Financing a condo tower or residential subdivision is one of the most complex parts of development. Here is how Ontario developers structure the capital to get projects built.
The development capital stack
Most projects combine several layers: equity, land financing, a construction loan, and sometimes mezzanine or private capital to fill gaps. Each layer has a different cost and risk, and lenders want to see a sensible structure with real sponsor equity.
Land and pre-construction
Before shovels are in the ground, you may need land financing and capital to carry pre-construction costs — design, approvals and servicing. Lenders look closely at zoning, approvals status, and the project’s feasibility.
Construction financing and pre-sales
For condos, lenders typically require a level of pre-sales before advancing construction funds; for purpose-built rentals, the focus is on projected income and programs like CMHC MLI Select. Funds are released in draws as the build progresses.
Matching lenders to the stage
Different lenders specialize in land, construction and take-out financing. Assembling the right mix — and lining up the exit — is where an experienced broker helps keep a development funded from acquisition through completion.
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