Construction loan GMP due diligence before the first drawdown
Construction loan GMP due diligence turns on four documents. Read them and you know whether you are lending against a price or against a careful estimate.
GMP fundamentals
What the ceiling covers, what it leaves open, and which documents answer that.
What this covers
The questions in this category
- What the ceiling actually guarantees
- GMP against lump sum and cost plus
- The amendment, exhibit by exhibit
- Reading a schedule of values
- What open book lets an owner see
- What preconstruction should have produced
Published
14 pieces
A construction budget review an investor can do in an afternoon
A construction budget review an investor can do in an afternoon: six lines that tell you whether the number is settled or still an estimate in a suit.
The GMP review timeline an owner can fit before signature
The GMP review timeline an owner can fit before signature is shorter than most people assume, because the reading runs alongside legal and lender work.
The independent GMP review an owners representative should ask for
The independent GMP review an owners representative should ask for: what it covers, what it produces, and how it holds up when the client reads it.
Signing a GMP under time pressure, and what it costs later
Signing a GMP under time pressure moves the reading to after the fact, where every finding is a change order instead of a negotiating position.
Construction loan lender questions a developer cannot answer yet
Construction loan lender questions a developer cannot answer yet, and the four documents that turn each one into a number before the bank asks it.
A construction overrun, and the equity waterfall it runs into
A construction overrun and the equity waterfall underneath it decide who absorbs the first dollar above the ceiling, and it is rarely the lender.
Self storage construction cost risk, on a repeatable building and a difficult site
Self storage construction cost risk is not in the building, which repeats. It is in the site, which never does, and in the entitlements attached to it.
Hotel operator requirements construction receives after the price is fixed
Hotel operator requirements construction receives after signature are normal and foreseeable, which is why they belong in the price as a stated basis.
Data center GMP contract risk, and pricing a design that is still moving
Data center GMP contract risk comes from fixing a price on a building whose purpose is defined by equipment the tenant has not finished choosing yet.
Multifamily GMP cost risk, and the three lines that move most
Multifamily GMP cost risk is concentrated. Three lines account for most of the movement on almost every job, and all three are readable before signing.
Mixed use construction GMP risk, and the two buildings inside one price
Mixed use construction GMP risk comes from pricing two buildings as one. The retail base and the tower above it behave differently in every column.
Fifteen questions to ask before signing a GMP
The questions to ask before signing a GMP, grouped by what each one protects: the price, the schedule, the scope, and the way change gets priced.
What does a guaranteed maximum price guarantee?
What does a guaranteed maximum price guarantee? A ceiling over one scope, defined on one date, and four mechanisms that move cost without touching it.