Capital Stack Summary
A one-page, table-based breakdown of every layer of capital in a deal's capitalization -- from senior debt at the base to common equity at the top -- showing each tranche's dollar amount, share of total capitalization, pricing, term, and repayment or distribution priority.
When to use this
Sponsors and brokers build this the moment a deal has more than one loan and one equity check -- typically once preferred equity, mezzanine debt, or a co-GP is layered in to close a financing gap -- so every party can see exactly where they sit in priority before term sheets are signed. Lenders and loan committees request it during underwriting to confirm the deal doesn't exceed a "combined leverage" covenant: many senior loan documents define maximum LTV/LTC to include preferred equity and mezzanine debt as debt-equivalent capital, not just the first mortgage, so a sponsor who only tracks senior-loan LTV can walk into closing over the real combined-leverage cap and trigger a last-minute re-trade or a lost commitment. It also forces the sources-equal-uses check that catches a funding shortfall or a double-counted reserve before closing, when it's cheap to fix instead of after wires are sent. And it gives LPs a plain-language preview of exactly how a promote will erode their pro rata share once the waterfall clears debt service and the preferred return, which is where return expectations set at the pitch stage most often diverge from what actually lands in an investor's account.
CAPITAL STACK SUMMARY
PROPERTY / DEAL NAME: [PROPERTY NAME / ADDRESS]
ASSET TYPE: [ASSET TYPE]
DEAL STAGE: [e.g., LOI / UNDER CONTRACT / LOAN COMMITTEE / CLOSING / REFINANCE]
PREPARED BY: [PREPARING PARTY / FIRM NAME]
DATE PREPARED: [DATE]
TARGET CLOSING DATE: [DATE]
AS-IS APPRAISED VALUE: $[APPRAISED VALUE]
TOTAL CAPITALIZATION: $[TOTAL CAPITALIZATION]
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CAPITAL STACK (LISTED TOP OF STACK / MOST JUNIOR DOWN TO BOTTOM OF STACK / MOST SENIOR)
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POS CAPITAL SOURCE / LENDER POSITION / SENIORITY AMOUNT % TOTAL PRICING TERM
--- --------------------------------- ------------------------------- ------------------------ ------------ ------------------------------- ------------------------
4 [LP EQUITY GROUP / INVESTOR NAME] Common Equity - Residual Claim $[LP EQUITY AMT] [LP %]% [TARGET IRR - NO FIXED PRICING] [HOLD PERIOD]
3 [SPONSOR / GP NAME] GP Co-Invest - Pari Passu w/ LP $[SPONSOR CO-INVEST AMT] [SPONSOR %]% [PRO RATA W/ COMMON + PROMOTE] [HOLD PERIOD]
2 [PREFERRED EQUITY INVESTOR NAME] Preferred Equity $[PREFERRED EQUITY AMT] [PREF %]% [PREF RATE]% CUMULATIVE PREF [PREF EQUITY TERM]
1 [SENIOR LENDER NAME] 1st Lien Senior Secured Debt $[SENIOR DEBT AMT] [SR DEBT %]% [INDEX] + [SPREAD] bps [LOAN TERM / AMORT / IO]
Stack Position 1 = most senior, first-secured claim (bottom of the stack).
Stack Position 4 = most junior, residual claim (top of the stack).
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REPAYMENT / DISTRIBUTION PRIORITY (WATERFALL POSITION)
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1ST - [SENIOR LENDER NAME] (Senior Debt): Paid first from operating cash flow and from
sale/refinance proceeds; monthly debt service is a hard obligation; 100% of outstanding
principal plus accrued interest and any exit/prepayment fees repaid before any equity
tranche receives a distribution.
2ND - [PREFERRED EQUITY INVESTOR NAME] (Preferred Equity): Return of 100% of preferred
capital plus any accrued and unpaid [PREF RATE]% preferred return paid before any
common equity distribution; pref may be current-pay from cash flow or accrue if cash
flow is insufficient, per the preferred equity agreement.
3RD - [SPONSOR / GP NAME] and [LP EQUITY GROUP / INVESTOR NAME] (Common Equity, pari
passu / pro rata at [SPONSOR %]% / [LP %]%): Return of common capital, then a
preferred return hurdle to the LP, then remaining profit split per the promote schedule
in the operating/joint venture agreement.
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SOURCES & USES RECONCILIATION
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USES AMOUNT
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Purchase Price $[PURCHASE PRICE]
Closing Costs (acquisition + financing) $[CLOSING COSTS]
Initial CapEx / Renovation Reserve $[CAPEX RESERVE]
Working Capital / Interest Reserve $[WORKING CAPITAL RESERVE]
TOTAL USES $[TOTAL USES]
SOURCES AMOUNT % OF TOTAL
----------------- ------------------------ ------------
Senior Debt $[SENIOR DEBT AMT] [SR DEBT %]%
Preferred Equity $[PREFERRED EQUITY AMT] [PREF %]%
Sponsor Co-Invest $[SPONSOR CO-INVEST AMT] [SPONSOR %]%
LP Common Equity $[LP EQUITY AMT] [LP %]%
TOTAL SOURCES $[TOTAL SOURCES] 100.0%
CHECK: TOTAL SOURCES ($[TOTAL SOURCES]) = TOTAL USES ($[TOTAL USES]) --> [BALANCED / OUT OF BALANCE BY $ ___]
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KEY CAPITALIZATION COVENANTS / CONDITIONS
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Senior Loan LTV (basis: As-Is Appraised Value): [SR LOAN LTV]%
Maximum Combined LTV/LTC (Senior Debt + Preferred Equity treated as debt): [MAX COMBINED %]%
Actual Combined LTV/LTC at Closing: [ACTUAL COMBINED %]%
Minimum DSCR (Senior Debt, trailing 12 mo.): [MIN DSCR]x
Recourse: [FULL RECOURSE / NON-RECOURSE W/ CARVE-OUTS]
Guarantor(s): [GUARANTOR NAME(S)]
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WATERFALL / PROMOTE AT EXIT
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At [EXIT EVENT - SALE OR REFINANCE], net proceeds are distributed sequentially up the capital
stack: first, to repay [SENIOR LENDER NAME]'s outstanding principal and accrued interest in
full; second, to redeem [PREFERRED EQUITY INVESTOR NAME]'s capital plus any accrued and unpaid
[PREF RATE]% preferred return; third, [LP EQUITY GROUP NAME] and [SPONSOR / GP NAME] receive
return of common capital pro rata ([LP %]% / [SPONSOR %]%); fourth, remaining profit is
distributed per the operating agreement's promote waterfall - typically [LP SPLIT TIER 1]% /
[GP SPLIT TIER 1]% up to a [HURDLE 1 IRR]% LP IRR hurdle, then [LP SPLIT TIER 2]% /
[GP SPLIT TIER 2]% above that hurdle - with [SPONSOR / GP NAME]'s co-invest dollars
participating pro rata in both the base common distribution and the promoted (outsized) GP
share, which is what allows the sponsor's blended return to exceed its [SPONSOR %]% capital
share of total capitalization.