A major developer recently secured $43.4 million in construction financing for a build-to-suit net lease project in Inglewood, California, just blocks from SoFi Stadium. The deal required careful structuring to address construction timeline risks, lease economics, and the complex entitlement environment in one of Los Angeles' fastest-changing submarkets.
The Deal
The borrower needed construction financing for a purpose-built facility that would be leased to a national credit tenant upon completion. The project sits in Inglewood's emerging development corridor, where massive infrastructure investments around SoFi Stadium have transformed the area into a high-priority growth zone for institutional investors.
The borrower had already secured entitlements and signed a lease with the tenant, but needed a construction lender willing to underwrite both the development risk and the long-term lease economics. The project timeline called for an 18-month construction period with lease commencement immediately upon completion.
The Challenge
Three factors made this deal more complex than a typical construction loan. First, the lender needed to get comfortable with the lease structure and tenant credit quality, essentially underwriting a permanent financing scenario before the building existed. Most construction lenders prefer to focus purely on development risk and leave lease analysis to permanent lenders.
Second, Inglewood's entitlement process has been evolving rapidly as the city manages unprecedented development activity. The lender needed assurance that approvals would hold and that the development timeline was realistic given local agency capacity.
Third, the borrower wanted certainty on the permanent financing takeout. Build-to-suit deals with national tenants typically attract life insurance companies, but those lenders weren't ready to commit to a project still in development. The construction lender needed confidence in the exit strategy without a formal takeout commitment.
The Solution
We structured the deal as a 24-month construction loan at 70% loan-to-cost, giving the borrower a six-month cushion beyond the projected completion date. The rate was set at Prime + 75 basis points, with interest reserves built into the loan amount to cover the full construction period plus three months of stabilization.
The key was finding a lender with both construction expertise and permanent lending capabilities. We identified a national life insurance company that could evaluate the long-term investment merit while providing construction financing. This eliminated the takeout risk that concerned other potential lenders.
To address the entitlement concerns, we worked with the borrower to provide the lender with detailed documentation of the approval process, including correspondence with city officials and confirmation that all major hurdles had been cleared. The lender also required a completion guarantee from the sponsor, which provided additional comfort on the development timeline.
The loan structure included standard construction loan mechanics—monthly interest payments during construction, draws tied to completion milestones, and conversion to permanent financing upon lease commencement and completion of a stabilization period. The permanent loan would be structured as a 25-year term with 25-year amortization at a fixed rate determined at conversion.
The Outcome
The borrower closed on the full $43.4 million facility with terms that provided both construction period flexibility and permanent financing certainty. The blended approach eliminated the complexity and risk of coordinating separate construction and permanent lenders, while the longer loan term provided cushion for any development delays.
The rate structure was competitive with standalone construction loans, but the borrower gained significant value through the permanent financing commitment. In the current environment, having locked permanent financing terms protects against potential rate increases or credit market volatility during the construction period.
For the lender, the deal provided entry into Inglewood's institutional-quality development market with a creditworthy tenant and experienced sponsor. The life company's dual construction and permanent capabilities allowed them to capture the full relationship while managing risk through a single, integrated underwriting process.
The financing supports continued development momentum in Inglewood's stadium district, where build-to-suit projects with national tenants are becoming increasingly attractive to institutional capital. The success of this transaction demonstrates how proper structuring can address the unique challenges of development financing in rapidly evolving urban markets.