Preferred Return
A preferred return is a mechanism for allocating cash flow to certain parties in a real estate transaction before others. Investors or partners entitled to a preferred return will receive cash flows returned by the investment before other equity investors receive any portion of the profit. Preferred returns signal that the Sponsor feels that the transaction’s performance will not only achieve, but also exceed, the level of the preferred return, because the Sponsor’s profits depend on it.
Learn more about preferred returns in our Resource Center.