The Deal
Commercial Lending Solutions arranged a $55M construction loan for a spec industrial park (3 buildings) in Phoenix, AZ. The development was a speculative industrial project designed to meet regional demand for high-clear, dock-served distribution space with modern specifications attractive to third-party logistics operators, last-mile distribution tenants, and light manufacturing users. The developer was an experienced industrial operator with a strong submarket track record, and the project site offered superior highway access and labor pool characteristics favorable to prospective tenants.
The Challenge
Securing construction financing for speculative industrial development required demonstrating submarket vacancy levels, absorption rates, and rent trends that justified the spec risk. Lenders evaluating construction deals without pre-leasing commitments focused heavily on market fundamentals, sponsor track record, and exit strategy certainty. The borrower had strong market data supporting spec development but had not executed pre-leases, which placed the deal above the comfort threshold for conservative bank lenders who required pre-leasing equal to the debt service stabilization amount before providing full construction commitments.
The Solution
Trevor Damyan at Commercial Lending Solutions identified a construction lender with an active spec industrial program in supply-constrained markets, whose underwriting criteria allowed full spec funding based on market vacancy below specified thresholds combined with sponsor track record scoring. The construction loan was structured to fund site work, vertical construction, and a portion of leasing costs, with a 24-month build and lease-up period. The takeout structure was clearly defined upfront, with the construction lender committed to providing the permanent financing upon project completion and stabilization at agreed occupancy milestones.
The Outcome
Construction started within 60 days of loan closing, and the project delivered on schedule within the construction term. Submarket vacancy remained below the lender's threshold throughout the construction period, validating the market fundamentals underpinning the spec approach. Leasing activity began accelerating at delivery, with two tenants executing leases within 90 days of project completion. The project reached stabilized occupancy ahead of the lease-up period budget, and the construction lender converted the loan to permanent financing at competitive fixed-rate terms reflecting the project's income quality upon stabilization. The development delivered strong equity returns to the sponsor and added institutional-quality product to the submarket.