We are developing a commercial project in a rural city and assessing construction to perm loans. One lender, who would be backed by the Dept. of Ag B&I guarantee program, is asking for about $10k/month in "construction management" fees during the construction period. This is in addition to the origination fee (0.5% to 1.5% range) and loan guarantee fee (3% upfront and 0.5% annually). We are hiring an owner's rep and very experienced builder... Is this "construction management" fee just us paying an additional owner's rep to make sure our owners rep and the construction company are doing their jobs? Does anyone have experience with this they'd be willing to share? Thank you.
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That is exactly what it is. Our partners typically engage a company such as Marx Okubo to review and comment on the drawings, conduct inspections during construction and issue field reports, and participate in the draw meetings assuring the proper amount of $ is being allocated for the work in place. Very typical for institutional equity and debt.
$10k/month is high though. I've seen $2-5k being charged for monthly inspections and draw reviews.
Agree, with it being high. I've seen the same.
Also, like every bank will require the fee.
I think I pay my lender $880.00 in fees monthly at the moment.
If they asked for $10,000.00 I'd probably find a new lender. No shortage of cheap debt at the moment.
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