The commercial real estate landscape constantly evolves as market demands shift and demographics change. When a retail center struggles with vacancies, an obsolete office building sits underutilized, or an industrial warehouse occupies a gentrifying neighborhood, property owners face a critical question: How can we reposition this asset for today’s market?
The answer often lies in change of use loans—specialized financing that enables property owners to convert buildings from one purpose to another, unlocking value and meeting current market needs.
What Are Change of Use Loans?
Change of use loans finance the modification of commercial properties to serve different functions than their original purpose. This conversion process involves physical modifications, zoning changes, permit approvals, and construction work to adapt the building for its new role.
One West Hard Money provides fast, flexible change of use loans for property owners and investors looking to reposition commercial assets. Our loans range from $3 million to $50 million with funding in as little as 8 days, allowing borrowers to capitalize on conversion opportunities before market conditions shift.
Why Property Owners Pursue Change of Use Projects
Commercial property modification projects address several market realities. When demand weakens for a property’s current use, modification to a thriving sector makes economic sense. As neighborhoods change character over time throughout the United States, property uses that once thrived may no longer fit. Sometimes buildings would generate significantly higher income or value if converted, providing borrowers with options for improved returns. Older buildings may no longer meet modern standards for their current use but could excel in a different role, serving family and community needs in new ways.
Types of Change of Use Conversions
One West finances property modification projects across multiple transformation scenarios:
Retail to Office Conversion: Empty big-box stores, struggling strip centers, and obsolete shopping malls can become productive office space. These conversions work particularly well in suburban markets with strong office demand but limited new construction.
Office to Residential Conversion: Office buildings, particularly older structures in urban cores, represent prime candidates for residential conversion. Converting office space to apartments addresses housing shortages while breathing new life into underutilized commercial buildings.
Industrial to Mixed-Use Conversion: Historic warehouses and industrial facilities in gentrifying neighborhoods offer exceptional bones for mixed-use development. These adaptive reuse projects typically combine ground-floor retail with upper-level residential units or creative office space.
Retail to Residential: Shopping centers and retail buildings can convert to residential use, particularly in markets with housing demand and limited development sites.
Office to Mixed-Use: Older office buildings can transform into mixed-use properties combining residential units, ground-floor retail, restaurants, and upper-floor offices.
Industrial to Office: Warehouse and industrial buildings in desirable locations often convert to creative office space, particularly appealing to technology companies and firms seeking distinctive work environments.
Change of Use Loan Terms from One West
One West structures change of use loans to match conversion project timelines and economics:
Loan Size: $3M – $50M – One West provides change of use loans from $3 million to $50 million, accommodating mid-sized retail conversions to large-scale adaptive reuse projects. This loan amount range covers acquisition, modification, and carrying costs. Borrowers can access substantial funds to complete comprehensive building transformations.
Loan Terms: 12 – 36 Months – Property modification projects typically require 12 to 36 months from acquisition through renovation, permits, construction, and initial stabilization. The specific loan term depends on project complexity and borrower needs.
Fixed Interest Rate: 9.5% – One West offers a competitive 9.5% fixed interest rate on change of use loans, providing cost certainty throughout your conversion project. This fixed rate protects borrowers from interest rate fluctuations during the modification period.
Origination Fee: 1% – 5% – Origination fees range from 1% to 5% depending on loan size, project complexity, and borrower qualifications.
Loan-to-Value Up to 85% – One West provides up to 85% LTV on change of use projects, calculated on the acquisition price plus modification costs. This high LTV minimizes equity requirements while ensuring appropriate investment from borrowers.
Post-Conversion DSCR: 1.20x Minimum – While properties undergoing modification don’t generate income during construction, One West requires 1.20x debt service coverage ratio post-conversion. This ensures the repositioned property will support permanent financing or operate profitably with sufficient income to cover debt payments comfortably.
Non-Recourse Structure – One West’s non-recourse change of use loans limit personal liability, providing important protection for property owners. This structure allows borrowers to reposition assets while managing risk appropriately without putting personal finances at stake.
No Prepayment Penalties – One West charges no prepayment penalties, giving borrowers complete flexibility to refinance or pay off the loan when advantageous, whether that occurs in one year or at loan maturity.
Rapid Funding: 8 Days – Once your project receives approval, One West funds loans in as little as 8 days, allowing borrowers to secure properties and begin conversions without delays.
The Change of Use Loan Application Process
Step 1: Property Evaluation – Conduct thorough feasibility analysis examining the property’s conversion potential, zoning requirements, and market demand. This information helps borrowers understand project viability before committing money to the application.
Step 2: Initial Consultation – Contact One West to discuss your conversion project. Share information about the property, proposed new use, modification scope, construction budget, timeline, and exit strategy. Our team provides preliminary feedback on feasibility and financing options.
Step 3: Formal Application – Submit detailed project information including property details, architectural plans, itemized modification budgets, market analysis, contractor qualifications, anticipated timeline, and exit strategy. One West evaluates these materials to structure appropriate loan terms.
Step 4: Loan Approval – Upon approval, One West issues a loan commitment outlining all terms, conditions, and requirements. Borrowers receive comprehensive information about monthly payments (if applicable), total interest obligations, and all fees before closing.
Step 5: Closing and Funding – The change of use loan closes with funding for property acquisition (if needed) and initial modification costs. The remainder of the loan amount is held in escrow, disbursed as work progresses.
Step 6: Construction and Completion – Throughout the modification process, submit draw requests with supporting documentation. One West reviews requests and releases funds, keeping your project on schedule. Upon conversion completion, work with One West to extend the loan for stabilization time or transition to permanent financing.
Key Considerations for Change of Use Projects
Zoning and Entitlements: Property conversion success often hinges on zoning approval. Research local zoning ordinances to determine if your proposed use is permitted by right, requires conditional use permits, or demands rezoning. Gathering this information before loan application helps borrowers assess project feasibility.
Building Codes and Compliance: Converting buildings between use types triggers modern building code requirements. Office to residential conversions may require sprinkler systems, additional means of egress, and accessibility improvements. Budget adequately for code compliance work, which can represent significant modification costs that borrowers must plan for in addition to cosmetic improvements.
Structural Evaluation: Before committing to a conversion, engage structural engineers and consultants to assess the building’s adaptability. Some conversions prove infeasible due to structural limitations or prohibitively expensive system upgrades. Professional evaluation identifies deal-breakers before borrowers invest substantial money or time.
Market Demand Analysis: Successful conversions meet real market demand in the target use. Conduct thorough market research examining supply, demand, absorption rates, and rental rates for the proposed property type. Understanding market conditions helps borrowers make informed decisions about conversion viability.
Construction Budget and Contingencies: Change of use projects frequently encounter unexpected conditions. Include 10-15% contingency reserves in conversion budgets to address surprises without derailing the project. Experienced contractors help manage these risks and reduce the likelihood of cost overruns that borrowers need to cover with additional money.
Timeline Realism: Conversion projects typically take longer than anticipated. Build realistic timelines with adequate cushion, ensuring your financing accommodates potential extensions. Understanding that projects may take an additional few months beyond initial estimates helps borrowers plan appropriately.
Advantages of One West Change of Use Financing
Specialized Expertise: One West’s team understands property modification projects, evaluating both current condition and future potential. Our experience helps borrowers navigate complex transactions.
Fast Decisions: Traditional lenders struggle with change of use projects. One West makes decisions quickly and funds in 8 days, allowing borrowers to secure conversion opportunities before competitors act.
Flexible Structures: One West customizes financing to fit your specific project rather than forcing borrowers into rigid loan products. This flexibility provides multiple options rather than one-size-fits-all terms.
High Loan-to-Value: At 85% LTV, One West’s change of use loans minimize equity requirements while maintaining appropriate project capitalization. This high leverage allows borrowers to preserve capital for other investments.
Non-Recourse Protection: One West’s non-recourse structure provides important liability protection while pursuing repositioning opportunities. Borrowers can undertake ambitious projects without risking personal assets beyond their equity investment.
No Prepayment Penalties: One West’s no-prepayment-penalty structure gives borrowers complete flexibility to exit when advantageous, whether that occurs after one year or at the end of the loan term.
Change of Use Conversion Example
To illustrate how change of use loans work in practice, consider this example:
Project: Retail strip center conversion to office complex
A 40,000 square foot strip retail center struggles with 50% vacancy. The property owner recognizes strong demand for suburban office space and decides to convert the property.
- Purchase Price: $3,000,000
- Modification Budget: $2,000,000
- Total Project Cost: $5,000,000
- One West Loan (85% LTV): $4,250,000
- Owner Equity (15%): $750,000
Conversion Work: HVAC upgrades for office use, restroom expansion, interior demising walls, parking reconfiguration, facade improvements, and signage.
Timeline: 18 months (3 months permits, 9 months construction, 6 months lease-up)
Payments: Interest-only monthly payments during construction with option for interest reserve
Outcome: Repositioned property achieves 90% occupancy at office rental rates 40% higher than previous retail rents, generating sufficient income to support refinancing into permanent mortgages. The borrower successfully converted the asset, avoiding the risk of continued retail decline.
Frequently Asked Questions
How much can I borrow for a property conversion?
One West provides change of use loans from $3 million to $50 million at up to 85% LTV. The specific loan amount depends on the property, conversion scope, borrower experience, and projected value in the new use.
What are typical monthly payments during conversion?
During the modification period, most borrowers choose interest-only monthly payments or utilize an interest reserve that capitalizes interest. This preserves cash flow when the property generates no income.
How long do conversions take?
Most conversion projects require 12 to 36 months from acquisition through completion and initial stabilization. Simple conversions may take 12-18 months, while complex projects often need 24-36 months.
Do I need prior conversion experience?
While experience helps, One West evaluates projects holistically. Strong projects with experienced contractors can succeed even if the property owner hasn’t personally completed conversions previously. Surrounding your project with experienced professionals demonstrates capability.
What if zoning approval is denied?
Zoning approval is typically a contingency in loan commitments. If permits or rezoning are denied, deals structured contingent on approvals can terminate without penalty. This protects borrowers from committing to unviable projects.
Can I convert property I already own?
Yes. One West finances conversions structured as cash-out refinancing for property owners who want to reposition assets they currently own.
What are typical conversion costs?
Modification costs vary dramatically based on project scope. Simple retail-to-office conversions might cost $30-50 per square foot, while complex office-to-residential projects often require $100-150+ per square foot.
Will my property generate income during construction?
Most conversion projects require vacating buildings during construction, eliminating rental income. One West’s interest reserve option helps manage cash flow, with interest capitalized until the property generates income in its new use.
What information do I need for loan application?
Borrowers need comprehensive information including current property details, architectural plans, detailed modification budgets, market analysis, contractor qualifications, project timeline, and exit strategy. Providing thorough information helps One West evaluate projects quickly.
Why Choose One West for Change of Use Financing
One West’s 8-day funding timeline allows borrowers to secure properties quickly. At 85% LTV, we minimize equity requirements for conversion projects, making more deals feasible. We build true partnerships with borrowers, working collaboratively through issues rather than rigidly enforcing terms that may not fit evolving project needs.
As a St. Louis-based lender, One West understands Missouri markets but finances conversions nationwide throughout the United States. We bring both local expertise and national perspective to every project. Our services extend beyond simple lending—we partner with borrowers to help them succeed in transforming properties for new uses.
Getting Started with Your Conversion Project
Ready to reposition a commercial property for today’s market? Here’s how to begin:
- Contact One West at (314) 970-4061 or loans@onewesthardmoney.com
- Discuss your conversion vision including current property details, target use, modification scope, and timeline
- Submit project materials including property information, preliminary plans, budget estimates, and market analysis
- Receive loan commitment outlining terms, conditions, and funding
- Close quickly and begin transforming the property
Transform Properties, Create Value
Change of use projects breathe new life into underutilized buildings while meeting current market demands. Whether you’re converting retail to office, office to residential, or industrial to mixed-use, One West Hard Money provides the financing expertise and capital to make your vision reality over the coming years.
Our change of use loans from $3 million to $50 million feature 85% LTV, competitive 9.5% fixed interest rates, flexible 12-36 month loan terms, non-recourse structure, and funding in just 8 days. We understand the complexities of property modification and structure loans that support successful repositioning.
Borrowers choose One West because we provide the money, expertise, and flexibility needed to complete complex conversion projects. We’re ready to help you access the funds you need and provide the assistance and information necessary to reposition commercial properties successfully.
Contact One West today to discuss your change of use project and discover how our specialized financing can unlock your property’s potential in a new role.
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