Non-Recourse Construction Loan | $37.4M Office-to-Residential Conversion

The project required converting two vacant commercial office buildings into residential use while simultaneously constructing new townhomes on the same site, all within a capital structure that integrated private construction debt with public economic development financing. The structural conversion from office to residential demanded extensive physical modifications: demolition of existing office interiors, new roofing across both buildings, facade improvements, elevator upgrades, new stairway construction, parking garage rehabilitation, building common area buildout, individual unit construction across 144 apartments, and comprehensive site improvements across the nearly 11-acre campus. The development budget for the office conversion alone, before the townhome construction, exceeded $23 million in hard and soft costs.

The townhome component added a second layer of construction complexity. Ninety-seven new residential units had to be designed, permitted, and built on existing parking areas adjacent to the converted office buildings, creating a cohesive residential community from what had been a commercial office campus. The combined scope of adaptive reuse conversion and ground-up construction on the same site, under the same capital structure, with phased delivery timelines and a lease-up strategy that allowed occupancy to begin before full project completion, required financing that could accommodate both construction streams simultaneously.

The capital stack itself was the most complex element. The $8.5 million TIF component required coordination between the developer, the municipality, and the economic development structure through which the tax increment financing was deployed. Aligning the TIF disbursement schedule with the private construction loan draw structure meant that every milestone, every inspection, and every funding advance had to be coordinated across public and private capital sources operating under different regulatory frameworks. The non-recourse construction lender had to underwrite the project knowing that a significant portion of the capital stack was municipal in origin and subject to public sector approval processes. The developer's equity position had to be structured to satisfy both the construction lender's requirements and the municipality's economic development conditions.

• Two three-story office buildings (approximately 180,000 combined SF) requiring full interior demolition, structural modification, and residential conversion into 144 apartment units
• 97 new townhomes to be constructed on existing parking areas within the same nearly 11-acre campus
• $8.5M TIF component required coordination between the developer, municipality, and economic development structure, aligned with private construction loan draw schedules
• Non-recourse construction lender had to underwrite a capital stack combining private debt, public TIF financing, and developer equity across different regulatory frameworks
• Phased construction and lease-up strategy required financing that supported occupancy before full project completion
• Total project cost exceeding $45.9M across adaptive reuse conversion and ground-up townhome construction

Cornovus Capital structured the $37,400,000 non-recourse construction loan as the senior component of a capital stack that integrated $8.5 million in tax increment financing and developer equity to fund the full $45.9 million project. The non-recourse structure limited the developer's personal exposure to the project's performance, while the construction loan's built-in mini-perm transition provided a stabilization runway that allowed the project to lease up, season its operating history, and position for permanent financing or disposition without a hard maturity forcing premature recapitalization.

The development proforma documented the full project budget across both construction streams. Hard costs for the office-to-residential conversion totaled approximately $15.4 million, covering interior demolition, structural modification, unit buildout, roofing, facade work, elevator improvements, parking garage rehabilitation, and building common areas. Townhome hard construction costs totaled approximately $17.5 million at $180,000 per unit. Site work across the nearly 11-acre campus added $2.75 million. Soft costs of $3.66 million covered architecture, engineering, environmental, legal, appraisal, marketing, lease-up reserves, operating deficit reserves, development fees, permits, inspections, and contingency. Capitalized financing costs of $4.2 million covered construction interest, origination, and intermediary fees. The proforma projected stabilized gross revenue exceeding $4.4 million, with one-bedroom apartments at approximately $1,350 per month, two-bedroom units at approximately $1,700 per month, and additional revenue from garage parking, storage, and other resident services. Stabilized NOI exceeded $2.9 million, producing a projected value of approximately more than $55 million at appraisal.

The TIF integration required Cornovus Capital to coordinate the public financing component with the private construction loan structure so that draw schedules, milestone certifications, and funding advances aligned without gaps that could interrupt construction. The municipality's economic development participation was structured to support infrastructure improvements and reduce the developer's net project cost, effectively enhancing the project's return profile while maintaining the debt service coverage the construction lender required. Cornovus Capital originated, underwrote, and placed the construction financing, coordinated the integration of private and public capital sources within the capital stack, and maintained advisory involvement through the closing process.

• Structured $37.4M non-recourse facility with built-in mini-perm transition for lease-up and stabilization
• Integrated $8.5M TIF component with private construction debt, aligning draw schedules and milestone certifications across public and private capital sources
• Documented full project budget: $15.4M office conversion hard costs, $17.5M townhome construction, $2.75M site work, $3.66M soft costs, $4.2M capitalized financing costs
• Projected stabilized NOI approaching $2.9M on gross revenue exceeding $4.4M at rents of $1,350 to $1,700 per month
• Projected stabilized value of $55M+ appraised value against $45.9M total project cost
• Coordinated acquisition closing, construction loan funding, and TIF deployment across all capital sources

The $37,400,000 non-recourse construction loan closed with the TIF component and developer equity coordinated into a single capital structure totaling more than $45.9 million. Construction commenced on the adaptive reuse conversion of the two office buildings into 144 apartment units and the ground-up construction of 97 townhomes across the nearly 11-acre campus. The phased development approach allowed lease-up to begin before full project completion, optimizing cash flow and occupancy ramp-up during the construction period. The mini-perm transition provided the stabilization runway the project required to season its operating history before permanent financing.

The transaction converted two vacant 1981-vintage commercial office buildings and their associated surface parking into a Class A residential community of 241 total units with high-end amenities including a fitness center, clubhouse, rooftop gathering areas, landscaped outdoor spaces, under-building parking, and universal Wi-Fi. Most one-bedroom units exceeded 1,000 square feet and included dedicated home office and den areas, reflecting the shift in residential design toward remote work accommodation. The office-to-residential conversion capitalized on the national trend of rising office vacancies and surging multifamily demand, transforming obsolete commercial space into a high-value residential asset projected to generate stabilized NOI exceeding $2.9 million and a stabilized value of approximately more than $55 million at appraisal. The $8.5 million TIF integration reduced the developer's net capital requirement, enhanced the project's return economics, and demonstrated how municipal economic development participation can be structured alongside institutional construction debt to make large-scale adaptive reuse conversions financially viable.

• $37.4M non-recourse facility closed with $8.5M TIF and developer equity in a $45.9M+ capital structure
• Two vacant three-story office buildings (approximately 180,000 SF) converted to 144 Class A apartment units
• 97 new townhomes constructed on existing parking areas across the nearly 11-acre campus
• 241 total residential units delivered with high-end amenities, home office accommodations, and under-building parking
• Phased lease-up commenced before full project completion, optimizing cash flow and occupancy ramp
• Mini-perm transition provided stabilization runway for permanent financing or disposition
• Projected stabilized NOI exceeding $2.9M and stabilized value of $55M+ appraised value
• TIF integration reduced net developer capital requirement and enhanced project return economics

Additional financing outcomes are available in our Transaction Highlights archive.