How to get a loan for a parcel to build?

[Ben Patel]

Hi,

Can anyone point me in the direction of obtaining land for a commercial 1.2-acre parcel to build a strip center?

The majority of brand name lenders have said no loans to vacant land/construction loans at the moment. 

one small bank quoted me 50% down with 10% interest with a prepay penalty.

Thank you

Ben

[Stuart Udis]

It's not uncommon for banks to offer 50% leverage for land and typically banks price both bridge as well as construction debt at WSJ Prime +1 point which isn't far off from the 10% you were quoted in today's higher interest rate environment. In most instances the acquisition of the land and entitlements are between 10-20% of the total development budget and lenders want to see this invested by the borrower first. This is why, when they do offer land loans the leverage is generally low. 

A few factors might be playing into why you are struggling to attract a lender. Is the land entitled (all civil and architectural approvals in place)?  Do you have any tenant commitments or is this entirely spec? What is your track record? Is there proof of concept in the market where you intend on building this strip center? Banks don't want to lend on land unless they are confident the borrower can develop the land and/or there is a clear market for the re-sale to an end developer.