Cost Overruns and Post-Completion Refis: The Land Alternative

The overrun is small. The capital that fixes it should not be expensive.

Mid 6s

Land capital, non-amortizing, not a lien

10–18%

What mezz and pref want for overrun dollars

30–40%

Of project value available in the land layer

The standard menu for overruns: rescue mezz and pref at double digits, or a lien-based retroactive refi that only reaches eligible components — often just 20–30% of costs — after an engineering audit, and then sits as a super-priority assessment that can complicate the agency takeout. The land is the bigger, cleaner pool.

Side by side

Three ways to fund an overrun.

	Rescue mezz / pref	Lien-based retro refi	Ground lease
Cost	10–18%, often with promote	High single digits, amortizing	Mid 6s, non-amortizing
How much it reaches	Whatever you will pay for	Eligible components only — often 20–30% of costs, after an engineering audit	The whole land layer: 30–40% of value
Lien position	Junior debt / equity	Super-priority assessment on the property	Not a lien at all — a lease
The takeout later	Must be repaid at refi	Can complicate agency and conventional takeouts	Leasehold takeouts are standard; the lease is drafted for the next lender
Control and upside	Consent rights, sometimes a promote	None taken	None taken — you keep the building and the upside

Already carrying an expensive assessment? The land layer is also how it comes off: our purchase retires it at closing — we do not close over one. Related: ground lease vs. C-PACE and loan-maturity options.

Questions, answered

FAQ.

How do developers usually finance cost overruns?

Rescue mezzanine or preferred equity at 10-18%, capital calls on the partners, or a lien-based retroactive refinancing that reaches only eligible components — often 20-30% of project costs — after an engineering audit. The land layer is the alternative most sponsors never price: 30-40% of value at a mid-6s non-amortizing cost.

Can I pull capital out after completion but before stabilization?

Yes — that window is exactly where land capital fits. The ground lease prices off stabilized income with the lease-up underway, and the proceeds retire the overrun bridge or expensive layers while the property finishes stabilizing.

Does a ground lease complicate my takeout financing?

A properly drafted lease does not: fixed rent, notice and cure, recognition agreement, new-lease rights — the protections takeout lenders require are built in. A super-priority assessment on the property, by contrast, is a known friction point for agency and conventional takeouts.

What if the overrun capital I need is small relative to the land value?

The structure still works — there is no minimum that kills it. Proceeds beyond the overrun can retire other expensive layers or return equity, and rent is sized to income either way.

Cost overruns and post-completion refis: the land alternative.