Which of the following typically has the highest priority in cash flow distribution?

In the context of real estate finance, debt service typically has the highest priority in cash flow distribution. This is because debt repayment obligations are contractual commitments that must be met before any other distributions can be made. When a property generates income, the first cash flows that are allocated are directed towards servicing the debt, which includes both principal and interest payments.

This prioritization is crucial for maintaining the integrity of the investment and ensuring that lenders receive their dues, thereby minimizing the risk of default. Once debt obligations are met, cash can then be allocated to other expenses and distributions, including capital expenditures (CapEx), net cash flow to equity holders, and other operational costs.

In comparison, capital expenditures are necessary for maintaining or improving the property but come second after debt obligations are satisfied. Net cash flow to equity represents the profits available for distribution to equity investors, but this distribution only occurs after all other obligations, including debt service, have been addressed. Net Operating Income (NOI) is a measure of a property's profitability before these considerations, and thus it does not factor into cash flow priority as it does not account for the cost of debt service and other expenses that must be paid out first.