Scenario:

Commercial-construction
5000 sqft existing on land
Adding 19000 sqft office condos
Property free and clear, value 700K
Spaces are currently being pre-sold per sq ft.
NOO
$1.5M

Advice on how to structure this loan will be greatly appreciated. Any recommendations as to what lender would be pretty good to take this loan. What is the standard charge for a loan like this?

Thanks

What is the standard charge for a loan like this?

There is no standard charge. The big developers can get a rate around 30-day LIBOR plus 2%. The small developers are around Prime plus 0.5%. Someone without any experience coming into this could be looking at Prime + 2% easily.

Upfront fees {other than out of pocket and appraisal expenses} follow the same pattern. You can expect to pay at a minimum 1%.

Advice on how to structure this loan will be greatly appreciated.

These type of loans are very standard, assuming that you are looking for an additional $1,500M for construction and that the number does not include any kind of equity cash-out, you are coming in at an acceptable loan-to-cost. Normally, the structure will be dictated by the lender specially when the borrower needs it more than the lender does. You can expect similar conditions to the following.

1- 12 to 18 month term during which the borrower pays interest only.
2- Principal gets repaid with the sale of the units on an accelerated basis. Yes the bank gets paid off first and the developer sees profit in the sale of the last units.
3- The construction loan might have an interest reserve built into it to pay the interest during the construction period.
4- There might be an extension option at the end of the construction. It might be conditional on a certain percentage of the condos having been sold, a certain amount of the loan having been paid or something else. Expect to pay a nominal fee for the extension {0.25% of outstanding is common, in your case it could be more}.
5- The owner of the property will need to provide an unlimited guarantee.
6- The contractor will need to be bonded and insured.
7- You will have to pay for an appraisal and an environmental audit.
8- Sale contracts will need to be submitted. A percentage of the condos might be required to be pre-sold prior to initial funding.
9- The owner’s financial strength and credit history might influence the chances of getting a loan.

Those are most of the standard ones, other conditions might apply depending on the lender.

Any recommendations as to what lender would be pretty good to take this loan.

A local commercial bank. Talk to at least three bankers. You will need a construction budget and information on the market for the product for the first meeting. If the lender is interested, he will ask you for financials and other information.