In This Market, Entitlements Are the Financing

Three Front Range projects, one quarter, three different outcomes.  These projects tell an interesting story about today’s construction lending market.

In July, Collins at Union Park closed a $115.5 million construction loan for a 457-unit multifamily project in southeast Fort Collins. In June, Formativ broke ground on Rowan, a 16-story apartment tower in Denver’s RiNo district. Meanwhile, a proposed 46.9-acre mixed-use development at the northeast corner of Interstate 25 and Mulberry Street recently re-entered the Fort Collins development review process after first being proposed in late 2022.

Two of those projects are moving forward with construction financing. The third is still working its way through the entitlement process.

That’s not a coincidence.

Union Park spent nearly two and a half years working through traffic issues, street connections, design revisions, and public review before ultimately receiving unanimous Planning and Zoning Commission approval. Rowan sits on a fully entitled transit-oriented site that has been planned for mixed-use development for years. The Mulberry property, by comparison, still needs rezoning, replatting, and annexation before it reaches the same stage.

For lenders, those are fundamentally different projects.

It’s tempting to look at recent construction loans and conclude that financing has loosened. I don’t think that’s what’s happening. Industrial absorption along the Front Range has slowed, office vacancy remains historically high, and institutional equity is still selective about new development. The projects getting financed today generally have one thing in common: they’ve already removed most of the entitlement risk.

That has real implications for how developers should think about putting deals together.

First, entitlements have become significantly more valuable. A fully approved project is no longer just closer to construction, it’s materially easier to finance. That changes the economics of land acquisitions and helps explain why purchase agreements increasingly include longer diligence periods, entitlement contingencies, and pricing tied to approval milestones.

Second, development agreements deserve the same attention as loan documents. Lenders review municipal approvals just as carefully as they review title commitments. Vesting provisions, public improvement obligations, impact fees, reimbursement agreements, and conditions of approval all become part of the underwriting process. Language that seems minor during negotiations with a municipality can create real issues when financing is on the line.

Finally, entitlement timing needs to be built into the capital structure. Municipal review rarely follows the schedule everyone hopes for. If investors assume approvals will take twelve months and the process stretches to thirty, someone has to carry that cost. Partnership agreements, extension rights, and capital call provisions should reflect that reality from the outset.

Northern Colorado continues to have strong demand for well-located development. What’s in shorter supply are projects that have already cleared the entitlement process. Right now, those two things are closely connected. More often than not, the projects attracting construction capital are the ones where the hardest work was finished well before the financing closed.

Whether you’re acquiring land, pursuing zoning and land use approvals, negotiating development agreements, or preparing a commercial real estate project for financing, the real estate and land use attorneys at Lyons Gaddis help developers, investors, municipalities, and property owners navigate complex projects throughout Colorado. Learn more at www.lyonsgaddis.com.