The package a small developer sends to a construction lender is almost always assembled in the order it was convenient to build. Pro forma first, because that's the document that got the deal to yes internally. Then the site plan, because the architect had one ready. Then a rent comp set, a sponsor bio pulled off a website, and a contractor budget in whatever format the GC exported it.
Reasonable. Also backwards.
The underwriter on the other end reads in a fixed order, and it has nothing to do with yours. The first twenty minutes decide whether the deal gets real work or a polite decline that says the loan doesn't fit the current box. That decline is rarely about the return.
The Order They Actually Read In
Sponsor and track record. Before anything else, they want to know if you have delivered this product type, at this scale, in this market. Not whether you're smart. Whether you've finished something like it. A sponsor bio that lists roles instead of completed projects reads as a resume, and a resume is what you send when you don't have a track record.
Sources and uses. One page. Total project cost, how much is debt, how much is equity, where the equity actually sits today. This is where the underwriter forms a number in their head that they will carry through the rest of the file.
The valuation basis. As-complete value, the appraisal assumptions behind it, the comps it rests on. If your comps are three buildings that traded in a different submarket during a different rate environment, the underwriter knows before you do.
The GC and the contract type. Guaranteed maximum price, cost plus with a cap, stipulated sum. Who carries the contingency, and how much. A GMP with a qualified subcontractor list behind it is a different risk than a budget the GC calls preliminary.
Entitlement status. What is approved by right, what is still discretionary, what appeals windows are open. A partially entitled deal is not a discounted version of an entitled deal. It's a different loan. Many construction lenders will not size to it at all, and the ones who will are pricing the remaining approval risk into the rate or the leverage.
The schedule. Start, duration, the draw curve, and whether the loan term has enough runway past certificate of occupancy to reach stabilization.
Then the pro forma detail. Last. The document you spent three weeks on is the last thing they open.
The Internal Consistency Test
Once they've read all seven, the underwriter does something simple and brutal. They pull the same number out of three places.
Total project cost in the sources and uses. Total in the GC's budget. Total implied by the schedule and the draw curve.
Those three should be identical. They usually are not. The sources and uses says one number, the GC's budget says something 4 to 6 percent different because it was updated after the model was locked, and the schedule implies a third because the draw curve was built off an older duration.
Nobody in that room concludes the sponsor is lying. They conclude the sponsor doesn't have control of the job yet. That read is worse, because it's unfixable in a follow-up email.
Which Constraint Actually Binds
Loan to cost and loan to value are two different tests and the lender sizes to whichever produces the smaller loan. Construction lenders commonly land somewhere around 60 to 70 percent LTC and 55 to 65 percent of as-complete value, and those two ceilings almost never land in the same place.
On a cost-heavy deal, a difficult site, deep foundations, a high-performance enclosure, LTC binds and your basis is the problem. On a deal with strong comps and lean construction, LTV can bind first and the appraisal is the problem. Know which one you're arguing about before the call, because the two arguments require completely different evidence.
The Guaranty Question
This is where small developers get blindsided. The construction loan can be non-recourse on repayment and still carry a full recourse completion guaranty. Different obligation, different trigger, often a different signer than the borrowing entity.
Read who signs it, what events trigger it, what "completion" means in the definitions, and whether the guaranty burns off at certificate of occupancy or at a stabilized debt service coverage test. Those are months apart. Sometimes many months.
The three-contingency undercapitalization check covers why three overlapping contingencies still leave a project short. The completion guaranty is what makes that math personal.
The Check: Rebuild Your Package in the Lender's Order
- Reassemble the file into seven sections in the order above. Sponsor, sources and uses, valuation basis, GC and contract, entitlements, schedule, pro forma. Do not rewrite anything yet. Just reorder.
- Pull total project cost out of three places — the sources and uses, the GC's current budget, and the schedule's draw total. Write all three on one line. Reconcile them or explain the difference in one sentence inside the package.
- Size the loan both ways. Run it at your target LTC and at your as-complete LTV. Circle the smaller number. That's your loan. Build the equity plan against that one.
- Find the completion guaranty in the term sheet or your last one. Name the signer, the trigger, and the burn-off condition out loud.
- Read the entitlement section as if you were a stranger. Mark every approval that is still discretionary in a different color. If more than one is marked, say so on the first page instead of burying it.
- Read the whole file cold, in order, in twenty minutes. Time it. Whatever you're still confused about at minute twenty is what the underwriter will call you about.
I was broker of record for an institutionally backed value-add multifamily firm, over $1B in assets under management, thousands of units of acquisition, disposition, and repositioning. I watched a lot of packages get read by people whose job was to say no efficiently. The ones that got real work were never the prettiest. They were the ones where every number agreed with every other number, and where the weakest part of the deal was disclosed on page one instead of found on page forty.
A clean package doesn't prove the deal is good. It proves you'll know when it isn't. That's the whole signal.
Where does this project break, and how early can we catch it?
Rebuild your package in their order this week. What's the first contradiction you find?
Durata Advisory provides development advisory services only. The practice does not provide brokerage services, securities advice, capital raising, or investment solicitation. Advisory observations are general in nature and do not constitute legal, financial, or investment advice.
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