Optimizing a project's capital structure can produce significant financial benefits. The adjacent charts illustrate how a developer's return on equity (ROE) increases through the use of senior debt and mezzanine financing. As a developer's equity contribution is reduced from 100% of total capital required to the 10% of total capital required, ROE increases from 25% to 129%.

*Assumptions: total project return 25%; project holding period 12 months; cost of senior debt 8% per annum; cost of mezzanine debt 33% of profit.