A preferred return ("pref") is a threshold return — often 6–9% annually — that limited partners receive before the sponsor shares in profits. It puts investors first in line for cash flow, aligning the sponsor’s upside with delivering investor returns.
The preferred return is the first tier of the equity waterfall. It can be cumulative (unpaid pref accrues and must be made up later) and is typically calculated on invested capital. It is a return priority, not a guarantee — distributions still depend on the property performing.
See how EagleCap structures multifamily investments for passive investors.
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