Capital Stack
The capital stack is the hierarchical structure of debt and equity financing a property acquisition, determining return priority, risk allocation, and total leverage.
| Stack Position | Priority and Risk |
| Senior debt | First claim, lowest risk, 3% to 6% return |
| Mezzanine debt | Second claim, moderate risk, 8% to 12% |
| Preferred equity | Third claim, higher risk, 10% to 15% |
| Common equity | Residual claim, highest risk, 15% to 25%+ target |
| Recovery order | Senior debt paid first in default |
| Example Capital Stack | AED 10M Property |
| Senior debt (60% LTV) | AED 6M at 5.5% interest |
| Mezzanine (15% of value) | AED 1.5M at 10% interest |
| Equity (25% of value) | AED 2.5M, residual returns |
| Total leverage | 75% debt (senior plus mezz) |
| Equity IRR target | 18% to 22% to justify risk position |
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