Debt for the whole life of a project
Land, construction, the bridge to stabilization, and the mezzanine or preferred piece that sits on top. Each has its own lenders and its own market. Most developers only ever hear from their bank.
Construction
Ground-up and heavy value-add. Banks to 65% of cost with recourse, debt funds to 75% without. The table below is the market this month.
Bridge
Lease-up, repositioning, or a loan coming due before the asset is ready. Floating rate, interest only, two to three years, sized to the business plan.
Land
Entitled and pre-development land. The hardest money in the stack and the most sensitive to sponsor, basis and timing.
Mezzanine and preferred
The piece between the senior and your equity, when the senior stops short of the number the deal needs.
| Bank | Debt fund | Mezzanine or preferred | HUD 221(d)(4) | |
|---|---|---|---|---|
| Loan to cost | 55 to 65%, more with land equity | Up to 75% | Stacks the total to 80 to 85% | Up to 90% |
| Recourse | Usually full | Non-recourse with carve-outs, burn-off available | Behind the senior | Non-recourse |
| Pricing today | 6 to 7% and up | 8% and up | 10 to 14% | Mid to high 5s, fixed for 40 years |
| Term | 24 to 36 months | 24 to 36 months, interest only | 36 months | 40 years |
| What they need from you | Net worth at or above the loan, around 10% liquid, a bonded contractor with a guaranteed maximum price, and three comparable completions | The deal underwritten, the interest reserve inside the loan, and a track record they can see | Co-invest, and an intercreditor with the senior | Patience for a 12 to 18 month approval |
The three-completions test is why capable second-time developers sit at 57%. It's a bank rule, not a market rule. A debt fund doesn't need it.
A sponsor with one or two completed projects that the bank has decided not to count.
A site with entitlement or environmental history the bank can't get comfortable with.
A project that needs 70% of cost and a bank that stops at 60.
A principal who won't sign a full recourse guarantee.
A bank that changed its terms since the last conversation, and a developer who found out late.
If the deal is straightforward, your bank will do it and you don't need us. If it has a wrinkle, that's the work.