Capital Stack Optimizer
Model your entire capital stack across senior debt, mezzanine, preferred equity, and common equity layers.
Model the whole capital structure at once — senior debt, mezzanine, preferred equity, and the common equity that fills what is left — and see what the combination does to your leverage, your coverage, and your blended cost of capital.
Project
Year 1 stabilized NOI
Senior Debt
Mezzanine Debt
Preferred Equity
Exit Assumptions
The formula
Blended cost = SUM(tranche amount x tranche rate) / total capital Common equity = total project cost - senior - mezzanine - preferred
What to watch
- Subordinate capital is accretive when its cost is below the return the deal generates on the dollars it funds. Above that, you are buying leverage by transferring upside to a capital provider.
- The blended figure understates what subordinate tranches really cost if they accrue rather than pay currently, or carry exit fees or minimum return multiples. Model your actual exit.
- Your senior lender's loan documents usually decide whether the gap can be mezzanine or must be preferred equity. Most senior loans prohibit additional debt and additional liens.
- Cost is only half of what a subordinate tranche takes. Consent rights, cash-flow traps, performance triggers, and removal rights are the other half, and they bind exactly when you need flexibility.
Frequently asked questions
What is a blended cost of capital?
The weighted average cost across every tranche in the stack, each weighted by its share of total capital. It is the right number for comparing one structure against another, because a single tranche's headline rate says nothing about what the whole structure costs.
How much total leverage will lenders accept?
It depends on the asset, the business plan, and which capital pools are involved rather than on a fixed ceiling. What actually constrains you is that senior sizing is capped by the lowest of coverage, debt yield, and loan-to-value — and subordinate providers then size against the remaining gap and their own return requirements.
Should I use mezzanine debt or preferred equity for the gap?
Usually your senior loan documents decide. Most prohibit additional indebtedness and additional liens, which rules out mezzanine without consent, while a carefully structured preferred equity investment creates neither. Timeline matters too — mezzanine requires an intercreditor agreement negotiated between two lenders, which takes time.
Go deeper
The CRE Capital Stack Explained: Priority, Cost, and Control
Senior debt, mezzanine, preferred equity, and common equity each sit in a defined place in the payment waterfall. Position determines cost, and cost is only half of what each layer takes.
Read the articleThis calculator produces estimates from the assumptions you enter. It is not investment, tax, or legal advice, and actual lender terms, pricing, and outcomes will differ. Confirm anything you intend to rely on with advisers engaged on your specific facts.
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