Preferred equity is often discussed in terms of its steady income, structural protections, and shorter investment horizon. But one of the most meaningful benefits for many investors is something less obvious: how the structure can improve after-tax outcomes compared to traditional income-producing investments. While tax considerations always depend on the specific deal structure and each individual’s personal situation, there are several features commonly associated with preferred equity that may contribute to a more efficient tax profile. In this article, we explore those possibilities at a high level.

Preferred equity has become one of the most appealing ways for passive investors to participate in commercial real estate. It offers a blend of steady income, stronger structural protections, and a clearer path to liquidity than traditional equity. In an overall market where uncertainty remains elevated and long hold periods are common, preferred equity provides a thoughtful middle ground that balances return potential with risk management.

In today’s commercial real estate market, owners and developers face one of the most complex and challenging financing environments in recent memory. With traditional lenders tightening credit and borrowing rates and construction costs remaining elevated, accessing sufficient capital to move projects forward has become increasingly difficult. Preferred equity has emerged as a vital solution, providing the flexibility, speed, and structure necessary to keep projects on track without diluting ownership.

The past five years have reshaped the commercial real estate landscape. Once fueled by a decade of near-zero interest rates, the market is now defined by higher borrowing costs, tighter credit, and a pullback from traditional lenders. These shifts have created a structural gap in the capital stack and a compelling opportunity for investors: preferred equity.