Janover Closes Central Colorado Industrial Construction Loan
A credit union provided the $2.7 million financing package, which features a 24-month interest-only construction period followed by 10 years of permanent financing at a fixed rate.
Better Financing Starts with More Options$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1M offered by a Credit Union at 5.1%Click Here to Get QuotesJanover has closed a $2.7 million construction financing package for the development of an approximately 20,000-square-foot build-to-suit industrial property in Gypsum, Colo., through its commercial real estate financing platform. The project site is located half a mile from the Eagle County Regional Airport and less than 4 miles from the nearest Interstate 70 on-ramp.
Brian Hamada, associate director of capital markets with Janover, coordinated the transaction between the borrower and the lender, a Colorado-based credit union. The construction loan closed at a 75% loan-to-cost ratio and includes interest-only payments for the 24-month term, which is immediately followed by a longer-term, permanent loan.
“This deal closed in under 60 days, and despite the challenges of a rising rate environment we were able to lock in a 10-year, permanent loan at a low, fixed interest rate,” said Hamada. The permanent financing component amortizes over 25 years without a prepayment penalty.
Build-to-Suit Projects Strong Nationwide
Industrial assets have consistently performed well ahead of most commercial real estate asset types in the past couple of years with few exceptions. Due to extremely low vacancy across the country, more and more developers are getting into the game, adding new, modern space to supply-constrained markets.
While the speculative development pipeline remains robust, build-to-suit projects offer additional security to developers seeking to reduce the costs associated with maintaining vacant buildings. REjournals reported that build-to-suit developments will continue to make up a larger and larger share of total construction activity as construction timelines become more and more prolonged.
While lenders closely scrutinize the borrower and the tenant in any build-to-suit development, risk factors are generally more noteworthy in custom facilities for highly specialized tenants. For distribution centers, logistics hubs, and easily repurposed manufacturing facilities, most companies with at least a bit of experience in building industrial projects face little trouble securing loans from more traditional lenders — think credit unions or banks. That said, an experienced broker can make a crucial difference in securing the absolute best terms for a project.
Related Questions
What are the benefits of industrial construction loans?
Industrial construction loans offer a variety of benefits to developers. These include access to capital for projects, reduced costs associated with maintaining vacant buildings, and the ability to secure the best terms for a project with the help of an experienced broker. Additionally, industrial assets have consistently performed well ahead of most commercial real estate asset types in the past couple of years with few exceptions due to extremely low vacancy across the country.
For more information, please see the following sources:
- Commercial Real Estate Loans: Industrial Property Loans
- Janover Closes Central Colorado Industrial Construction Loan
- CommercialEdge: National Industrial Report
- REjournals: Industrial Insider: A 2022 Forecast for Industrial Real Estate
- Commercial Real Estate Loans: How to Finance a Build-to-Suit Industrial Development
What are the requirements for obtaining an industrial construction loan?
The requirements for obtaining an industrial construction loan vary depending on the lender. Generally, lenders require a minimum loan amount of $5 million, flexible terms, up to 70% loan-to-cost (LTC) leverage, interest-only payments during construction, and non-recourse options available for loans over $20 million.
For more information, please visit Commercial Real Estate Loans.
What are the advantages of financing industrial construction projects?
Industrial construction projects offer a variety of advantages when it comes to financing. For one, industrial assets have consistently performed well ahead of most commercial real estate asset types in the past couple of years with few exceptions. This is due to extremely low vacancy across the country. Additionally, build-to-suit projects offer additional security to developers seeking to reduce the costs associated with maintaining vacant buildings. According to REjournals, build-to-suit developments will continue to make up a larger and larger share of total construction activity as construction timelines become more and more prolonged. Lastly, lenders closely scrutinize the borrower and the tenant in any build-to-suit development, reducing risk factors for developers.
For more information about what loan may be right for your situation, head to our portal and our advisors will connect you with a wide variety of lenders to get a quote at no charge.
What are the risks associated with industrial construction loans?
The risks associated with industrial construction loans include the possibility of monthly payments increasing significantly at the end of the interest-only period when you are required to start paying both principal and interest. Additionally, if the property’s value decreases, you could find yourself underwater on your loan – owing more than the property is worth. Source
Lenders also closely scrutinize the borrower and the tenant in any build-to-suit development, and risk factors are generally more noteworthy in custom facilities for highly specialized tenants. Source
What are the most common types of industrial construction loans?
The most common types of industrial construction loans are life companies, regional and national banks, institutions, pension funds, and private debt funds. These loan terms are available for permanent financing in 2023.
For more information, please visit Commercial Property Construction Loan Terms.
What are the best practices for managing an industrial construction loan?
The best practices for managing an industrial construction loan depend on the type of loan you have. Traditional lenders, such as banks, life insurance companies, and credit unions, typically offer commercial construction loans. Specialized lenders may offer financing packages that include a construction component followed by a longer-term, permanent loan upon completion.
When managing a construction loan, it is important to keep debt service costs as low as possible for as long as possible. This is because developers won’t begin collecting rental income until after the building is completed. Depending on the leasing contract, it might not be considered “done” until after a tenant completes all necessary tenant improvement work.
For more information about industrial acquisition financing options, head to our portal and our advisors will connect you with a wide variety of lenders to get a quote at no charge.