Case Study: $8M Mixed-Use Construction Financing

Developer secures ground-up construction financing for mixed-use project combining retail and multifamily in high-growth Austin submarket.

$8M Mixed-Use Construction Financing Case Study

The Challenge

An experienced developer had entitled a 0.75-acre site in a high-growth Austin submarket for a mixed-use project featuring 8,000 square feet of ground-floor retail and 32 multifamily units above. The project had strong pre-leasing interest and favorable economics, but securing construction financing proved challenging.

The developer faced several obstacles:

• Mixed-Use Complexity: Many lenders preferred single-asset-class projects
• Market Conditions: Rising interest rates had caused some construction lenders to pull back
• Timeline Pressure: Material costs were escalating and permits had an expiration date
• Equity Gap: The developer needed maximum leverage to preserve capital for future projects

The Solution

Clear House Lending leveraged our network to identify construction lenders actively financing mixed-use developments in Texas growth markets. We created competition among three qualified lenders, ultimately securing terms that exceeded the developer's expectations.

Loan Structure

Key Features

• Construction-to-Perm: Single close eliminated refinance risk and reduced closing costs
• Interest Reserve: 12-month interest reserve funded at closing reduced cash flow burden during construction
• Flexible Draw Process: Monthly draws with minimal documentation requirements kept construction on schedule
• Rate Lock: Option to lock permanent rate 6 months before stabilization protected against rate increases

The Results

Construction proceeded on schedule and the project achieved stabilization within 90 days of completion. Key outcomes included:

• On-Time Delivery: Project completed in 16 months, ahead of the 18-month construction term
• Retail Leasing: 100% retail space leased before certificate of occupancy at rents 15% above pro-forma
• Multifamily Lease-Up: Achieved 95% occupancy within 90 days at rents 8% above underwriting
• Seamless Conversion: Transitioned to permanent financing without additional closing or fees

Project Economics

Key Takeaways

• Construction-to-Perm Reduces Risk: A single-close structure eliminated refinance uncertainty in a volatile rate environment.
• Competition Improves Terms: By presenting the deal to multiple qualified lenders, we secured better rates and a funded interest reserve.
• Lender Selection Matters: Finding a lender comfortable with mixed-use and active in Texas markets was critical to execution.
• Speed Creates Value: Closing quickly allowed the developer to lock in material costs and begin construction before further price escalation.