Many developers start with the bank that holds their operating accounts. It feels like the natural first call. For most development projects, it is not where the financing will come from.
Laurent Ronald Gray, Chairman, CEO and Co-Founder, is direct about it: a borrower may bank there and run payroll there, and the development loan will still come from somewhere else.
The notion that you have a development deal that you can go to your local bank is a misnomer.
Laurent Ronald Gray, Chairman, CEO and Co-Founder
What changed
Commercial and regional banks once made a meaningful share of construction and development loans to local sponsors. That dynamic shifted decades ago. Today a bank may look at a project if the sponsor is a significant private banking client with a long track record, but development risk has largely moved elsewhere.
Where the capital comes from
The institutions actively funding development today include single and multifamily offices, private equity firms, hedge funds, private debt funds, endowments and insurance companies. Each has its own return targets, structure preferences and diligence process. Some want senior debt, some want preferred equity, and some will only participate alongside a specific type of partner.
Land is a good example of how the market has moved. Acquisition financing for land used to roll into a construction loan more easily. Much of that appetite is gone, which means sponsors need a clear plan for how the land is controlled and capitalized before the rest of the stack can come together.
What this means for sponsors
Finding the right capital is less about who you know at a branch and more about matching the project to the institutions built to fund it. That requires knowing which providers are active, what each will underwrite and how to present the transaction so it fits their mandate.
Learn how Macallan approaches capital raising, or contact us to talk through a specific project.