How Large Commercial Real Estate Projects Are Financed Using Senior Debt, Mezzanine, Preferred Equity & JV Equity.

How Large and Complex Commercial Real Estate Projects Are Financed Using Senior Debt, Mezzanine, Preferred Equity & Joint Venture Equity

When it comes to funding large commercial real estate developments—such as high-rise multifamily, mixed-use urban redevelopments, or institutional-grade office parks—the capital stack becomes more layered and strategic. At Commercial Partners of Texas / Amerimort, we specialize in structuring these deals by leveraging a combination of senior debt, mezzanine financing, preferred equity, and joint venture equity to optimize cost, risk, and flexibility.

Here’s how these financing components work together:

🧱 Understanding the Capital Stack

The capital stack refers to the layers of financing used to fund a commercial real estate project. Each layer carries a different level of risk, return, and repayment priority.

1. Senior Debt – The Foundation Layer

• Loan-to-Value (LTV): 50%–70%

• Cost: Lowest interest rates (bank or life company debt)

• Security: 1st lien on the property

• Lenders: Banks, Credit Unions, CMBS, Life Insurance Companies

  
  

This is the primary source of financing. Senior debt providers are repaid first and hold the least risk—but they also require strong assets, borrower experience, and cash flow coverage.

2. Mezzanine Financing – Filling the Gap

• Loan-to-Cost (LTC): Brings total leverage up to 85%-90%

• Cost: Higher interest rates (9%–14%+)

• Security: Pledge of ownership interests

• Use: Bridges the gap between senior debt and equity

Mezz lenders step in where traditional lenders stop, allowing sponsors to reduce the amount of cash equity they need to inject.

3. Preferred Equity – Hybrid Capital

• Position: Between debt and common equity

• Returns: Fixed or structured (10%–15%+)

• Control Rights: Often includes “cure” or “takeover” rights

• Use: Popular in joint ventures or recapitalizations

Preferred equity offers more flexibility than mezzanine and is often used when the borrower doesn’t want to give up ownership control but still needs additional capital.

4. Joint Venture (JV) Equity – The True Equity Partner

• Role: Co-investor in the deal, shares in profits

• Risk/Reward: Highest risk, highest return potential

• Use: Ground-up development or large value-add projects

• Partners: Institutional funds, family offices, REITs

JV equity typically comes in when a sponsor lacks the full equity required or needs a strategic partner for credibility and financial strength.

🔗 How Amerimort Matches the Right Capital to the Right Project

At Amerimort, we analyze your project's size, type, location, and risk profile to structure the best financing package. Whether you need a single-source loan or layered capital stack, we align your needs with:

• Life Insurance Companies for low-leverage, long-term fixed-rate debt

• Bridge and Mezzanine Lenders for transitional or value-add assets

• Private Equity Firms and Funds for preferred or JV equity investments

• Banks and Credit Unions for stabilized assets at favorable terms

Our expertise allows us to navigate complex structures—ensuring each layer of the stack fits your capital goals and project timeline.

🏗️ Ideal Projects for Structured Finance

• High-rise multifamily or condo developments

• Mixed-use commercial towers

• Industrial parks or logistics centers

• Hospitality repositioning and conversions

• Redevelopment of underperforming assets

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📞 Ready to Finance Your Next Project?

If you're working on a $10M+ commercial real estate project and need smart capital structuring, Amerimort is your trusted partner. We guide you through each layer of the stack to secure the funding you need—on terms that work for your bottom line.

👉 Contact us today at www.amerimort.com or call 832-607-1113 to schedule a capital consultation.