Summary

Rand Partners own Dylan Marma and Mike Taravella discuss the evolution of preferred equity in the multifamily investing space. Preferred Equity Receives preferred return of cash flow before common equity Doesn’t receive upside Ideal for investors who want to receive yield This structure has been used in Office and Retail asset classes Common Equity Doesn’t receive preferred return Receives upside Ideal for opportunistic investor seeking high IRR Expert Tip: Don’t just invest in an Opportunity Zone for the “Tax Benefits” Make sure the deal works first and treat the Opportunity Zone as an added benefit Contact Information: Invest with Rand Partners Follow Us on Linkedin @Randpartners Follow Us on Instagram @Randpartners Follow Us on Facebook @Randpartners

Transcript

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0:00.0	All right, ready to rock?
0:01.6	Absolutely, let's do it.
0:04.0	Welcome to the Wheelbarrow Profits Podcast, Rand Partners Edition.
0:12.2	All right, what's up, everyone?
0:13.7	This is Dylan Marma, bringing to you the Rand Partners podcast.
0:18.6	Join by my co-host, Mike Taravella.
0:20.5	How you doing today Mike you know
0:22.2	Dylan just living the dream making it happen for all of our viewers and living the dream
0:26.9	absolutely so Dylan what are we here to talk with our viewers today about so lately
0:33.5	we've received a lot of investors reaching out to us asking questions about preferred
0:38.9	equity. Preferred equity, not just in the sense of a preferred return as part of the equity
0:44.6	structure, but more so in the context of having a unique class of shares offered to investors
0:51.2	that takes priority over, say, common equity.
0:55.0	Let me break that down.
0:57.0	Those of you that are familiar with evaluating syndications understand that the most common
1:01.5	structure that we see in sort of the crowdfunding space, multifamily world in which everyday
1:08.8	investors have the opportunity to invest in these private
1:11.2	investments, most of us are used to seeing a model where you have one asset offered and you
1:17.2	have one class of shares which is offered to all of the investors.
1:22.6	Oftentimes, this class of shares can include a preferred return and then in addition to that, some type of a profit share above the preferred return.
1:31.9	And for instance, 8% preferred return with a 7030 split above the preferred return.
1:38.2	So you're actually getting the first 8% of all cash flows coming in direct to the investors.
	...

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