Breaking Down the Capital Stack & Waterfall Structures in Commercial Real Estate

📌 Episode Overview:

In this episode of The Ironclad Underwriting Podcast, host Jason Williams and recurring guest Frank Patalano take a deep dive into one of the most misunderstood aspects of commercial real estate: the capital stack and waterfall structures. From senior debt to common equity, they unpack how each layer of financing works, who gets paid first, and where the risks and rewards lie. Whether you’re a new investor or a seasoned operator, this episode will give you clarity on structuring deals that stand the test of time.

🗂 Topics Covered:

• The fundamentals of the capital stack: debt, equity, and everything in between
• Why senior debt is the safest investment and how secondary/mezzanine debt works
• Understanding preferred equity vs. common equity and their risk profiles
• The mechanics of waterfall structures: preferred returns, splits, and IRR hurdles
• Why keeping structures simple is often the smartest move for syndicators and GPs

💬 Notable Quotes:

• “Remember, the very first rung gets paid first with the lowest risk, and common equity is last with the highest risk, but also the highest potential reward.”
• “A confused mind says no. If you overcomplicate your waterfall with dozens of hurdles and classes, investors won’t sign up.”
• “Debt is fixed. Equity shares in the upside. That’s the tradeoff: security versus potential.”

🎧 Connect with Jason:

✅ LinkedIn

✅ https://IroncladUnderwriting.com

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🎧 Connect with Frank:

✅LinkedIn