Preferred Equity
Preferred equity ranks above common equity but below all debt in the capital stack. It carries no lien on the property, so it isn't secured, but it earns a fixed or accruing preferred return and is paid before common equity in both operating distributions and capital events. It's often used to fill a gap between a senior loan and the sponsor's own equity.
Unlike mezzanine debt, preferred equity holders can't foreclose on default — their typical remedy is a change-of-control right letting them replace the managing member, not seize the asset. That makes pref equity riskier than mezz debt while still sitting senior to the sponsor's common equity.
Pref equity is common where senior loan documents flatly prohibit subordinate debt: because it's legally equity, not debt, it can fill the same financing gap without violating that covenant. Returns typically run above mezz debt to compensate for the added risk and lack of collateral.