80341 Resource 78777 78860 1071 1105290880485 1215931032741 Controlled Commercial Financing - Most Large Commercial Construction Loans Now Need a Mezzanine Loan Piece

Large Commercial Construction Lenders Prefer to Be Less Than 80% Loan-to-Cost

<p>In the old days, if a developer wanted to build a $20 million office tower or mixed use project, he merely had to contribute $3 million towards the total project cost (15%).&nbsp; Some bank would then make a commercial construction loan that was 85% loan-to-cost.<br /><br />Modernly most large commercial construction lenders want to stay around 80% loan-to-cost.&nbsp; Eighty&nbsp;percent?!&nbsp; Does this mean that the developer has to cover 20% of the total project cost in cash ($4 million in our example above)?<br /><br />No.&nbsp; The way deals are getting done is that the developer contributes around 7% of the total project cost and then obtains a mezzanine loan (which resembles a second mortgage) for around 13% of the project cost.&nbsp; A typical mezzanine loan on a construction project today might cost 10% and 1-2 points.&nbsp;&nbsp;The mezzanine lender on such a highly leveraged construction deal would also&nbsp;typically also take between 25% to 50% of the profits (&quot;of the up&quot;).<br /><br />You can apply to scores of mezzanine lenders using C-Loans.com.<br /></p> 9 application/xml false commercial construction loan commercial financing commercial loan commercial mortgage commercial real estate loan mezzanine loan Apply to 60 Mezzanine Lenders Using C-Loans http://www.c-loans.com/onlineapp Mozilla/4.0 (compatible; MSIE 7.0; Windows NT 5.1; .NET CLR 1.1.4322; .NET CLR 2.0.50727) 127.0.0.1 127.0.0.1 johngaudio 216.87.92.57 false true false false true 198508 false false true false false false true 78777 blog blogsite/CLoans/web