UBIT Implications for Preferred Equity Investment

[Michael Politi]

I am considering investing in a Preferred Equity Syndication. The pref equity would pay out a 7% (annualized) quarterly distribution and a 7% back end return when the pref equity capital is returned. The capital stack is approx 70% debt, 5% pref equity and 25% common equity. If I utilize qualified funds would this investment be subject to UBIT re UDFI? I know a common equity investment would be subject to UBIT but since there is no back end upside I wasn't sure if the pref equity would be viewed as a loan?