Using Preferred Equity To Bypass UDFI

[Bryan Hancock]

Is anyone familiar with using preferred equity in a new legal entity as "debt" to avoid UDFI when utilizing SDIRA money to capitalize real estate deals? I would be interested in reviewing literature or case law about this if anyone knows of any.

To avoid goofing with small regional banks for construction loans our fund is exploring using preferred equity from a third party to provide the main tranche of capital as preferred shares where we would supply the capital for the common shares. Procedurally this is easier and we're wondering what the tax implications are for folks that would invest (via securities and/or as partners) with their SDIRA.

Our securities attorney is working on all of this, but it would be helpful to get some information about it if any is available. Conceptually we'd use a new LLC for each transaction with the third party supplying the preferred capital and our fund providing the common capital.

Thoughts? Opinions? Ideas?