Overview
Commercial Lending Solutions arranged $34,000,000 in ground-up construction financing for a five-story mixed-use development in Denver's LoHi neighborhood. The project combines 85 market-rate residential units with 12,000 square feet of ground-floor retail along a high-traffic transit corridor. Getting this deal closed at the right basis required navigating a capital stack that had to underwrite two fundamentally different income profiles under one loan, in a Denver submarket where construction lenders have become materially more selective over the past several cycles.
The Deal
The sponsor needed $34,000,000 in construction financing to execute a ground-up infill project in one of Denver's most recognized urban neighborhoods. LoHi carries strong residential demand fundamentals, walkability, and transit access, but it also carries real entitlement complexity. Height restrictions, design review, and parking requirements add timeline risk before a shovel ever touches the ground. The capital need was sized to cover hard costs, soft costs, carry, and an interest reserve sufficient to get the residential component through lease-up, with the retail component requiring its own separate conversation inside the underwriting.
The sponsor brought a track record of completed mixed-use and multifamily projects in comparable infill markets, which proved to be load-bearing in this process. Without it, this loan does not happen at this size.
The Challenge
The core underwriting problem here is that mixed-use construction is not multifamily construction, even when 85 residential units represent the majority of the rentable area. Construction lenders price and size debt against stabilized net operating income, and the path to stabilized NOI on the retail component of this deal was genuinely uncertain at loan origination.
Ground-floor retail along a transit corridor sounds compelling, but lenders know that lease-up velocity for retail depends heavily on tenant mix, build-out timing, and foot traffic patterns that do not exist yet when a project is in the ground. The standard lender response is to discount unsigned retail income substantially or exclude it from initial debt sizing altogether. That discount compresses the blended loan-to-cost ratio below what a comparable pure multifamily project would support, which means the sponsor would have needed to bring more equity to close the gap or accept a smaller loan.
Getting to $34,000,000 required more than good comps on the residential side. It required building a credible pre-leasing narrative on the retail side, structuring an interest reserve that reflected realistic lease-up timelines, and finding a lender whose credit box was built for exactly this kind of complexity rather than one for whom mixed-use retail was an exception to their standard model.
The lender universe narrowed quickly on that basis. Life companies and CMBS conduits were not the right fit here. Both generally want a stabilized, income-producing asset before they engage. Agency execution was not available at this stage. The realistic universe was construction-focused regional banks with Colorado or mountain west platforms, and private debt funds with dedicated CRE construction desks that had experience underwriting mixed-use retail components in supply-heavy metros.
Denver's multifamily supply pipeline added another layer of scrutiny. Lenders reviewing deals in dense infill submarkets like LoHi have seen enough optimistic rent growth assumptions in recent years to push back hard on anything that looks like a forward projection rather than a defensible comp. Every assumption in the residential proforma needed to be anchored to actual absorption data, not neighborhood narrative.
The Solution
The placement strategy centered on a lender category that had both the construction expertise and the mixed-use retail underwriting experience to evaluate this deal on its merits rather than run it through a checklist that was built for simpler collateral.
On the residential side, the underwriting package was built around specific LoHi and adjacent submarket absorption comps, with conservative rent growth assumptions that reflected current market conditions rather than peak-cycle projections. The goal was to give the lender nothing to recut.
On the retail side, we worked with the sponsor to document the pre-leasing runway in detail, including letters of intent, prospective tenant categories, and the transit corridor foot traffic data that supported retail demand. The interest reserve was structured with enough runway to cover a longer retail lease-up period without triggering a covenant problem on the residential stabilization timeline. The loan was structured as a floating-rate construction facility with a term sized to cover the construction period plus a realistic lease-up cushion, and an extension option tied to project milestones rather than a hard calendar date.
The sponsor's track record was presented as a core underwriting input, not a background exhibit. In a deal with this much lease-up risk on the retail side, lender confidence in execution is part of the credit.
The Outcome
The $34,000,000 construction loan closed with a construction-focused regional bank that had an established Colorado lending platform and prior experience with mixed-use retail underwriting in comparable supply environments. The loan-to-cost came in at a level that reflected the blended risk profile of the asset rather than the worst-case retail discount that had compressed earlier conversations with other capital sources. The sponsor retained the equity structure they needed to make the project work and entered the construction phase with an interest reserve sized to the actual lease-up timeline rather than an optimistic one.