Case Study 101: 44-Unit Multi-FamilyConstruction & Permanent Financing
- nuelmarketing999
- Oct 17
- 3 min read
This case study illustrates a model of the financing and development of a new multi-family apartment building in San Diego, showcasing how a strategic approach to commercial lending, facilitated by NextGen's platform, can bring complex projects to fruition.
Project Overview: The San Diego Haven
The project presents as a ground-up construction of a 44-unit multi-family apartment building in a high-demand submarket of San Diego. The unit mix consisted of 34 one-bedroom units and 10 two-bedroom units, designed to cater to the growing need for modern, amenity-rich housing in the region.
The borrower, an experienced local developer with a strong track record, seeks financing for both the construction phase and the subsequent permanent takeout loan.
Financial Structure: From Land to Lease-Up
NextGen's platform plays a critical role in structuring a comprehensive financing package, identifying optimal lenders through our strategic partnership with CommLoan's hi -tech lender portal and capable of handling the project through its entire lifecycle.
Total Project Cost Breakdown Assumptions:
Land Acquisition Cost: $4,200,000
Hard Construction Costs: $12,500,000 (Site work, foundation, framing, finishes, etc.)
Soft Costs: $2,800,000 (Architectural, engineering, permits, insurance, legal, interest reserve, etc.)
Total Project Cost: $18,500,000
Construction Loan Parameters:
A construction loan at 70% Loan-to-Cost (LTC).
Construction Loan Amount: $13,650,000 (70% of $19,500,000)
Sponsor Equity Requirement: $5,850,000 (30% of Total Project Cost)
Interest Rate: Prime + 0.50% (variable, paid on drawn balance)
Term: 24 months with a 6-month extension option
Construction Phase: Building Foundations for Success
The construction phase is forecast as 20 months. The construction loan was disburses draws tied to project milestones and is verified by third-party inspectors. NextGen's platform continuously monitors market conditions and lender appetites to ensure a smooth transition to permanent financing.
Stabilized Rent Roll Projections (Post-Construction):
Average 1-Bedroom Rent: $2,850
Average 2-Bedroom Rent: $4,100
Potential Gross Income (PGI): ($2,850 * 34) + ($4,100 * 10) = $96,900 + $41,000 = $137,900 per month / $1,654,800 per year
Vacancy & Credit Loss (5%): $82,740
Effective Gross Income (EGI): $1,572,060
Operating Expenses (30% of EGI): $471,618
Net Operating Income (NOI): $1,100,442
Stabilized Value (4.50% Cap Rate): $1,100,442 / 0.045 = $24,454,266
The project forecasts achieving stabilization (90% occupancy) within six months of receiving the Certificate of Occupancy, demonstrating strong market demand.
Permanent Financing Transition: Long-Term Stability
As construction nears completion and the project achieves stabilization, NextGen can facilitate the procurement of permanent financing, which "takes out" the construction loan. The borrower's strong profile and the property's robust performance will attract highly competitive offers from institutional lenders.
Permanent Takeout Loan Structure and Terms:
Loan Type: Fixed-rate, non-recourse loan
Loan Amount: $12,838,490 (70% LTV of the $18,340,700 stabilized value)
Interest Rate: 5.25% fixed for 10 years
Amortization: 30 years
Debt Coverage Ratio (DCR): 1.35x (based on annual debt service)
Prepayment Penalty: Yield maintenance for the initial 7 years, then 1% for the remainder of the term
NextGen's Role: Optimal Lender Matching and Execution
NextGen's proprietary platform would be instrumental in this project's success. Leveraging its extensive network and AI-driven analytics, NextGen is able to:
Identify Optimal Lenders: For the construction phase, NextGen connects the developer with a regional bank specializing in ground-up multi-family development in San Diego, offering flexible draw schedules and competitive rates tailored to the project's risk profile.
Secure Best Terms for Permanent Financing: For the takeout loan, the platform matches the stabilized asset with several life insurance companies and CMBS lenders, who prioritize long-term, fixed-rate, non-recourse debt on performing assets. This results in favorable terms that maximizes the borrower's cash flow and long-term investment strategy.
Streamline the Process: From initial underwriting to closing, NextGen provides expert guidance, ensuring all documentation is meticulously prepared and presented, significantly reducing the time and effort typically associated with complex commercial real estate financing.
Conclusion: A Seamless Financing Journey
The 44-unit multi-family project in San Diego stands as a testament to the complexity and need for the power of intelligent financial planning and execution. By identifying and securing both construction and permanent financing through NextGen's platform, the borrower can successfully navigate the complexities of development, achieving their investment goals with optimal terms and a clear path to long-term profitability. This case study exemplifies how NextGen can empower developers to unlock value and achieve success in competitive real estate markets.
Developer/Sponsor Documentation
Experience and track record
Financial statements
Resumes of key personnel
Project Documentation
Architectural plans and specifications
Engineering reports (structural, civil, environmental)
Permits and approvals
Construction contracts and agreements
Financial Analysis
Detailed project budget
Comprehensive cost breakdown
Proposed draw schedule
Sources and uses of funds
Market Analysis
Comparable sales and rental data
Absorption studies
Demographic analysis
Market feasibility report
Legal Requirements
Title commitments and surveys
Zoning and land use compliance reports
Environmental assessments (Phase I & II)
Property insurance details
Construction-Specific Items
General Contractor qualifications and experience
Performance and payment bonds
Builder's risk insurance
Construction schedule
Timeline & Milestones
Detailed project timeline with key milestones
Completion deadlines
Lease-up projections
Comments