Last-mile and completion capital
A project that is most of the way built, where the value on completion is clear and the capital to reach it is not.
Part of Ascent Pinnacle’s structured credit practice.
Last-mile capital funds the gap between a project that is nearly finished and one that is finished. It is among the better-secured situations in the market and among the most frequently mishandled, because the thing that makes it attractive — most of the cost is already sunk — is also what makes the incoming lender's position delicate.
The incoming capital is usually last in and needs to be first out. Establishing that, against lenders who funded the earlier stages, is the transaction.
When this applies
- Construction is substantially advanced and stalled for funding rather than for approvals or demand.
- Part of the project is complete and sold down, and the remainder has not started or has stopped.
- An existing lender will not fund completion but will not release the security either.
- Value on completion is materially higher than value in the current state, and the gap is a construction programme rather than a market view.
What makes it difficult
Incoming capital must rank ahead of the money already spent, or it will not come. Achieving that means negotiating priority with lenders who funded earlier and whose recovery depends on completion — which is the leverage, and is also why the conversation is difficult.
Exposure also has to be confined to the programme being funded, not extended to the developer's balance sheet. Bringing other projects into the security package exposes the new lender to construction risk it has not underwritten.
And the money must arrive as the work is done. A lump disbursal against a stalled project funds the borrower's other problems before it funds completion.
How it is structured
Ring-fence the remaining project
Isolate the towers, phases or units still to be completed, together with the buyer receivables attached to them, into a structure the incoming lender can secure against directly.
Establish priority
Negotiate the ranking of completion capital with existing lenders, whose recovery generally improves if the project completes and worsens if it does not.
Disburse against certified milestones
Release capital against independently certified construction progress so exposure grows only as the underlying value does.
Escrow the collections
Route buyer receipts through a controlled account with a fixed waterfall, so completion funding is repaid from the sales it makes possible.
Confine the exposure
Keep the developer's other projects outside the security package, so the facility is underwritten against one certified programme rather than a balance sheet.
What a capital provider tests
- The cost to complete, independently verified rather than taken from the developer's estimate
- Approvals outstanding, and whether completion is a construction question or a regulatory one
- The receivable book attached to the units being funded, and its concentration
- Priority relative to existing lenders, documented rather than assumed
- What the units are worth on completion in a slower market, not only in the current one
Discuss a situation
Bring the position, the existing debt schedule and the timeline. We come back with a view on whether it is structurable and what it would take.
Discuss a mandate