The keys to financing any office building project are going to be the amount of time you have to work with, the amount of money or equity you are investing in the project, and the amount of space you have committed prior to building at market rents.
The more time you have to work with and the stronger your project is viewed in terms of location, design, and tenants, then the more likely you will be able to qualify for bank or institutional construction financing.
When there are some elements of an “A” credit lending package that are missing, then there is going to be the need to focus in on the next level of financing sources in the “B” credit or sub prime construction financing category.
While sub prime institutional lending will likely be slightly higher cost than a “A” credit bank or institutional lender, there can also be some advantages to this type of lender that should also be considered.
For instance, sub prime or quasi institutional lenders may be willing to consider a higher level of leverage than an “A” lender. Its not uncommon for banks to only finance 65% of hard costs. A sub prime lender may be able to finance up to 75% of hard and soft costs, depending on the strength of the overall project. Secondary lenders may also be open to considering a lower level of tenant commitment at the commencement of construction.
Once again, depending on the time you have to work with, and the factors related to any specific office building construction loan requirement, a private mortgage lender can also be a good choice.
Yes, rates are likely going to be a bit higher. But if you are working on a project that will be completed in less than one year, interest rate on advanced construction funds is less of a concern compared to a long term interest commitment.
The real advantages of private mortgage construction funding on office building projects is the speed in which financing can typically be put into place and the predictability of the draw advance schedule.
In some cases these two factors may cause a private mortgage to either be the preferred choice to the builder or developer, or the only choice.
The key here is to make sure that your project is lined up with the most relevant source of capital, which may not always be the lowest cost office building construction mortgage financing sources out there.
The best way to get an office building construction loan that is the best fit for your requirements is to work with an experienced construction mortgage broker who can help you navigate through the market and get you working with lenders that are most likely to be able to fund your deal in the time you have to work with.