Updated July 21, 2026
Preferred equity sits between senior debt and common equity in the capital stack — it's paid a fixed or accruing return ahead of common equity holders, but unlike debt, it's not secured by the property and typically has no fixed maturity or foreclosure remedy.
Preferred equity lets a sponsor raise additional capital without diluting common ownership as much as a straight equity raise would, and without the leverage covenants a mezzanine lender would impose. It's priced and structured deal-by-deal — coupon rate, whether it's cash-pay or accrues, and what triggers give the preferred holder control rights if the deal underperforms.
Preferred equity has become a more common piece of the capital stack in LA multifamily deals since 2022 as senior loan proceeds shrank — sponsors use it to close the gap between what a bank or agency will lend and what the deal actually needs, without bringing in a full mezzanine lender.
From the Sterman LA Multifamily Glossary — defined the way a broker actually uses these terms.
Michael Sterman, Senior Managing Director Investments, Marcus & Millichap.
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