Construction Financing’s Quiet Resurgence

There is a disconnect happening right now in multifamily development finance that every sponsor, developer and capital markets professional should understand. The equity markets have largely gone quiet. But the debt markets? They are wide open, competitive, and in some cases, historically aggressive.

Bank construction quotes for multifamily are coming in at the low 200s over SOFR, and market chatter suggests select deals are getting done sub-200. That is not a typo. For middle-market and institutionally sponsored transactions that meet credit parameters, regional and community banks are actively competing for quality construction business.

Debt funds are in the mix as well. For large-scale transactions, pricing in the high 200s is achievable. For middle-market deals, expect the low-to-mid 300s, though individual deal dynamics matter significantly. We recently sourced a debt fund quote at 80 percent LTC priced at 350 over SOFR, and a separate execution at 65 percent LTC at 335 over for a loan around $40 million. Those are real numbers from live transactions, and they reflect just how much competition exists among non-bank lenders for multifamily construction exposure.

The irony is not lost on anyone close to the market: The same lenders who were sitting on their hands 18 months ago are now reaching out proactively.

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The real story: Debt’s alive, equity’s the problem

Here is the counter-intuitive reality developers need to hear. The capital stack on most ground-up multifamily projects today is not constrained by debt availability. It is constrained by the equity gap.

LP equity has pulled back sharply. Return expectations have reset. Exit cap rate uncertainty makes underwriting a new development project feel like a guessing game. Sponsors who spent years relying on a predictable equity capital markets ecosystem are finding that playbook no longer works.

But that does not mean development is dead. It means the equity structure has to be rethought.

Preferred equity filling the gap

Preferred equity is one of the more interesting tools available right now, pricing in the low-to-mid teens. For developers who can negotiate a strong senior debt deal and have meaningful common equity in the deal, preferred equity is a viable bridge between the two. It is not cheap, but in markets with strong fundamentals and supply constrained dynamics, it pencils for the right project.

The key is understanding where preferred equity providers are comfortable in the capital stack and what their return hurdles actually require from a project standpoint.

Bridge lending: active across the board

For existing multifamily assets, bridge financing remains healthy and competitive. Spreads in the low 200s to mid-300s depending on leverage, with banks and debt funds actively competing. The bifurcation is generally leverage-driven: lower LTV executions attract bank interest, while higher-leverage bridge requests move toward the debt fund universe.

This is a meaningful data point for owners who acquired assets in the 2019 to 2022 window and are navigating maturity extensions, value-add business plans or pre-stabilization refinances ahead of agency execution.

What this means for developers and owners

If you are sitting on an approved project wondering whether capital markets can support a start, the debt answer may surprise you. The conversation has changed. Construction lenders are open. The question is what your equity structure looks like and whether you have a capital advisor who has current relationships across both buckets.

The deals getting done right now are not the obvious ones. They are the ones where the sponsor has a thoughtful capital stack, real skin in the game, and an advisor who can run a real process across lenders and equity sources simultaneously.

Zack Streit is founder & president of Priority Capital Advisory.