MODEL DESIGN
How to Model the Construction-to-Perm Loan Transition
Overview
ARTICLE IN PROGRESS
We're writing a deep engineering essay on DV-003. How we built it, the design choices behind it, and how to use it. The model itself is live and available today.
DV-003 tracks the financing transition from construction loan to permanent debt at stabilization. The transition deserves its own model because the refinance event is where most development deals discover that the interest reserve was undersized, the DSCR floor binds before the LTV ceiling, or the proceeds waterfall back to the deal looks nothing like the underwriting case.
Planned Sections
When the full piece is published, it will cover:
- Why the transition deserves its own model.
- Design choice: explicit refinance event with sizing constraints.
- Design choice: DSCR floor vs LTV ceiling. Which binds when.
- Design choice: interest reserve adequacy testing.
- Design choice: refinance proceeds waterfall back to the deal.
- How to pair this model with DV-001 or AQ-141.
For an example of the engineering-essay format this article will follow, see how we engineered AQ-141, the Multifamily Opportunistic Pro Forma Model.
About the Model
DV-003 is an Institutional-tier, cross-asset construction-to-perm loan transition model. Refinance event sizing, DSCR and LTV constraints, interest reserve testing, proceeds waterfall. Built for REPE developers needing to model the financing handoff at stabilization.