Lending advice/direction for spec redevelopment deal in Texas.

[Travis Wilkes]

We have been planning on redeveloping this property once leases expired. The property is in Temple, Texas CBD, which has seen significant revitalization, and needs a rehab to maximize value and attract high performing tenants(retail and office). The building is 3 levels (including basement) building with a total of 36,000 sq ft. Over the past 10 years only the street level has been occupied as the elevator was not functioning.

We are planning on a complete rehab to modernization the property. Due to our low debt in the property even with a construction loan and TI allowances of $1.5 million we can still charge below market rents and break even with 51% vacancy. All the existing redeveloped properties have been owner occupied including a $30 million dollar office project. Anything on the market for lease is class c or below with almost zero retail. We also did some initial market test and received positive feedback.

We tested the waters with our local bank and got the response that they don’t lend on speculative projects. Even though the building has been rented, due to no new leases in hand they weren’t interested. The property was also appraised at $1.8 million as-is and over $3 million when completed. We know there are lenders out there that focus on these deals and will look at the value of the property as well as the proforma and consider the full picture. In fact, I am sure several are on members of Biggerpockets. Any advice on how to locate and approach these lenders would be appreciated.