The simplest solution is not always the best one. A complicated strategy to financing commercial real estate projects can actually be an advantage. In our real estate development company, we have found that adding complexity to the capital stack can help make your project more profitable and less risky for investors.
The standard capital stack, the framework that represents how a commercial real estate project is financed, is typically structured in two parts: 30% equity and 70% debt. It’s a straightforward, easy-to-digest formula; developers have to come up with 30% of the total project cost from investors, then cover the remaining 70% with a construction loan.