Pari passu, meaning "on equal footing," is a term used in finance and law to describe the equal treatment of investors in commercial real estate. It ensures that all creditors receive the same fractional payouts during bankruptcy and is often included in the waterfall structure of real estate partnerships. This structure allows profits to be distributed pro rata among partners, with specific return benchmarks for sponsors. In commercial mortgage-backed securities, pari passu notes help distribute risk and improve liquidity, benefiting both investors and lenders.
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