Capital Stack Model
Structure multi-tranche debt-and-equity capital stacks with waterfall distributions and construction draws.
Frequently asked questions
What is a capital stack?
A capital stack is the ordered layer cake of financing on a deal — from senior debt at the bottom (paid first, lowest risk, lowest return) up through mezzanine, preferred equity, and common equity at the top (paid last, highest risk, highest return). Each tranche has different priority, cost, and control rights.
How do senior debt, mezzanine, and equity differ?
Senior debt is secured by the asset, has first priority on cash flow and sale proceeds, and prices at 6-8%. Mezzanine sits behind senior, is usually unsecured or equity-pledged, and prices at 10-14%. Common equity has no fixed return, absorbs first losses, and captures all residual upside.
How do you structure a construction-to-acquisition capital stack?
A construction loan funds vertical work in draws tied to milestones, while acquisition capital pays for land at closing. This tool splits total debt between an acquisition tranche drawn at Month 0 and a construction tranche drawn against a budget, then rolls both into permanent financing at stabilization.