NYC ground-up development requires a stacked capital structure — equity, mezzanine or preferred equity, and a senior construction loan. Each layer has its own pricing, sizing, and covenant package. Understanding how the stack fits together is the difference between a development pro forma that pencils and one that doesn't.
Senior Construction Loan Structure
A typical NYC senior construction loan is 60-65% loan-to-cost (LTC), 24-36 month term plus 12-month extension options, floating rate at SOFR + 300-500 bps. The lender requires a completion guarantee, a carry guarantee, and bad-boy guarantees from the sponsor. Drawdowns happen monthly against an approved construction draw schedule, certified by the lender's consulting engineer. The take-out is typically a mini-perm (3-5 year stabilized loan) or a refinance into agency or CMBS once leased.
Equity Sizing and Sources
NYC construction equity typically runs 35-45% of total project cost. Common equity sources include sponsor capital, family offices, institutional LPs (real estate funds), and joint venture partners with operating expertise. For projects with 25%+ affordable component (Mandatory Inclusionary Housing or 467-m conversion), tax credit equity (LIHTC) may layer on top. EB-5 capital is occasionally available but with execution complexity.
Mezzanine and Preferred Equity Fillers
When senior LTC + common equity doesn't equal 100% of cost, mezzanine debt or preferred equity fills the gap. NYC construction mezz prices at SOFR + 800-1200 bps; preferred equity targets 11-14% current pay with a participation in residual upside. The mezz/pref layer is usually 10-15% of total project cost. Sponsors evaluate the mezz coupon against the marginal cost of equity from LP sources.
Recent NYC Examples
The $300M Brookfield construction loan on Vanbarton's 6 East 43rd Street office-to-residential conversion ($135M acquisition, Skyline Properties-brokered) is a recent example of a major NYC conversion-financing structure. The 101 Greenwich Street conversion by Quantum Pacific + Metro Loft ($105M acquisition) is following a similar template — bridge during conversion, refinance into stabilized residential debt post-CO.
- Engage the construction lender during entitlement; deal certainty improves with early lender involvement.
- Cost-overrun guarantees from the sponsor are non-negotiable for NYC construction lenders.
- For affordable-component projects, tax credit equity timing affects construction draws — coordinate carefully.
- Skyline Properties’ development practice introduces sponsors to active construction lenders matched to each project type.
Robert Khodadadian and Skyline Properties broker development site acquisitions across Manhattan and Brooklyn. The firm has closed $976M+ in NYC commercial real estate including conversion candidates financed by major construction lenders. Email info@skylineprp.com or call (212) 537-9239 for confidential construction-financing introductions.