Capital Structure
Capital Stack Analysis
Building, optimizing, and restructuring the capital stack. From sizing the first mortgage to modeling a mid-hold recapitalization, with worked examples and 2026 market terms throughout.
The capital stack determines every downstream number in a CRE investment: levered cash flows, equity returns, promote waterfalls, refinancing timelines, and the loss cascade in a downturn. Getting the architecture right requires more than picking a lender. It requires sizing each layer by its binding constraint, pricing the tradeoffs between debt types, stress-testing the structure under adverse conditions, and knowing when a mid-hold recapitalization creates more value than a straight hold.
These five articles cover the full lifecycle of capital stack analysis. Start with the model-building guide if you are constructing a capital stack from scratch. Move to leverage optimization to calibrate the right LTV. Use the stress-testing framework to validate your structure under downside scenarios. Compare capital sources when evaluating financing alternatives. And read the recapitalization guide when a mature asset needs a structural reset.
5 articles
How to Build a Full Capital Stack Model for Commercial Real Estate
Step-by-step construction of a capital stack model: senior debt sizing by the binding constraint (LTV, DSCR, debt yield), subordinate capital allocation, blended cost of capital, and the MIN() function approach. With a $50M multifamily acquisition modeled across three capital structures.
Optimizing the Capital Stack: Leverage vs Equity Returns in Commercial Real Estate
How changing leverage affects equity IRR, cash-on-cash return, and equity multiple. A single $50M deal modeled at five LTV levels (0% to 80%), the positive vs negative leverage test, the interest rate sensitivity of optimal leverage, and the diminishing-returns curve that defines where additional debt starts destroying value.
Capital Stack Stress Testing: How to Model Downside Scenarios, Break-Even Thresholds, and Cascading Impairment
A framework for stressing the capital stack across five variables (NOI decline, cap rate expansion, interest rate increase, hold period extension, cost overrun). Break-even occupancy and NOI formulas, DSCR breach mechanics, a cascading impairment diagram, and a $50M deal modeled under four stress scenarios.
Comparing Capital Sources: A Decision Framework for Commercial Real Estate
A multi-dimensional comparison of the five primary CRE capital sources (senior debt, bridge, mezzanine, preferred equity, common equity) across eight evaluation dimensions. Includes a full WACC calculation, a $50M worked example with three capital structures, and a five-question decision tree for capital source selection.
Recapitalization Modeling: Refinancing, Buyouts, and Restructuring in Commercial Real Estate
When and how to recapitalize vs refinance, the timing decision framework, three worked recap scenarios (cash-out refinancing, partner buyout, full restructuring) on a $60M multifamily at Year 3. Waterfall reset mechanics, promote crystallization, and the tax treatment of each recap type.