Historic Commercial Building/Condo Renovation

Hey Folks,

I have a project in downtown Chattanooga, TN that I am preparing to take on within the next few weeks and I’d like to ask a couple of questions about the lending process and requirements for this type of project.

A little background on the project;
The building we are purchasing is a historic property that was built around 1910. It’s a 30,000 sq ft, 5 story building (including basement) that is located in the heart of downtown Chattanooga between Market St. and Broad St. which are two of the main thoroughfares through the city. The first level of the property will be used as commercial space, 2 units, one facing Market and the other facing Broad. Our intent is to renovate the entire building and utilize levels 2 through 4 as very high end, luxury, loft style condos that will market for somewhere between 600k - 900k each upon completion. We have had an architectural firm begin our initial feasibility study as well as prepare a digital rendering and floor plans for us to this point. Based on these initial numbers, the renovation cost will be somewhere around the 3 million dollar mark.

What types of funding are available for commercial/historic renovations? We are prepared to put down 20% of the purchase price on the property (405k), possibly more. What will lenders need from us in order to persuade them to lend the funds for the construction costs and what would be the typical payment scenario during the construction phase (12-18 months) of the renovation?

Based on an average of other condos in the local downtown area, we have come up with and average sale price per sq ft of $281. We expect to be able to market our condos somewhere in this range which would provide us with a gross profit of between 4.3 and 5.3 million. The plan is to pay off the loan with the proceeds from the condo sale and establish triple net lease tenants in the commercial space which will allow us to remain in control of the property. Any information you can provide that would help us through this process would be greatly appreciated.

If you can offer advice or suggestions, please feel free to email me.

In addition, I am looking for good commercial funding sources as well that may be able to take on a project like this.

Thanks in advance!


Jeff Dickson

Hi Jeff,

Typical terms are:

80% loan to cost (purchase & acquisition)
75% as of completed or bulk project value

mezzanine financing up to 90% of costs
debt service ratio of 0.75 & above
Max term: 24 months
Payments interest only
Principle repayment from condo unit net sales

Patti Porter