Architecting the OZ Capital Stack

The Five-Layer Stack


╔══════════════════════════════════════════════╗
║  LAYER 1 — SENIOR DEBT                      ║
║  Bank · SBA · FHA · Agency                  ║
║  First claim on assets · Lowest risk        ║
║  Typical: 55–70% of total project cost      ║
╠══════════════════════════════════════════════╣
║  LAYER 2 — SUBORDINATE / MEZZANINE DEBT     ║
║  CDFIs · USDA · Bridge debt                 ║
║  Below-market rates · Patient capital       ║
║  Typical: 10–25% of total capitalization    ║
╠══════════════════════════════════════════════╣
║  LAYER 3 — TAX CREDIT EQUITY                ║
║  LIHTC · NMTC · Historic Tax Credits        ║
║  Grants · City/county funds                 ║
║  Typical: 10–20% of total capitalization    ║
╠══════════════════════════════════════════════╣
║  LAYER 4 — PREFERRED EQUITY                 ║
║  Fixed preferred return · Downside prot.    ║
╠══════════════════════════════════════════════╣
║  LAYER 5 — QOF EQUITY + SPONSOR EQUITY      ║
║  Maximum risk · Maximum upside              ║
║  10-year appreciation: 100% TAX-FREE        ║
╚══════════════════════════════════════════════╝

Senior Debt Underwriting Metrics

Metric	Benchmark	Real Example (2910 Arthur Ashe, Richmond VA)
LTC	55–70%	64.99%
DSCR	1.25x–1.50x	1.45x
Debt Yield	8–10%	9%
Interest Rate	Market	4.5% fixed

Typical CDFI-OZ Stack Percentages

Layer	%	Origin
Senior Bank Debt	30%	Traditional bank/agency
CDFI Subordinated Debt	20%	CDFI mezzanine
QOF Equity	35%	Qualified Opportunity Fund
Grants / PRIs	10%	Federal, state, local grants
Sponsor Equity	5%	Development team

Real Deal Stack Examples

2910 N Arthur Ashe Blvd — Richmond, VA ($131.5M)

Layer	Amount
Senior Construction Loan	$85.5M (65% LTC)
QOF LP Equity (Bridge Investment Group)	$29.0M
GP Sponsor Equity	$17.0M

MLK Gateway I — Washington, D.C. ($34.4M)

Layer	Amount
Senior Construction Loan	$13.5M
NMTC Equity	$15.0M
LISC Pre-Development Loan	$1.7M
Local Grants	$700k
OZ Equity (gap fill)	$2.78M

55 Willoughby — Brooklyn, NY ($289.8M)

Recapitalization Prior to Certificate of Occupancy: A sum of $41M in QOF equity substitutes the construction loan once the building is finished, thereby eliminating construction risk for OZ investors and securing the 10-year tax-free appreciation period.