$24,000,000 Mixed-Use, St. Louis, MO

Overview

Commercial Lending Solutions arranged $24,000,000 in construction financing for an adaptive reuse mixed-use project in St. Louis, Missouri's Cortex Innovation District. The sponsor was converting a former industrial warehouse into creative office and retail space inside one of the Midwest's most active technology and bioscience corridors. Getting this deal closed required navigating environmental remediation uncertainty, historic tax credit compliance, and speculative lease-up risk, all on a single construction draw schedule.

The Deal

The borrower controlled a historically designated warehouse in the Cortex Innovation District, a submarket anchored by Washington University and BJC HealthCare that has become a genuine pull for bioscience and tech tenants rather than a promotional concept. The rehabilitation plan called for converting the structure into creative office and ground-floor retail, and the sponsor had structured the equity stack to include both Missouri state and federal historic tax credits as a meaningful component of the project's capital. The ask was a $24,000,000 construction loan sized in the mid-60s loan-to-cost, with the expectation that tax credit equity would monetize after the rehabilitation was certified and reduce the effective cost of capital over the project timeline.

The Challenge

Three separate problems had to be solved in sequence, and each one had the ability to unwind the others if it moved in the wrong direction.

First, the former industrial use of the building triggered a full Phase I and Phase II environmental assessment requirement before any lender would engage seriously on terms. Until the environmental picture was clean or at least quantified, the capital stack had no floor to price from. Construction lenders are willing to underwrite a lot of things. Open-ended environmental liability on a former warehouse is not one of them.

Second, the historic designation created a compliance overlay that does not coexist easily with a construction draw schedule. To preserve eligibility for both the state and federal historic tax credits, the rehabilitation scope had to track the Secretary of the Interior Standards throughout construction. Any deviation from the approved scope, whether driven by cost savings, material substitutions, or field conditions, risked the credit certification. The credits were not optional. They were underwritten into the equity stack, and if they fell out, the loan-to-cost ratios and the sponsor's return assumptions both broke.

Third, the project was creative office and retail in a submarket where the broader St. Louis office market remains soft. Cortex leases differently than suburban office parks, and that distinction matters, but a construction lender still has to underwrite the realistic possibility that the tenant roster at certificate of occupancy looks different than what the pro forma assumed. Pre-leasing at groundbreaking was not where a generic lender would want it to be for a project of this size.

Layering tax credit equity beneath a construction loan also required solving a timing problem. The credits do not monetize until after the rehabilitation is complete and the certification is issued. That means the construction lender is carrying the full stack through the entire build period, with credit equity arriving after the fact. Without a specific structure to address that sequence, a standard construction loan terms sheet simply does not work.

The Solution

We positioned this with a regional bank that has a genuine track record in historic tax credit construction lending, not a lender that treats tax credit deals as a variation on their standard construction product. That distinction matters because the underwriting conversation is entirely different. A lender experienced in this space understands the certification timeline, knows how to read a historic tax credit bridge structure, and does not require the broker to spend the first two meetings explaining why the equity arrives after the loan closes.

The structure incorporated a bridge-to-credit-delivery mechanism so the construction lender was not required to carry the full capital stack indefinitely. The tax credit equity was committed and structured to flow in at certification, reducing the lender's effective exposure at the back end of the loan term. Leverage was sized conservatively in the mid-60s loan-to-cost, reflecting both the soft broader office market and the reality that speculative lease-up carries real risk regardless of submarket quality.

The environmental process ran concurrently with lender selection, which compressed the overall timeline. By the time the lender's credit committee was reviewing the full package, the Phase II findings were already incorporated into the underwriting rather than outstanding as a condition.

The Outcome

The borrower closed a $24,000,000 construction loan structured around the specific requirements of a historic tax credit rehabilitation, with a lender who understood both the compliance overlay and the lease-up dynamics of an innovation district submarket. The capital stack held together because the structure was built around the actual risk profile of this project, not a generic construction loan template with footnotes added for the tax credits.

If you are working on a project with layered credit structures, environmental complexity, or historic designation requirements, contact Trevor Damyan at Commercial Lending Solutions to discuss how we approach the capital stack.