FED FUNDS3.75–4.00%CMBS DQ (OCT)7.87% ▼15bpOFFICE DQ (SEP)12.2%ALT LENDER SHARE Q348%2026 MATURITIES$875BAS OF NOV 10
The CRE Grind
Season 1 · Episode 1 · Capital Markets · November 10, 2026 · 35 min

The Capital Stack: Who's Actually Lending in Late 2026

The capital stack, explained layer by layer on one Jersey City deal, plus who is writing the checks in late 2026, what the Fed's September hike means for floating-rate borrowers, and why rescue capital is having its moment.

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Five things to remember

  1. Priority sets risk. Cash flows down the stack and losses hit from the top: senior debt, then mezz or pref, then common equity.
  2. Loans are sized by three tests: LTV, DSCR and debt yield. The loan is the smallest amount that passes all three. In Q3 2026 the averages were about 64% LTV, 1.32x DSCR and a 9.5% debt yield (CBRE).
  3. Mezz and pref fill the same gap but work differently. Mezz is a loan secured by a pledge of the equity, enforced through a fast UCC foreclosure and governed by an intercreditor agreement. Pref is equity with priority, enforced through the operating agreement. Mid-2026 pricing is roughly 11–16% for mezz and 8–15% for pref. The real difference between them is control.
  4. Alternative lenders are taking share. They were 48% of CBRE's non-agency closings in Q3 2026, up from 37%. Banks were 26%, and often fund the debt funds through repo lines and CRE CLOs. Private-label CMBS was about $90B through August, mostly SASB deals.
  5. The market is in a "resolve or reset" phase. The Fed hiked to 3.75–4.00% in September and held in October. CMBS delinquency was 7.87% in October and office around 12%. About $875B of loans mature in 2026, and that is drawing in rescue capital.

The worked example

A sponsor buys a $100M Jersey City apartment building with $6.5M of NOI, a 6.5% cap rate. The stack is a $65M senior loan at 6.25% interest-only, $15M of preferred equity at 12%, and $20M of sponsor equity.

  • Senior loan: DSCR about 1.6x and debt yield 10%, both comfortably inside today's averages.
  • Cash to common equity: about $0.64M a year (3.2%) today. If NOI grows to $7.5M, that rises to about $1.64M (8.2%), because the senior loan and the pref take fixed returns. This is leverage at work.
  • Downside: a 20% fall in value wipes out the common equity entirely. The senior lender still has a 35% cushion beneath it.
  • Negative leverage: the blended cost of the debt and pref is about 7.3%, above the 6.5% cap rate. The deal only works if NOI grows.

Sources