# iii. Financing Structures & Capital Stack Financing structures and the capital stack describe how capital is arranged to acquire, develop, or operate real estate assets. These structures determine the priority of payments, allocation of risk, and distribution of returns among different capital providers. #### **Capital Stack** The hierarchy of capital invested in a property, ranked by priority of repayment and risk exposure. #### **Construction Loan** Short-term financing used to fund development or major renovation prior to stabilization. #### **Debt Financing** Borrowed capital that must be repaid according to defined terms, typically secured by the property. #### **Equity Financing** Capital invested in exchange for ownership interests and participation in returns. #### **Loan-to-Cost (LTC)** A ratio comparing total loan amount to total project development cost. #### **Loan-to-Value (LTV)** A ratio comparing loan amount to the appraised value of a property. #### **Mezzanine Debt** Subordinate financing that sits between senior debt and equity in the capital stack. #### **Preferred Equity** An equity position with priority return rights over common equity but typically without control rights. #### **Senior Debt** The highest-priority loan in the capital stack, typically secured by a first lien on the property. #### **Subordinate Debt** Debt that ranks below senior debt in repayment priority and carries higher risk. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://info.building.inc/lexicon/finance-valuation-and-risk/iii.-financing-structures-and-capital-stack.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.