Preferred Return Question
Hi all,
Been looking at typical syndication structures and have seen a common one is to offer an 8% preferred return and then 70/30 the cash flow above that between GP/LP's.
My question is, what is the 8% preferred return based off of? 8% preferred return on the original equity contribution?
What's the difference between a preferred return and an IRR hurdle? Besides the fact that they're two different metrics, don't they basically serve the same purpose, to establish a threshold to be met before a promote incentive can kick in?
Thanks for clarifying!