Preferred Equity Stack Calculator

Preferred equity sits between debt and common with fixed returns.

Pref equity amount

Current pay rate %

Accrual rate %

Term years

Total pref payment

$16,382,256

Current pay total

$3,000,000

Accrued at maturity

$3,382,256

How the math works

Current pay = pref × rate × years. Accrued = pref × ((1+rate)^years − 1). Total = principal + current + accrued.

$10M × 6% × 5 = $3M current + $10M × (1.06^5 − 1) = $3.38M accrued + $10M principal = $16.38M total.

How to Use

Enter pref equity amount.
Enter pref rate %.
Enter current pay rate %.
Enter accrual rate %.
Enter term years.
Read total pref payment.

Frequently Asked Questions

Pref equity mechanics?

Fixed return, senior to common equity. Typical 10-14% total return. Split into current pay (cash to pref holder) and accrual (compounds to maturity). Senior to common in waterfall. Subordinate to debt.

Current vs accrual split?

100% current pay: high cash burden on project. 100% accrual: no cash burden but massive maturity payment. Hybrid (6% current + 6% accrual = 12% total): common structure. Balances project cash flow with pref holder current yield need.

Redemption mechanics?

Redemption at maturity typical. Optional redemption (call) allowed at premium (typically 102-105% par). Mandatory redemption (put) with specific triggers. LP exit timing considerations critical in pref structuring.

How does this interact with the rest of the capital stack?

Each tier of the stack affects the next. Senior debt constrains LTC and DSCR. Mezz and pref consume equity spread. Interest rate hedges protect DSCR but cost premium. Always model the full stack holistically — optimizing one tier alone often degrades another. Institutional underwriters run three or four scenarios across the stack before committing capital.