What are preferred stocks?

Within the spectrum of financial instruments, preferred stocks (or "preferreds") occupy a unique place. Because of their characteristics, they straddle the line between stocks and bonds . Technically, they are equity securities, but they share many characteristics with debt instruments. They're sometimes called hybrid securities .

What is preferred equity in real estate?

Preferred equity fills the gap between senior debt and common equity as loan financing for projects shrinks. Preferred equity can keep commercial real estate projects moving that otherwise might have fallen short of the capital funding needed to get off the ground. How Does Preferred Equity Work? How Is Preferred Equity Used in Real Estate?

How does preferred equity work?

A company that finances a transaction using preferred equity usually sees a preferred return. This means they're given preference when the cash flow is distributed. After investors repay debts, they will have paid an agreed-upon preferred return. Any remaining equity flows down to common equity positions.