A higher priority payout as compared to other potential distributions, a Preferred Return is paid to investors before a sponsor receives any share of the cash flow.

A Preferred Return is not a guarantee of payment, such as a dividend a corporation may offer.

The cash flows generated by a property service debt first, and in some cases, may fall short of what is required from debtors and investors. In such cases, the Preferred Return continues to accrue and unpaid amounts are ultimately recouped by the investor when the property is sold.

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