$48,000,000 Mixed-Use, New York, NY

Overview

Commercial Lending Solutions arranged $48,000,000 in bridge financing for the adaptive reuse conversion of a former industrial building in Brooklyn's Williamsburg neighborhood. The project involves the conversion of a vacant pre-war manufacturing structure into 65 residential units with ground-floor retail along one of the borough's primary commercial corridors. The deal closed with a private debt fund on a floating-rate, interest-reserve-funded facility sized in the mid-60s percent of stabilized value, structured to carry the asset through conversion and lease-up to a permanent takeout.

The Deal

The sponsor controlled a vacant former industrial building sitting inside Williamsburg's 2005 waterfront rezoning footprint. The business plan was straightforward in concept: confirm the as-of-right conversion path, remediate any legacy environmental conditions, and execute a gut renovation producing 65 residential units with retail at street level along the Bedford Avenue corridor. The financing need was a bridge facility large enough to cover acquisition basis, hard and soft construction costs, carry reserves, and leasing costs for the retail component, with a term long enough to get through entitlement confirmation, construction, and full lease-up before refinancing into agency or life company permanent debt.

On paper, the asset class combination is well understood in Brooklyn. In practice, this particular deal had enough moving parts that the capital stack required careful assembly before the first lender conversation happened.

The Challenge

The fundamental problem was that every lender who prices off in-place cash flow was eliminated from the conversation before it started. A vacant building converting from industrial to residential throws off zero net operating income during entitlement, construction, and lease-up. There is no trailing 12-month rent roll to underwrite, no debt service coverage ratio to calculate, and no stabilized occupancy to point to. Sizing had to be built entirely off projected stabilized value and a hard-nosed assessment of sponsor execution capacity. That eliminated balance-sheet banks with conventional CRE underwriting mandates, it eliminated CMBS entirely, and it eliminated life company capital, which is simply not structured to fund transitional assets with no current income.

The environmental picture added a layer that could not be papered over. Pre-war industrial buildings in Williamsburg carry real legacy exposure: manufacturing, printing, and metalworking uses that operated for decades before any environmental regulation created the kind of soil and groundwater conditions that will kill a deal if a lender discovers them during due diligence rather than before the term sheet. A Phase I and Phase II environmental assessment were prerequisites, not items to be ordered after a lender committed. The Phase II results then drove the structure: any lender willing to close needed either a clean remediation sign-off or an indemnification structure around residual conditions that gave their counsel something to work with.

The retail component created its own underwriting problem independent of the residential stack. Bedford Avenue retail has been uneven since 2020. A lender looking at ground-floor commercial space in that corridor today has to stress-test a lease-up timeline that does not assume pre-pandemic absorption velocity. That meant the facility needed dedicated tenant improvement and leasing commission reserves sized for a realistic retail lease-up, and the lender's retail underwriting had to run separately from the residential stabilization analysis rather than blending the two into a single income projection.

The full risk stack, no in-place income, legacy environmental exposure, entitlement confirmation requirements, and a split lease-up across residential and retail, pointed to one part of the capital markets: bridge debt funds with experience in New York City adaptive reuse.

The Solution

Trevor Damyan and the Commercial Lending Solutions team positioned this deal as a bridge debt fund execution from the first conversation and built the lender outreach accordingly. The environmental work was commissioned and completed before meaningful lender engagement, so by the time term sheets were being negotiated, the Phase I and Phase II results were in hand along with a proposed indemnification structure that had already been reviewed by environmental counsel. Presenting a lender with a solved problem is a different conversation than presenting them with a pending one.

The as-of-right zoning confirmation was documented and included in the initial deal package. Lenders underwriting adaptive reuse in New York want to know that the conversion does not depend on a variance, a special permit, or a favorable Board of Standards and Appeals outcome. Providing that confirmation upfront removed a category of uncertainty that would otherwise have generated weeks of back-and-forth.

The retail underwriting was presented with its own reserve analysis and a conservative lease-up timeline that acknowledged current market conditions on the corridor. Showing the lender that the retail risk was already stress-tested, rather than waiting for them to stress-test it themselves, tightened the due diligence process considerably.

The facility closed as a floating-rate bridge loan, interest-reserve-funded for the full construction and lease-up period, with a term structured to carry the asset to stabilization and a clear path to agency or life company permanent financing once occupancy and retail leasing reached threshold levels.

The Outcome

The sponsor closed on $48,000,000 in bridge financing sized in the mid-60s percent of projected stabilized value. The structure included full interest reserves, dedicated TI and leasing commission reserves for the retail component, and a loan term matched to a realistic conversion and lease-up schedule. The borrower has a clear refinancing target once the residential units are occupied and the retail space is leased, at which point the asset will qualify for the lower-cost permanent capital that was never available at origination.