Senior Debt
The primary mortgage loan that has first priority claim on a property's cash flows and collateral. Senior debt sits at the top of the capital stack with the lowest risk and lowest cost of capital. Senior lenders are repaid before any subordinate financing or equity in case of default or sale.
Related Terms
Capital Stack
The layered structure of capital used to finance a real estate investment, arranged by priority of repayment. From lowest risk to highest: senior debt, mezzanine debt, preferred equity, and common equity. Each layer has different risk/return profiles. Understanding the capital stack is essential for structuring deals and evaluating investment opportunities.
Mezzanine Debt
Subordinate financing that sits between senior debt and equity in the capital stack, secured by a pledge of ownership interests rather than a mortgage on the property. Mezzanine debt allows borrowers to achieve higher leverage (up to 85-90% of cost) while keeping the senior loan in compliance. Rates are higher than senior debt but lower than equity returns.
More Deal Structure Terms
← View all glossary termsHave Questions About CRE Financing?
Our experienced team can help you navigate the complexities of commercial real estate capital markets.
Contact Us