$5,500,000 Refinance in Orangevale, CA
When a Construction Loan Matures Before a Project is Finished
Loan Amount: $5,500,000
Loan Term: 12 Months
LTV: Under 60%
Lien Position: 1st Deed of Trust
In commercial real estate, timing can be just as important as the quality of the asset itself.
A Los Angeles-based private equity group acquired a 50-unit apartment community in Orangevale, California with plans to renovate the property, increase occupancy, and either refinance into permanent financing or pursue a sale once the business plan was complete.
The project was progressing well. Renovations were underway, units were being upgraded, and significant capital had already been invested into the property.
Then the project’s timeline and financing timeline stopped aligning.
The existing acquisition and construction loan was approaching maturity before the property had reached stabilization, creating a challenge that many value-add multifamily investors face.
The borrower needed additional time and capital to finish the final phase of renovations, lease the remaining units, and fully execute their business plan.
The Challenge: A Property in Transition
When Rubicon Mortgage Fund, LLC became involved, the apartment community was approximately 75% complete from a renovation standpoint.
Most of the heavy lifting had already been done. The majority of the units had been renovated and were ready for occupancy. Only a small number of units remained unfinished.
At the time of financing, 12 of the property’s 50 units were occupied.
The borrower’s plan was straightforward:
- Complete the remaining renovations
- Relocate existing tenants into newly renovated units
- Finish improvements across the property
- Lease the remaining units
- Refinance into long-term financing once stabilization was achieved
While the project was well underway, it did not fit neatly into a traditional lender’s box.
Banks typically prefer stabilized multifamily properties with strong occupancy and predictable cash flow. They are often hesitant to finance projects that are still in the final stages of construction or lease-up, even when the finish line is clearly in sight.
The borrower needed a lender that could evaluate where the project was headed, not just where it stood today.
Financing the Construction Loan
Rubicon Mortgage Fund, LLC provided financing to pay off the existing acquisition and construction lender while also creating a path for the borrower to complete the project.
The loan gave the borrower what they needed most: time.
Time to finish construction.
Time to execute the lease-up strategy.
Time to unlock the value that had already been created through the renovation process.
Rather than forcing a premature sale or scrambling to find replacement financing at the last minute, the borrower was able to continue moving toward stabilization and position the property for long-term success.
Why Transitional Multifamily Properties Need Short-Term Financing
Many multifamily renovation projects face a similar challenge.
A property may be significantly improved but not yet stabilized enough to qualify for conventional financing.
Occupancy may still be growing, renovations may still be wrapping up, or lenders may view the project as incomplete despite substantial progress.
This financing gap is where commercial bridge lenders play an important role.
By focusing on the asset, the business plan, and the path to stabilization, commercial bridge lenders can help experienced sponsors reach the finish line when traditional lenders are unwilling to participate.
Frequently Asked Questions
Can you refinance a construction loan before a project is complete?
Yes. Many borrowers refinance maturing construction loans with short-term financing when additional time is needed to complete renovations, increase occupancy, or stabilize the property.
Why do banks avoid partially completed projects?
Traditional lenders typically prefer stabilized assets with consistent income. Properties that are still under renovation or lease-up often fall outside conventional lending guidelines.
What happens when a construction loan matures?
If a construction loan matures before a project is complete, borrowers may need short-term financing to pay off the existing lender, finish the project, and create a path to long-term financing.
Need financing for a multifamily renovation, lease-up, or maturing construction loan? Rubicon Mortgage Fund, LLC specializes in short-term loans for transitional commercial real estate projects throughout California.
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