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-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's 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.