The quick read: You finance ground-up mixed-use construction with a single construction loan sized on loan-to-cost and checked against the appraised as-completed value of the whole building, but the lender underwrites the apartments and the commercial space as two separate income streams. Unleased retail usually drags proceeds, so lenders often set preleasing conditions. Bank construction leverage is measured against an 80% supervisory loan-to-value limit, which a bank may exceed only for a capped volume of exception loans, and a bank avoids a 150 percent risk weight when, within that limit, the borrower contributes at least 15 percent of as-completed value.
Loan type: ground-up commercial construction loan on a mixed-use building, drawn against inspected progress
Sizing test: loan-to-cost on the full budget, checked against the appraised as-completed value
Bank supervisory LTV, commercial and multifamily construction: 80% (12 CFR Part 34, Subpart D, Appendix A)
HVCRE exemption contribution: at least 15% of appraised as-completed value, with LTV within the supervisory limit (12 CFR 324.2)
The swing factor: how much of the commercial space is leased before the lender commits or funds
Exit: one permanent loan on the whole building, or a takeout whose rules the finished commercial share must fit
This guide covers ground-up construction only. For how lenders treat a completed, operating mixed-use property, see the mixed-use lending overview.
How does a construction lender size a ground-up mixed-use loan?
A construction lender sizes a ground-up mixed-use loan on loan-to-cost, the loan as a share of the full development budget, and then tests that amount against the appraiser's as-completed value of the finished building. The lower answer sets the loan, and your cash equity fills the gap between that loan and total cost.
The OCC's Comptroller's Handbook on commercial real estate lending (Version 2.0, March 2022) lists mixed-use developments among the projects a commercial construction loan finances, alongside apartments, retail centers and office buildings. It says prudent policies set loan limits as a maximum percentage of cost (LTC) as well as market value (LTV) to make sure the borrower contributes sufficient equity, and that the bank's policy should state that equity be contributed before disbursements of the construction loan commence.
For a bank, two federal rules shape the answer. The interagency real estate lending guidelines in 12 CFR Part 34, Subpart D, Appendix A (2025 edition) set a supervisory loan-to-value limit of 80% for commercial, multifamily and other nonresidential construction, 75% for land development and 65% for raw land. These are supervisory limits rather than absolute caps: a bank may make exception loans above them, but the guidelines say the aggregate of such loans should not exceed 100 percent of total capital, and 30 percent for commercial, multifamily and other non-1-to-4 family loans. Under the FDIC's capital rule, a bank must assign a 150 percent risk weight to a high-volatility commercial real estate (HVCRE) exposure (12 CFR 324.32(j)); a construction loan avoids that label when its loan-to-value is within the supervisory maximum, the borrower has contributed capital of at least 15 percent of the property's appraised as-completed value before the bank advances funds and that capital is contractually required to remain in the project (12 CFR 324.2). Test your own budget with the loan-to-cost calculator before you ask for terms.
Why do lenders underwrite the apartments and the retail separately?
Lenders underwrite the apartments and the retail separately because the two components lease up on different timelines, carry different vacancy risk and are valued off different market evidence, so a single blended assumption would hide the weaker piece. The as-completed value the loan is tested against is effectively the sum of two separately underwritten income streams.
The OCC handbook says the market analysis behind a construction loan may include effective rental rates, vacancy rates, building starts and absorption, and that it should support the revenue assumptions in the pro forma. The interagency guidelines expect sensitivity analysis of income projections to changes in variables such as interest rates, vacancy rates or operating expenses, and the handbook says market values for proposed construction and partially leased or vacant buildings must include analysis for appropriate deductions and discounts. It also warns that speculatively developed properties should meet demand that exists at a future point, and that supply often overestimates demand, resulting in prolonged lease-up.
In a mixed-use building those tests bite the commercial space hardest. The apartments may have deep rental comparables nearby; a ground-floor bay in a new building often does not, and it may sit empty through a long lease-up and then need tenant improvements and leasing commissions before it pays rent.
Hypothetical illustration (not a quote or a market figure): suppose an appraiser values the finished apartments at $16 million and the leased-up commercial space at $4 million, for $20 million as stabilized. If the retail is unleased at completion, the appraiser may apply deductions to the commercial component for lost rent, leasing costs and time, so the as-completed value the lender tests against falls below $20 million, and every dollar of that discount reduces the loan the value test supports.
Does the ground-floor retail have to be pre-leased?
There is no federal rule that fixes a pre-leasing percentage for mixed-use retail, but bank lending policies must address preleasing for income-producing property, and many lenders make a minimum level of signed commercial leases a condition of commitment or of funding. The required level is set lender by lender and deal by deal.
The interagency guidelines in 12 CFR Part 34, Subpart D, Appendix A list pre-leasing and pre-sale requirements for income-producing property among the items a bank's real estate lending policy should establish, next to feasibility studies, sensitivity analyses and takeout commitments. The OCC handbook says prudent loan policies seek to mitigate market risk by establishing minimum levels of preleasing or sales as a condition of commitment or funding, and that banks typically analyze and monitor preleasing to determine whether it represents bona fide commitments.
In practice, three things help when the retail is not leased yet. First, a signed lease or letter of intent from a credible tenant, because the lender will check whether it is a real commitment. Second, a market study that supports the commercial rent and the lease-up time you assume. Third, a sizing case that still works if the commercial space produces no rent for a long stretch after completion, so the loan does not depend on it.
Which lender types finance ground-up mixed-use, and how do their terms compare?
Five lender types finance ground-up mixed-use construction: local and regional banks, credit unions, private debt funds, life companies through forward commitments and construction-to-permanent lenders. Only the bank row has dated, published leverage rules; every other term is quoted deal by deal, so the table below sorts quotes rather than ranking lenders.
Table: Ground-up mixed-use construction lender types (framework, not a ranking)
| Lender type | Leverage (dated public figure where one exists) | Retail pre-lease requirement | Recourse | Takeout |
|---|---|---|---|---|
| Local or regional bank | 80% supervisory LTV for commercial and multifamily construction (12 CFR Part 34, Subpart D, App. A, 2025 edition); 150% risk weight unless LTV is within the supervisory limit and the borrower contributes at least 15% of as-completed value (12 CFR 324.2 and 324.32(j), 2025 edition) | Policy must address preleasing; the level is set per deal | Quoted per deal; ask for completion and payment guaranty terms separately | Bank term loan, a forward commitment, or a refinance at stabilization |
| Credit union | No dated public benchmark found; set by the credit union's own commercial lending policy | Set per relationship | Quoted per relationship | Often the credit union's own term loan; confirm before closing |
| Private debt fund | No dated public benchmark found; quoted per deal | Set per deal; ask how unleased space is sized | Quoted per deal; ask about carve-out and completion guaranties | Refinance or sale, inside an initial term with extension tests |
| Life company forward commitment | Not a construction lender; commits to the permanent loan the construction lender relies on | Usually tied to performance criteria such as lease-up at funding (OCC handbook) | Set in the commitment; ask before you rely on it | Funds at completion and, almost always, lease-up |
| Construction-to-permanent | The same supervisory limits apply when a bank writes it | Set per deal; ask whether conversion tests include commercial occupancy | Quoted per deal | Converts to a term loan when completion and performance tests are met |
No dated public source we found publishes mixed-use construction rates, spreads or fees by lender type, so this page prints none; for how construction pricing is built, see construction loan rates.
What should a mixed-use construction budget carry besides hard costs?
A mixed-use construction budget should carry soft costs, a contingency, an interest reserve sized through lease-up of both components, and the tenant improvement and leasing costs the commercial space needs before it pays rent, because each is real cash spent before the building stabilizes. A budget that leaves them out is short.
The OCC handbook says contingency allowances vary with a project's size and complexity but usually range between 5 and 10 percent of the overall budget. It says project costs paid to related parties, such as developer fees, leasing expenses, brokerage commissions and management fees, may sit in soft costs if they are reasonable against third-party pricing, while interest or preferred returns owed to equity partners or subordinate lenders should not be in the construction budget. Deferred developer's profit and unearned developer fees are generally not considered equity.
The interest reserve gets the closest look. The handbook describes it as an account, typically funded as a budget line item, that pays loan interest during construction and lease-up, and says an appropriate reserve provides sufficient funds through the project's anticipated completion and lease-up. For a mixed-use building, size it to the slower component, usually the retail.
Draws follow progress. On commercial projects, the handbook says the bank normally retains, or holds back, 10 to 20 percent of each payment to cover cost overruns or unpaid suppliers and subcontractors, and releases it at the final draw after lien waivers, a final inspection and a certificate of occupancy. Plan your cash for that lag.
How do you plan the takeout: one permanent loan or a split?
You plan the takeout before you close the construction loan, because the construction lender sizes and prices the risk that permanent financing will not be there at completion. For mixed-use, that means confirming the finished commercial share fits the permanent program you are counting on, or arranging one loan on the whole building.
The OCC handbook says permanent loans, or takeouts, can come from the construction lender or another lender, including life insurance companies, pension funds and commercial mortgage-backed securitizations. A forward commitment, frequently from a life insurance company, commits to refinance the construction loan upon completion and, almost always, lease-up; a standby commitment is back-up financing whose pricing may be meant to discourage its use. The handbook cautions that both may mitigate little of the construction lender's risk, because they require completion and, in most cases, performance criteria such as lease-up to break even or better with leases at minimum rental rates.
That creates the mixed-use decision. A program built for apartments may cap how much commercial space or commercial income a building can carry, so a large ground floor can push the deal to a bank, life company or CMBS loan on the whole building instead. Check the limits of the takeout you plan before you fix the ground-floor size, and plan the construction loan's term around the retail lease-up; the handbook says extension options should be consistent with the expected construction time plus the projected absorption period. The mixed-use loan page covers the permanent options.
Building apartments over retail? What a construction lender will size
A construction lender will size apartments over retail only after it sees a complete package: site control and entitlements, plans and a line-item budget, a general contractor, a market study for both components, any signed commercial leases or letters of intent, your cash equity and a takeout plan that fits the finished mix.
YieldStack is a commercial mortgage brokerage, not a lender. It costs Zero upfront to submit a deal and review offers; YieldStack's broker fee is 0.50–1.00% of the loan amount and is paid only at closing. Every credit decision is made by the lender; YieldStack arranges the introductions and negotiates on the borrower's side, and no loan, rate, or closing is guaranteed. Submit your mixed-use construction deal with the package above, and the brokerage will route it to the bank, credit union, debt fund and construction-to-permanent lender types whose current programs fit the project.
The bottom line
Ground-up mixed-use construction is financed on loan-to-cost, checked against an as-completed value built from separately underwritten apartment and commercial income. Banks work to an 80% supervisory LTV limit, which they may exceed only for a capped share of loans, and with LTV within that limit, at least 15% contributed capital avoids HVCRE treatment. Expect preleasing conditions on the retail, budget a 5 to 10 percent contingency and an interest reserve through the slower lease-up, and lock a takeout the finished mix fits.