Banks are lending on construction again — at 70–75% of cost, leaving sponsors to find 25–30% in cash equity. The gap-filler most sponsors never price is under their feet: the land, typically 30–40% of project cost, can come out as non-amortizing capital at the construction closing — priced off the finished project’s income, with no dilution and no promote given away.
| Step | How it works |
|---|---|
| 1. The land sells at as-complete value | Not at raw-dirt comps. Ground rent is sized off the finished project's stabilized NOI (covered 3–4x), capitalized at a ground-lease rate — so the land contributes at the highest valuation lens in the deal. |
| 2. The construction loan shrinks | The lender sizes off the leasehold basis — a smaller loan on a smaller basis. Leasehold construction lending is standard practice: the lease carries the full lender suite (notice and cure, recognition agreement, new-lease rights). |
| 3. The cash equity check shrinks | Land proceeds count as capital in the deal. On typical numbers — land at 30–40% of cost, equity requirement at 25–30% — monetizing the land can cut the sponsor's cash check roughly in half. |
| 4. The upside stays home | No JV partner, no promote given away, no dilution. Ground rent is a fixed, deductible operating cost; everything above it belongs to the sponsor. |
Works both ways: the sponsor who already owns the site frees the equity trapped in it; the buyer acquiring a site closes land-light from day one. Either way the lease is drafted for the construction lender before the construction lender ever sees it.
Yes — leasehold construction lending is well-established. Lenders require a financeable ground lease: fixed rent with no market resets, notice and cure rights, a recognition agreement, and new-lease protections. Ours is drafted to those standards before the lender ever sees it.
The land is typically 30-40% of total project cost when priced off the finished project's income. With construction lenders requiring 25-30% cash equity, monetizing the land often cuts the sponsor's cash check roughly in half.
Rent is sized off stabilized income with 3-4x coverage at completion, and the structure can accommodate the construction period. The carry is a known, fixed line in the budget from day one, unlike equity returns that compound.
Preferred equity prices at double-digit rates and usually takes control rights and a piece of the upside. Land capital is non-amortizing, mid-6s in cost, takes no promote and no control, and never matures.
Send the site, the budget, and the stabilized pro forma — an indicative land value and the implied equity relief come back fast. Fee positions under $15 million are our lane.
Email us the property