As interest rates remain high for most debt products, multifamily developers are seeking ways to exit their high-cost construction loans before the property being fully leased. However, qualifying for a new permanent loan can be difficult when an asset isn't stabilized or they are not achieving their proforma rents, leaving developers stuck between a rock and a hard place. This situation is becoming increasingly common.

Construction take-out loans that occur before stabilization can lower developers' borrowing costs sooner than if they waited for the property to be stabilized. This type of financing is called a "pre-stab" or "lease-up" loan and is a good choice for new, recently constructed or newly renovated multifamily apartments. Lease-up loans can also eliminate the need for a bridge loan if the developer has an approaching loan maturity prior to stabilization. However, some lenders require a property to be 50% leased or occupied, at a minimum, before financing new loans earlier in the lease-up period. Outlined below is how different lenders determine the timing, sizing and pricing of these products.

Agency Loans