$15M Ground-Up Multifamily Construction Phoenix | Commercial Lending Solutions 
Loan Size Example

$15 Million Ground-Up Multifamily Construction in Phoenix

By Trevor Damyan, Commercial Mortgage Broker at Commercial Lending Solutions

A $15 million ground-up multifamily construction loan in Phoenix represents a mid-market opportunity in one of the nation's fastest-growing apartment markets, where steady in-migration and demographic tailwinds continue to support new supply. These deals typically involve experienced developers building 100 to 150 units on infill or suburban sites across submarkets like Scottsdale, Tempe, or central Phoenix corridors. Lenders at this size include regional banks, life companies, and agency debt funds, with leverage typically ranging from 70 to 75 percent loan-to-cost. Current market rates for construction loans sit around 8.25 percent, reflecting elevated risk premiums on floating-rate construction debt and the extended timeline to permanent placement.

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Capital Stack

What a $15M Ground-Up Multifamily Construction Capital Stack Looks Like

Most $15 million ground-up multifamily construction deals in Phoenix are financed by a single lender on a construction-to-permanent or stand-alone construction basis, with agency permanent takeout commitment secured in parallel. Regional banks and life companies dominate this size, favoring experienced sponsors with strong local track records and at least 50 to 60 percent equity injection. Lender selection hinges on construction expertise, permanent financing appetite, relationship depth, and appetite for the specific submarket and unit type.

Capital Source Rate / Cost Size / LTV Notes
Regional bank 8.25 to 8.75 percent floating on construction $10.5M to $11.25M (70 to 75% LTC) Typically leads construction and permanent takeout; requires 50%+ equity; strong relationship requirement; 24 to 30 month construction period with monthly interest accrual
Life company 7.75 to 8.50 percent fixed on permanent (takeout) $10.5M to $11.25M (70% LTV on stabilized NOI) Enters at permanent phase post-stabilization; targets 55 to 65% LTV on fully-leased basis; 10-year amortization; subordinate to construction lender's position during build
Agency debt fund or credit union 8.00 to 8.50 percent on construction (alternative) $7.5M to $9M if bank unavailable Niche player for sponsors with proven Phoenix market presence; slower closing timeline; prefers 50%+ equity and strong debt service reserve requirements
Equity (sponsor injection) Basis return target 15 to 20% IRR; 7 to 10 year hold $3.75M to $4.5M (25 to 30% of total project cost) Permanent working capital reserve required; 6 to 12 months of debt service reserve held by lender; typical profit split 70/30 or 80/20 depending on sponsor clout

Pricing reflects active CLS CRE quote pipeline as of April 2026. Specific deal pricing depends on sponsor, property, and structure.

Sponsor Profile

Who Closes a $15M Ground-Up Multifamily Construction Deal

Typical sponsors at the $15 million ground-up level in Phoenix have 10 to 20 years of multifamily development experience, a net worth of $5 million to $15 million, and a track record of 3 to 8 completed apartment projects in the Southwest region. They are motivated by unit economics on core-plus development, demographic growth in emerging Phoenix suburbans, and the ability to refinance into agency debt at stabilization for significant equity takeout. Most have in-house construction and property management capabilities or exclusive relationships with local GCs and operators.

From the CLS CRE Pipeline

A Real $15M Example

CLS CRE closed a $14.8 million construction loan in 2023 for a 125-unit Class A garden-style community in a Tempe infill location adjacent to Arizona State University. The borrower was a 15-year-old Arizona-based developer with five prior deliveries; we secured a 72% LTC construction facility from a regional bank at 8.35 percent floating, with permanent takeout from an agency lender committed at 7.65 percent on a 60% LTV basis. The sponsor injected 28% equity, structured a 30-month construction schedule with interest reserves funded for the first 12 months, and achieved stabilization at 92% occupancy within 18 months of lease-up, allowing an early permanent refinance and a significant sponsor equity recap at month 24.

Anonymized. All deal references protect borrower and lender identity.

FAQ

$15M Ground-Up Multifamily Construction Phoenix FAQ

Ground-up apartment projects in Phoenix typically run 24 to 32 months from permit to certificate of occupancy, depending on site complexity, soil conditions, and local permitting timelines in the specific submarket. Interest reserves are usually funded for 12 to 18 months of the construction period; the sponsor must be prepared to cover any cost overruns or lease-up delays beyond that window. Lenders build in 3 to 6 months of post-occupancy stabilization before releasing holdback funds.
Regional banks and life companies typically require 50 to 75 percent sponsor equity injection for ground-up multifamily construction, translating to $3.75 million to $5.625 million in cash. Lower equity can be considered for sponsors with substantial Phoenix track records and strong guarantor net worth, but lenders will demand higher interest reserves, full recourse guaranties, and larger debt service reserves. First-time or out-of-market developers should expect to bring 60 to 75 percent equity.
Most construction lenders require a forward commitment or conditional permanent takeout letter from an agency lender, life company, or bank balance sheet before construction funding begins. The permanent lender issues a non-binding or binding takeout letter based on appraisal, sponsor credit, and a preliminary operating pro forma; the permanent terms lock in but are contingent on lease-up performance and final appraisal at stabilization. The construction lender holds a subordination agreement signed by the permanent lender, protecting the construction lender's position during build.
Agency and institutional lenders typically target a minimum 1.25x DSCR on stabilized NOI, with some life companies accepting 1.20x for strong sponsors in high-growth Phoenix submarkets like Chandler, Gilbert, or Tempe. The permanent loan amount is sized so that the stabilized NOI, divided by the annual debt service, meets this floor; construction lenders rely on the permanent lender's appraisal and underwriting to validate the pro forma. Covenant DSCR (if included) is usually set 20 to 40 basis points higher than the underwritten ratio to provide reserves.
Arizona offers minimal state-level multifamily tax incentives, but individual Phoenix neighborhoods and Maricopa County communities occasionally provide property tax abatements, expedited permitting, or impact fee waivers for new construction that meets affordability or workforce housing thresholds. Some smaller Phoenix submarket cities (Chandler, Gilbert, Tempe) offer incentive programs for projects in designated growth corridors; sponsors should work with local economic development teams early in underwriting. These incentives rarely move the needle enough to justify a deal, but they can improve IRR by 50 to 100 basis points if available.


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