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#198: A Deep Dive Into Preferred Equity And It's Pros and Cons with Paul Moore
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In this episode of the Multifamily Wealth Podcast, we welcome back Paul Moore of Wellings Capital. With over 20 years of experience in real estate, Paul has a diverse background that includes residential and commercial investments, as well as ventures in oil and gas. He is the author of "The Perfect Investment" and has a deep understanding of the multifamily syndication space.
In this episode, Paul and Axel dive into the topic of preferred equity, a hot topic in the multifamily and commercial real estate sectors. They discuss the different types of preferred equity, including its use in development, value-add deals, refinancing, and as rescue capital. Paul explains the benefits of investing in preferred equity, such as immediate cash flow, future upside, and lower downside risk exposure. He also shares insights on what to look for in a preferred equity investment and the importance of partnering with experienced operators.
In this episode we discuss:
- What is preferred equity and why is it a hot topic in the multifamily and commercial real estate sectors?
- How does preferred equity differ from preferred returns or preferred hurdle rates?
- What are the different types of preferred equity investments, such as development, value-add acquisitions, refinancing, and rescue capital?
- What are the benefits of investing in preferred equity for LPs, including immediate cash flow, future upside, and lower downside risk exposure?
- How can preferred equity help operators reduce their blended cost of capital and capture more of the upside in a deal?
- What attributes does Wellings Capital look for in preferred equity deals, such as experienced operators, reasonable underwriting, and clean backgrounds?
- What are some signs that a preferred equity deal may not be a good investment, such as red flags in the operator's background, changing deal terms, or lack of a cohesive team?
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