• Senior Debt
• Mezzanine Debt
• Equity

Each layer sits in a defined position within the structure, with repayment priority flowing from the top of the stack down.

In the event that something does not go to plan such as delays, cost overruns, or market changes the order of repayment becomes critical. Capital providers at the top of the stack are repaid first, while those further down absorb losses first.

This structural hierarchy is what drives the different risk-return profiles.

Senior debt forms the foundation of most real estate funding structures. It is typically secured by a first-ranking mortgage over the property and therefore sits at the top of the capital stack.

Because of this priority position, senior lenders are the first to be repaid from the project’s cash flows or asset value.

The result is generally lower relative risk compared to other layers, which in turn means lower but more stable returns.

• Conservative loan‑to‑value ratios (LVRs)
• First‑ranking security over the asset
• Defined covenants and controls
• Active monitoring throughout the life of the loan

For investors seeking exposure to real estate credit, senior debt offers access to property-backed returns with a level of structural protection. At Ark Capital, our senior‑secured lending approach prioritizes downside protection and capital preservation through structure, rather than stretching for yield.

Mezzanine debt sits between senior debt and equity in the capital stack.

It is often used when the borrower requires additional capital beyond what a senior lender is prepared to provide but does not want to dilute equity ownership further.

• Ranks behind senior debt in a downside scenario
• Often relies more heavily on asset value growth or successful execution
• Can be more sensitive to market or cost volatility

From a risk perspective, mezzanine capital sits closer to the point of loss if project assumptions do not hold. As a result, while it offers higher returns, it is inherently more sensitive to changes in value, cost, or timing.

• Development margins
• Market timing
• Asset repositioning opportunities
• Long-term value creation

• Where does the first dollar of loss sit?
• How much buffer exists before senior capital is exposed?
• What controls are in place during the life of the investment?

• Downside scenarios, not just base cases
• Asset quality and exit liquidity
• Borrower alignment and meaningful equity participation
• Governance processes that separate origination from credit approval

This discipline reflects a broader philosophy: capital preservation comes before capital growth. Returns should be a function of disciplined structuring and risk management—not leverage or optimistic assumptions.

For investors, understanding the capital stack is a powerful framework. It clarifies why different investments offer different returns and why higher returns almost always come with higher exposure to loss.

Senior debt, mezzanine debt, and equity each have a role. The key is aligning your capital with your risk tolerance, income needs, and investment objectives.

At Ark, our role is to operate where structure, discipline, and alignment matter most—providing investors with exposure to real estate credit that is deliberately positioned to prioritise resilience, transparency, and consistent risk-adjusted outcomes over the long term.