Capital structure in mixed-use development

Abstract

A survey-based approach was employed to determine the most important factors contributing to the successful financing of mixed-use development. Individual real estate developers were contacted to discuss their specific projects along with construction and permanent lenders. These projects contained three or more uses and were located in major metropolitan infill locations across the US. Specific questions were asked about the entire capital structure including equity, construction and permanent debt. 'The thesis contains a background on mixed-use development and its growing importance in the marketplace, discussion of equity and lending fundamentals within commercial real estate, a presentation of the data and finally an analysis of the findings. From the data, three main factors were derived that affect the ability of mixed-use developments to successfully receive financing. These include the size of the developer in relation to the project, the amount of pre-leasing and pre-sales completed and the ability to compartmentalize the project by use. These conclusions are important for any developer attempting to complete a mixed-use development of any size or complexity. To successfully build the project and appease any lender concerns, the developer must address each issue.