From Land to Lease-Up: How to Structure Capital for Ground-Up Projects

Ground-up development is one of the most rewarding—and capital-intensive—ventures in commercial real estate. Unlike stabilized acquisitions, successful projects require a dynamic capital stack that evolves through distinct phases: land acquisition, construction, and lease-up. Each stage demands tailored financing solutions to manage risk, control costs, and maximize returns.

Land Acquisition: Laying the Financial Foundation

Securing the right parcel is the critical first step. According to Wolfgramm’s guide, land acquisition financing typically involves a combination of equity and short-term debt or bridge loans. Because land carries no immediate cash flow, lenders and investors focus heavily on zoning, entitlements, and market feasibility.

Sponsors often raise a higher percentage of equity during this phase to absorb predevelopment risks, including permitting and architectural design. Building strong local relationships and having a clear entitlement strategy can make this phase more attractive to capital providers.

Construction Financing: Balancing Debt and Equity

Once the land is secured, construction financing comes into play. ReInvestor Guide emphasizes the importance of layering construction loans with mezzanine debt or preferred equity to fill funding gaps while preserving sponsor upside.

Construction loans are typically interest-only and short-term, with lenders closely monitoring draw schedules and budget adherence. To manage contingencies and cost overruns, sponsors structure flexible capital stacks with equity cushions and reserve funds. This approach reduces refinancing risk at stabilization and keeps projects on track.

Lease-Up and Stabilization: Positioning for Permanent Capital

After construction, the lease-up phase transitions the project toward stabilized operations. As Anchor Loans points out, this phase is critical for converting construction debt to permanent financing, often through long-term, fixed-rate loans or portfolio debt.

Equity partners typically expect distributions to begin during lease-up, and capital stacks adjust to reflect reduced risk and increased cash flow. Sponsors may also pursue partial recapitalizations to return equity or fund additional growth.

Looking to structure capital for your next ground-up development? At Estates of Elysium, we help sponsors assemble capital stacks that evolve with your project—from dirt to delivery to lease-up. Whether you need land acquisition equity, layered construction financing, or permanent debt solutions, we connect you with investors and lenders who understand every phase. Visit www.estatesofelysium.com to learn how to build smarter capital stacks.