Understanding the EB-5 Capital Stack: Four Positions Investors Should Know
- ARCFE U.S.
- Jul 16
- 3 min read
Updated: Jul 23
Not all EB-5 real estate investments occupy the same position within a project.
A project may be financed through a Senior Loan, Mezzanine Loan, Preferred Equity, Common Equity, or a combination of these sources. Together, these layers form the capital stack.
Understanding this structure helps investors compare repayment priority, collateral, and relative risk before selecting an EB-5 project.
1. Senior Loan
A Senior Loan generally sits at the top of the capital stack.
It is normally repaid before the Mezzanine Loan and equity positions. When the loan is secured by a first-priority lien on the project property, it may also have the strongest collateral position in the structure.
For investors, the key characteristics are:
Higher repayment priority
Loan-based contractual rights
Potential real estate collateral
Lower dependence on residual project value
A Senior Loan does not eliminate risk, but it generally occupies the most senior and protected position in the capital stack.
2. Mezzanine Loan
A Mezzanine Loan sits below the Senior Loan but above equity.
Unlike a mortgage loan secured directly by the real estate, a Mezzanine Loan is often secured by a pledge of ownership interests in the entity that owns the property.
Its rights may also be subject to an intercreditor agreement with the Senior Loan lender. As a result, the Mezzanine Loan generally has lower repayment priority and weaker collateral protection than a first-lien Senior Loan.
3. Preferred Equity
Preferred Equity is an ownership position rather than a traditional loan.
Preferred Equity investors generally receive distributions before Common Equity investors. However, all project debt—including the Senior Loan and Mezzanine Loan—normally must be satisfied first.
Preferred Equity therefore sits below the loan positions and depends more directly on the project retaining sufficient value after its debt obligations are paid.
4. Common Equity
Common Equity usually sits at the bottom of the capital stack.
It often represents the developer’s or sponsor’s ownership capital. Common Equity may participate in the greatest upside if the project performs well, but it also absorbs losses before the other capital layers.
This is why Common Equity generally carries the lowest repayment priority and the greatest exposure to project performance.
A Simple Comparison
Position | Basic Structure | Relative Repayment Priority |
Senior Loan | Project loan, potentially secured by real estate | Highest |
Mezzanine Loan | Subordinate loan, often secured by ownership interests | Below Senior Loan |
Preferred Equity | Equity with priority over Common Equity | Below all loans |
Common Equity | Ownership capital | Lowest |
The capital-stack position is important, but it should not be reviewed alone. Investors should also consider the collateral, project leverage, developer equity, construction financing, and repayment plan.
The USCIS Policy Manual requires EB-5 capital to remain at risk. A higher position therefore does not guarantee repayment, but it can provide stronger repayment priority and structural protection relative to subordinate positions.
The ARCFE Perspective
ARCFE evaluates EB-5 opportunities through both an immigration lens and a real estate finance lens.
Our EB-5 projects use a First-Lien Senior Secured Loan structure, placing the project-level EB-5 loan in the senior secured position of the capital stack.
This approach reflects ARCFE’s focus on:
First-priority repayment
Real estate collateral
Institutional underwriting
Construction-loan analysis
Practical repayment planning
Founded by iCross Capital, ARCFE benefits from nearly 20 years of New York City real estate lending experience. That financing background shapes how projects are evaluated before they are presented to investors.
Final Thoughts
The capital stack helps investors understand that two EB-5 real estate projects may offer very different risk positions.
A Senior Loan, Mezzanine Loan, Preferred Equity, and Common Equity do not provide the same repayment priority or collateral rights.
Understanding these differences is an important first step toward evaluating an EB-5 project more clearly.
To learn more, read EB-5 Investing 101: Measuring Risk Through the Capital Stack, review the ARCFE EB-5 Process, or explore ARCFE Group 22.
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