Let's examine the benefits of issuing or investing in private secured notes (vs. unsecured).   Investing in secured notes backed by commercial real estate assets isn't really that different from the previous example of someone buying a home and getting a mortgage. Only in these commercial situations, investors are the ones doing the lending, not the bank.  The real estate companies sign a note promising to make repayment of the debt to the investors and pledge land, buildings, and/or shares of the entity that owns these as collateral.

So, why is raising money for commercial real estate projects through notes good for the real estate company?

Office space is typically classified as class A, B, or C, but there is no definitive grading system.  An “A” building in Harrisburg, PA may be a “B” building in New York City. Generally speaking, a Class “A” office property is relatively new, well situated, has modern HVAC systems, and is of top-quality construction.  During a downturn, Class A buildings are generally more resilient and tend to remain leased.  Class B space is less well located, smaller, older, and has fewer amenities.  Class C office buildings represent the remainder of the properties. “B” and “C” properties are great to own during times of economic expansion and in tight markets where their ability to be very competitive on price can keep them well occupied.

We will start with what is probably the most popular type of investor‐owned real estate in the country: multi‐family. The National Multi‐Housing Council estimates that apartments account for approximately one‐fourth of the nation's stock of income‐producing property. Multi‐family properties have historically benefited investors with a low volatility of physical occupancy, enhanced tax sheltering, and superior rent flexibility.