$12,300,000 Industrial Warehouse, Boise, ID

Overview

Commercial Lending Solutions arranged $12,300,000 in ground-up construction financing for a speculative industrial warehouse in Boise, Idaho. The deal closed without a signed lease in hand, in a secondary market where most institutional construction lenders still want meaningful pre-leasing before they open a credit file on a project this size. Getting this one to the finish line required a clear-eyed read on which lenders actually understand Mountain West industrial fundamentals and a structure precise enough to absorb the execution risk inherent in spec construction.

The Deal

The sponsor needed construction financing for a purpose-built industrial warehouse targeting the logistics and e-commerce users that have been following population and business migration into the Boise market from higher-cost West Coast metros. The thesis was straightforward: demand for functional Class A industrial space in the submarket was outpacing available inventory, and a well-configured building delivered into that window would lease. The problem was that the thesis, however well-supported, was still a thesis. No anchor tenant. No letter of intent. Pure spec.

The sponsor needed a lender willing to fund a 12 to 18 month build and a realistic lease-up runway beyond that, against a hard cost basis that reflected what materials and labor actually cost in the current environment, not what they cost two years ago.

The Challenge

Most of the conventional construction lending universe disqualified itself immediately. Banks with active construction books were requiring 50 to 60 percent pre-leasing on ground-up industrial at this loan size before issuing a term sheet. Life companies do not underwrite unleased construction risk at all as a matter of policy. Conduit and agency executions are irrelevant until a building is leased and stabilized. That left a narrow band of capital sources: private debt funds with an industrial construction mandate, or regional banks with an active book in the Mountain West that understand the Boise submarket well enough to underwrite to its own fundamentals rather than pricing it as a discount to Seattle or Los Angeles.

The underwriting complexity ran in several directions at once. The interest reserve had to be sized against a combined construction and lease-up period with no committed tenant providing any offset. The general contractor's bonding capacity, track record, and hard cost basis had to hold up under scrutiny in a construction cost environment that has not fully normalized. And the building's physical configuration mattered more than usual on a spec deal: clear span, clear height, dock door count, and trailer storage had to match what regional third-party logistics operators and e-commerce distributors actually require in this submarket, not just what looks good on paper. A building that does not configure correctly for the target tenant base is a much harder lease in any market. In a secondary market with no anchor tenant and no fallback, it is a real problem.

The recourse and completion guarantee structure also needed to work. Most debt funds and regional bank lenders willing to do spec construction at this scale want a full completion guarantee at close, with a partial recourse burn-off tied to a defined stabilization threshold, typically a combination of occupancy percentage and debt service coverage. Negotiating where those hurdles sat and what the burn-off mechanics looked like was not a secondary conversation.

The Solution

The deal was placed with a private debt fund with an established industrial construction book and direct experience in Mountain West secondary markets. The final structure came in at approximately 65 percent loan-to-cost, floating rate, with an 18-month initial term and extension options tied to project milestones. The interest reserve was sized to cover the full construction period plus a conservative lease-up buffer, which was a critical point given the speculative leasing profile. The sponsor provided a full completion guarantee at close, with partial recourse burning off upon reaching a defined occupancy threshold supported by executed leases at or above the underwritten rent assumptions.

The lender's credit approval was grounded in an independent review of Boise submarket vacancy trends, absorption rates, and asking rents for comparable clear-height and dock-configured product, which supported the sponsor's lease-up timeline. The GC's bonding was confirmed, and the hard cost basis was stress-tested against current bid-level pricing rather than pre-construction estimates.

The Outcome

The sponsor closed a $12,300,000 construction loan on a fully speculative industrial project in a secondary market without pre-leasing, with a structure that gave the project a realistic runway to deliver, stabilize, and convert to permanent financing. The interest reserve, recourse mechanics, and extension options were all calibrated to the actual risk profile of the deal rather than a generic construction loan template.

This was not a deal that fit a standard credit box. It required knowing which lenders have real conviction in Mountain West industrial fundamentals and presenting the credit in a way that addressed the spec leasing risk directly rather than minimizing it.