Tyler Stone is the founder and president of Capstone
Financial, which specializes in privately funded loans
for commercial and fix-and-flip investment properties.
A national direct lender launched in 2010, Capstone has
simplified underwriting processes for first-lien position
investment and bridge financing. Programs range from
streamlined fix-and-flip rehab loans to one-off funding for
“makes sense” deals. Reach Stone at (480) 336-2828, ext. 107,
Mixed-Use Deals Can Pay Dividends
Lining up financing for such properties requires planning and market savvy
By Tyler Stone
Do a Google search for “mortgage for mixed use” or “getting financing for mixed-use real estate.” Guess what? Multiple items pop up on the first page, featuring lenders
that will fund these types of loans.
So, lining up financing for a mixed-use property
must be a piece of cake. You’re halfway to the closing
table already. If only it were that simple, however. How
easy or realistic it is to get these loans funded is the
As an originator, how should you be setting borrowers’
expectations for the process of getting from point
A (loan application) to point B (borrower bliss) when it
comes to mixed-use project financing? To answer that
question, we need to take a deeper look at this lending
niche, and its benefits and difficulties. With that
knowledge, commercial mortgage brokers can better
understand whether it may be a potential opportunity
to pursue and drive more revenue.
Define the niche
First, we need to define what a mixed-use property is,
so we are all on the same page. A mixed-use property
or development involves more than one type of tenant
use in a building or set of buildings that are part of a
commercial complex or campus.
A mixed-use property often entails some sort of
retail or office tenants, with residential apartments
either behind or above the commercial space. In
addition, mixed use also may involve a warehouse with
office use, or really any combination of tenant uses
across the commercial property spectrum.
Buildings with at least 50 percent residential use
may sometimes qualify under multifamily-specific
financing programs. So, it pays to ask your client upfront
about tenant-use ratios to determine if a mainstream
multifamily loan might come into play. A multifamily
loan program is still commercial financing, of course,
but it is likely to involve a more straightforward process than a mixed-use financing program.
Lower the risk
One of the reasons mixed-use projects can be hard to
finance is that this type of commercial development is
sometimes seen as riskier by many banks and lending
institutions. This is primarily because financial success
depends on the various property uses all being in high
demand at the same time, in the same area, and in
many cases, in the same building.
Loan-file submissions for mixed-use financing are
most often turned down by banks because of unpredictable economic returns. A widely held opinion that
this is true is when local and state government support
or subsidies are uncertain, or the process to obtain
such backing is seen as too arduous.
Mixed-use projects are often supported by state
and local governments, however, because they lower
the dependency on commuting and are often located
near public-transit areas or are incorporated into
municipal planning. Mixed-use zones also are often
put in place by governments to address increasing urban
density and to foster local employment growth.
As a result, another way to strengthen a submission
for a mixed-use loan is to get a copy of the local urban-growth plan. This may be called a “zoning plan” in
some markets. Further, even though the process of
applying for government subsidies may be arduous, more
often than not it is worth the effort for the borrower
and may result in better leverage or better loan terms.
Prepare with data
A good strategy for mortgage brokers to use when
submitting a loan application for a mixed-use property
is to find some supporting economic research and
data for the area to include with the file. The lender
may have its own proprietary data, but adding some
support data to the file is always beneficial.
Over the course of real estate market recovery, especially in 2016, the financing opportunities for mixed-use
property types started to open up a little bit. Some of
the best resources for this lending niche are community
banks with local knowledge and relationships in the
area. This does not mean every community bank will
love every deal presented to them, however.
Local community banks might favor one geographic
area of the market for mixed-use projects over another.
Scottsdale, Arizona, for example, has the more affluent
reputation when compared to the neighboring city of
Phoenix, and one would think it would be easier to get
a loan in Scottsdale.
Continued on Page 48 >>
For more articles on commercial
View these articles and more at
“Distressed Properties Differ From
“Closing the Ballooning CMBS Gap,”
“The Commercial Property Sector Is in Flux,”
“Focus on Urban Opportunities,”
Jan B. Brzeski,
Managing director and chief investment officer
Cross wind Financial and Arixa Capital Advisors LLC
BY JAN B. BRZESKI
Illustration by Dennis Wunsch