Structured Capital

Development capital is a stack of claims, and their order is the real architecture of a project. Senior debt is repaid first, priced for that safety; equity last, priced for that risk. Between them sits a family of instruments (stretch senior, mezzanine debt, preferred equity, joint-venture equity, participating structures) because projects are rarely funded by two clean layers. Used deliberately, structured capital completes a sources-and-uses, preserves liquidity across a pipeline, or resolves a partnership without stopping a project; used casually, it stacks costs and rights nobody fully mapped.

Evoque Commercial structures and arranges these layers for residential and residential-led development. Structured capital is most active on projects from $16 million to $25 million, though they appear alongside core-range projects from $8 million to $15 million and beyond. One boundary: nothing on this page is tax, accounting, securities, or legal advice. Structures are documented with the sponsor's own counsel and advisors.

When structured capital fits

The instruments earn a place when a defined gap exists between the senior facility and available equity, or when sponsor equity is better deployed across several projects than concentrated in one. They fit partner recapitalizations, where a partnership needs to change shape without a fire-sale exit. They do not fit every file: when senior debt plus available cash completes the project, the simplest stack is usually the strongest, and the review says so.

The capital stack, seat by seat

Senior debt holds the first-priority lien and funds the largest share of cost; everything else arranges around its documents.

Stretch senior is a single senior facility sized past conventional proportions: one lender, one set of documents, priced between pure senior and mezzanine risk. The appeal is simplicity; the cost, more covenants and a senior with more at stake.

Mezzanine debt sits behind the senior loan, typically secured by a pledge of the ownership interests rather than the real estate. It narrows the equity requirement in exchange for current cost and defined remedies, and lives or dies by the intercreditor agreement.

Preferred equity invests inside the ownership structure with a priority return ahead of common equity and negotiated rights rather than a lien. Where senior documents restrict subordinate debt, preferred equity is often the accommodating shape.

Joint-venture equity is a capital partner in the deal, sharing risk, return, and governance through the operating agreement's waterfall.

Participating structures and A/B notes blend the categories: debt with a share in upside, or a single loan split into senior and junior pieces held at different pricing, for stacks needing a risk split the standard seats do not provide.

What structured capital is used for

The recurring uses: completing a sources-and-uses when costs or timing moved after the senior sizing (capital-stack gap); reducing cash equity concentrated in one project so the pipeline keeps moving; recapitalizing a partnership when a partner exits or stops funding (partner recapitalization); and sponsor equity structures for developers whose track record outruns their liquidity. The instrument follows the problem; the review starts with the gap and its cause, not a product to place.

What capital sources evaluate

Every seat underwrites the same project through a different exposure. The last-dollar question governs: at what total basis each layer stands, and what must be true for it to be repaid. Junior capital reads the senior documents as carefully as the appraisal: covenants, cure rights, transfer provisions. Alignment is examined: how much sponsor capital remains at risk beneath the layers, and how the waterfall behaves when plans change.

Projected returns are tested at the whole stack's blended cost, not layer by layer. Sizing, pricing, rights, and intercreditor terms are confirmed during project review; they vary by project, sponsorship, and capital source.

Sponsorship, alignment, and the sources-and-uses

Structured files run on documents: the organizational chart, the operating agreement and its waterfall, existing partner arrangements, and the senior term sheet all shape what can be built. Expect candid questions about control (who decides what, at which trigger points) because rights negotiated in good times are exercised in hard ones. Tell the capital story plainly: informal capital formalized at closing is routine; discovered at closing, a delay.

Exit strategy

Layered stacks make exits mechanical: the waterfall pays seats in order, so proceeds and timing determine every layer's outcome. Structured capital is underwritten against the same exit discipline as any senior loan (absorption for for-sale product, stabilization and refinance or sale for rental) plus sequence: which layers retire at which events, and each layer's rights if an event slips. A stack whose exit only satisfies its senior layer was never complete.

Documentation to expect

Expect the file a senior lender would want (budget, schedule, market support, sponsor résumé and financial summary, sources-and-uses) plus the structural layer: organizational chart, operating and partnership agreements, the waterfall, existing capital commitments, and the senior facility's documents. Valuation support matters doubly on recapitalizations. The developer document checklist generates the structured-capital list; the capital stack calculator frames the layers before the first conversation.

Where structured files get difficult

The recurring difficulties: intercreditor negotiations begun after everything else is agreed, blended costs that consume the projected margin, control rights that surprise a sponsor at the first covenant test, junior layers sized to make yesterday's basis work rather than today's, and partnership valuations that anchor to hope. None of these is automatically fatal. All are structural: solvable in review, before documents, where solving them is cheapest.