Mezz Pref Blend Calculator

Mezz + pref stacks blend. This calculator computes blended cost to borrower.

Senior balance

Senior rate

Mezz balance

Mezz rate

Pref balance

Pref rate

Blended cost

8.30%

Total capital

$27,000,000

Annual interest

$2,240,000

How the math works

Blended = sum(balance × rate) ÷ total capital.

When blended cost approaches stabilized cap rate, leverage becomes negative on an unlevered basis. A 5.5% cap asset with an 8.5% blended stack is losing NOI to interest — the plan must include NOI growth fast enough to outrun the carry, or the deal is structured for stress.

How to Use

Enter senior debt balance and rate.
Enter mezz balance and rate.
Enter pref equity balance and rate.
Enter total capital stack.
Read blended cost.

Frequently Asked Questions

Typical rates?

Senior mortgage: 6-8%. Mezz: 10-14%. Preferred equity: 11-16%. Each layer higher cost due to subordination. Adding mezz + pref raises weighted cost 200-400 bps vs all-senior structure.

When stack makes sense?

When senior alone provides insufficient LTV (say, senior at 60%, deal needs 80%). Adding mezz/pref to 75-85% LTV raises leverage at cost of blended rate. Works when asset NOI growth supports higher carry.

Risk added?

More lenders = more constraints. Intercreditor agreements, cross-defaults, covenants multiply. Distress more complex. Stack stratification that looks clean in pro forma often gets ugly during workouts.

How does this interact with the rest of the capital stack?

Each tier of the stack affects the next. Senior debt constrains LTC and DSCR. Mezz and pref consume equity spread. Interest rate hedges protect DSCR but cost premium. Always model the full stack holistically — optimizing one tier alone often degrades another. Institutional underwriters run three or four scenarios across the stack before committing capital.