Ground-up Build-to-Rent in the Austin MSA. 86% LTC with land lift. Non-recourse. Pref equity layered beneath the senior to keep the GP's cash equity under five percent of total project cost.
The sponsor came to WelcomeLend with a fully entitled 19.4-acre site in a high-growth Austin MSA submarket. Land had been acquired unentitled in late 2021 and carried through full entitlement, site plan approval, and pre-construction diligence. A guaranteed maximum price (GMP) was in hand. Site development and vertical building permits had been issued.
The brief on the financing was specific: source maximum-leverage, non-recourse construction debt for a 200-unit ground-up Build-to-Rent community, and structure the cap stack to minimize the GP's actual cash equity. The plan was to develop, lease up, and exit either via institutional sale or HUD/agency permanent take-out at stabilization.
Underwriting was anchored in Austin MSA fundamentals. The metro continues to print top-tier population and net-migration metrics among major US markets, multifamily absorption has accelerated to multi-year highs, and the construction pipeline is contracting sharply. BTR specifically is the asset class institutional capital has rotated into — outperforming traditional multifamily on retention, valuation, and cap rates.
The combination of constraints narrowed the lender universe quickly. Bank construction debt in this size range typically requires meaningful recourse and tops out well below 80% LTC. Debt funds with appetite for stretch BTR construction are a small group, with selective programs and specific structural preferences.
On top of that, the sponsor wanted appreciated land basis recognized in LTC. Land had been bought at roughly $8 per square foot in late 2021 and had appreciated meaningfully against current market basis. Without crediting that land lift into the LTC calculation, headline proceeds wouldn't move the needle on GP cash requirement.
Finally, even at 86% LTC, the remaining 14% equity requirement on $67.4M of total project cost sits at roughly $9.4M. That's a meaningful check. The GP's ask was to bring its own cash contribution to under five percent of TPC, which required a pref equity tranche stacked beneath the senior to satisfy the lender's minimum equity test.
Three non-negotiables defined up front: maximum LTC with land lift, non-recourse on the senior, and a cap stack that reduced GP cash equity below 5% of TPC. Anything that didn't satisfy all three was off the table.
Process ran to a curated set of programmatic BTR construction lenders with current appetite for stretch leverage in Sun Belt secondary markets. Bank lenders and balance-sheet construction shops were screened out early on the recourse and LTC requirements.
Multiple competing term sheets came back. We pushed pricing inside the market on the winning quote, secured land lift recognition in the LTC calculation, and locked in non-recourse on the senior with customary completion, carry, and bad-boy carveouts.
Pref equity layered beneath the senior debt to satisfy the 14% minimum sponsor equity requirement, collapsing the GP's actual cash contribution to under 5% of total project cost while keeping promote economics intact for the sponsor.
Closed at $58.145M senior, SOFR + 525, IO throughout, on a 3-year initial term with two 12-month extension options. Embedded take-out optionality at stabilization alongside HUD/agency permanent exit.
Senior debt did the heavy lifting. The 86% LTC headline mattered, but the real unlock for the GP was layering pref beneath the senior to bring actual cash equity below five percent of total project cost.
*Customary bad-boy carveouts, completion / cost overrun guaranty, and full carry guaranty. No repayment recourse on senior debt.
WelcomeLend is a CRE debt and equity brokerage focused on the middle market. Ground-up BTR, multifamily bridge, condo and townhome development — we know the lenders, we know the structures, and we move quickly.
