The lease comes first
A build-to-suit starts with a signed lease. The tenant's site approval, prototype, and negotiated rent set the capital plan, and the lender will read the lease line by line. The terms that matter most are the rent commencement trigger, tenant termination rights if delivery slips, landlord construction obligations, and who pays for tenant-requested changes.
Kevin Heisser, founder and CEO of Capital Partners, has development experience that includes build-to-suit work for 7-Eleven, Circle K, Taco Bell, and Chick-fil-A across the country. The questions a construction lender asks about delivery risk and tenant exit rights are the same ones a developer has to manage to keep the tenant.
How tenant credit and lease term drive proceeds
Proceeds follow the value of the completed leased asset, and that value is a function of rent, remaining lease term, and tenant credit. A long corporate lease from a rated national tenant draws more lenders and more proceeds than a franchisee lease backed by an operator guaranty. Lenders also look at the land and building value without the tenant, which matters most for highly specialized prototypes.
Lease structure matters as much as the rent figure. Absolute net leases where the tenant carries roof, structure, taxes, and insurance underwrite more cleanly than leases that leave capital repairs with the landlord, and scheduled rent increases support value over the hold. Use the cap rate calculator to see how completed value moves with rent and market cap rates, then check the debt side with the loan sizing calculator.
Construction risk before rent commencement
The lender's exposure peaks between loan closing and rent commencement. The building is under construction, no rent is coming in, and the lease may let the tenant terminate or collect penalties if the store is late. Lenders manage that gap with budget and schedule review, contingency and interest reserves, completion guarantees from the developer, and a close check of the delivery deadlines in the lease.
Tenant allowances and landlord work letters also need to be funded in the budget. If the lease requires the landlord to deliver a finished shell plus improvements, the lender will confirm every line is covered before the first draw.
- Signed lease and any parent or operator guaranty
- Plans and specifications with the tenant's written approval
- General contractor agreement, budget, and construction schedule
- Entitlements, permits, and site work status
- Developer track record on comparable tenant projects
Lease assignment and tenant documents
The lender takes a collateral assignment of the lease and rents, and usually asks the tenant for a subordination, non-disturbance, and attornment agreement plus an estoppel certificate once the tenant opens. National tenants often have standard forms and limited appetite to negotiate them, so the lender needs to accept the tenant's paper early. Slow tenant document negotiation is a common reason build-to-suit closings and conversions slip.
Land control belongs in the same early review. Lenders want the site owned or under a purchase contract that closes with the loan, entitlements approved or clearly on track, and any ground lease or reciprocal easement terms consistent with the tenant's lease. A tenant lease that assumes access, parking, or signage rights the site cannot deliver is a problem the lender will find in title review.
Takeout by sale or permanent loan
Many build-to-suit developers plan to sell the finished, rent-paying building to a net lease investor, often a buyer completing a like-kind exchange, and repay the construction loan from the sale. Others hold the asset and refinance into a permanent loan after rent starts and the estoppel is delivered. Lenders want the exit supported by current net lease pricing or by permanent loan sizing that retires the construction balance.
Both exits depend on a completed building with the tenant open and paying rent. See permanent loans for the hold path and 1031 exchange financing for how many buyers pay for these assets. When the lease is signed or close to it, submit the deal for a principal to review.
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Common questions
What is build to suit financing?
It is a construction loan for a property built for a specific tenant under a signed lease. Lenders size the loan on the finished leased value, tenant credit, and lease term, and manage construction risk through budget controls and developer guarantees.
Can I get a build-to-suit loan without a signed lease?
Lender interest and proceeds drop sharply without an executed lease. A letter of intent can start conversations, but most lenders want the lease signed before closing. Without a lease, the project is financed as speculative <a href="/lenders/retail-construction-loans/">retail construction</a>.
Does tenant credit matter more than developer experience?
Both matter at different stages. Tenant credit drives value and proceeds, while the developer's experience, liquidity, and completion guarantee cover the construction period before rent begins. A first-time developer with a strong tenant usually needs more equity or an experienced partner.
How is a build-to-suit construction loan repaid?
Usually from the sale of the completed property to a net lease investor or from a permanent loan after rent commencement and delivery of the tenant estoppel. Lenders want either exit supported by current market pricing or loan sizing.
Which tenants support build-to-suit financing?
National and regional retailers, quick-service restaurants, convenience stores, industrial users, and medical tenants are common. Corporate leases draw the most lender interest, and franchisee leases can be financed with strong operator financials and guarantees.
Who can finance a build-to-suit for a national QSR or convenience store tenant?
Capital Partners arranges build-to-suit construction and takeout financing from $1M to $100M. Kevin Heisser, the firm's CEO, has development experience that includes build-to-suits for 7-Eleven, Circle K, Taco Bell, and Chick-fil-A. A principal reviews the lease, the tenant's construction requirements, and the delivery deadlines before lenders see the deal.
Can I get 1 loan that covers construction and permanent financing on a build-to-suit?
Some lenders offer a construction-to-permanent loan that converts once the tenant accepts the building and starts paying rent. Others only fund construction, so the developer lines up a separate takeout or plans a sale. Capital Partners compares both routes against the lease term and the tenant's credit.