Construction loans VS Capital Group places
Construction debt is the most structure-sensitive financing in commercial real estate. The interplay between the senior, any subordinate capital, the equity, the GMP contract, the GC's bonding capacity, and the lender's draw and inspection regime determines whether the project gets built on schedule and on budget.
We have placed construction financing across every major asset class and every major U.S. market.
- Ground-up multifamily, build-to-rent, and student housing
- Hospitality construction, full-service, select-service, resort, and flagged hotels
- Industrial, logistics, cold storage, and last-mile development
- Hyperscale data centers, colocation, and AI infrastructure
- Mixed-use, urban infill, and adaptive reuse
- Medical office, behavioral health, and assisted living development
- Self-storage, retail, and restaurant net-lease construction
Structuring the construction capital stack
Most construction projects do not pencil with a single senior loan. The total capital required exceeds what any one lender will underwrite to a developable, supportable debt yield. The solution is a stack: a senior construction loan sized to the lender's comfort, then mezzanine debt or preferred equity sized to bring sponsor equity down to a competitive level.
VS Capital Group structures the entire stack, not just the senior. We coordinate intercreditor agreements, recognition agreements, completion guaranties, and the funding waterfall so every layer of capital functions together at closing and throughout the construction draw cycle.
Construction loan terms we deliver
Terms are highly project-specific, but the following ranges are representative of recent VS Capital Group construction executions.
- Loan size: $5M to $500M+ on single assets, larger on portfolios and platforms
- Term: 24 to 60 months including stabilization period
- Leverage: 60% to 75% loan-to-cost senior; up to 85%+ LTC with subordinate capital
- Pricing: SOFR + 250 to SOFR + 700 depending on asset class, sponsor, and market
- Interest-only during construction; capitalized interest reserve typical
- Completion and carry guaranties standard; springing repayment guaranties on bank executions
Construction-to-permanent and mini-perm options
Some projects benefit from a single facility that funds construction, lease-up, and stabilized operations under one document, particularly self-storage, build-to-rent, and certain industrial projects. Others are better served by a construction loan with a built-in mini-perm extension that bridges the borrower into a permanent agency or CMBS execution.
VS Capital Group will run the underwriting both ways and present the sponsor with a quantitative comparison: total cost of capital, optionality, refinancing risk, and prepayment economics.
Frequently asked questions
- How much leverage can I get on a construction loan?
- Senior construction loans typically fund 60 to 75 percent of total project cost. With mezzanine debt or preferred equity behind the senior, total debt and preferred capital commonly reaches 80 to 90 percent of cost, leaving 10 to 20 percent in true common equity.
- What is the difference between construction-to-permanent and a stand-alone construction loan?
- A construction-to-permanent loan funds construction and then converts automatically into permanent debt at stabilization under one set of loan documents. A stand-alone construction loan terminates at stabilization and must be refinanced, typically with an agency, CMBS, life company, or bank loan, into separate permanent debt.
- Do construction loans require personal guarantees?
- Most institutional construction loans require a completion guaranty and a carry guaranty from the sponsor or sponsor entity. Bank construction loans frequently require a springing repayment guaranty that becomes recourse on defined trigger events. Non-recourse construction debt is available from select debt funds at higher pricing.
- How long does it take to close a construction loan?
- Senior construction loan closings typically run 60 to 120 days from term sheet acceptance, depending on the lender, the complexity of the capital stack, and the readiness of plans, GMP contract, environmental reports, and title and survey.
- Will a construction lender finance pre-development costs?
- Most construction lenders will reimburse pre-development costs at closing as part of the borrower's equity contribution, but they will not advance against pre-development costs before closing. Pre-development capital is typically financed with sponsor equity, a small bridge loan, or pre-development capital from a programmatic equity partner.