My construction loan closed at 65 percent LTC and I thought I had it figured out

That line about the GC's contract is where I'd push too, because in my reading, if the GC scheduled floor three framing before floor two mechanical sign-off, that is not an administrative gap, that is a sequencing decision that transferred carry cost to you without your sign-off. I have not built anything, I am closing on a three-bed next month and I am already paranoid about draw timing on something that has zero draws, so take that for what it is. But I have spent enough time reading construction loan post-mortems to know that the $2,800 a month owner's rep solution above is real, and the people who find it in month two rather than month seven are the ones who either had it written into the GC agreement from the start or got lucky. The question I keep landing on with Cedar City specifically is whether you are dealing with a lender who has actually done rural Utah multifamily before, because the inspector scheduling problem your friend hit in Provo gets worse when there is no local inspector on retainer and someone is flying in on a fixed day regardless of site status.

The sequencing problem you are describing is a lien waiver timing problem wearing an inspection delay costume. Most construction lenders release draws against completed line items because their inspector's approval is the legal trigger that keeps them senior to mechanic's liens filed by subs who claim they worked but were not paid. When the inspector holds the floor-two mechanical sign-off because it is not "fully complete," they are protecting the lender's lien position, and your GC's sequencing decision to push ahead on floor three created the gap. The lender is not being difficult. They are following the one protocol they will never waive, because releasing a draw before a sub's work is certifiably complete and waived opens the door to a lien that could prime the construction loan.

The piece that changes this answer is whether your GC's contract has a pay-when-paid clause tied to draw releases, and how the schedule of values was structured at close. If the schedule of values lumped mechanical rough-in across all three floors into a single line item, you will not get a partial release on floor two's portion alone, because the inspector cannot certify a fraction of one line. If it was written floor by floor, you have an argument for a partial draw on floor two even while floor three frames out, and the conversation with your lender becomes administrative rather than structural. What does your schedule of values look like in terms of floor-by-floor breakdown versus trade-by-trade breakdown, because that single document is what either traps you in this cash drag for the next several months or gives you a path to realign the draw schedule to the actual sequence of work?

Thirty-four units in Cedar City with a mechanical sequencing bottleneck is a rough spot to be in nine months deep.

What does your GC's contract say about who eats the carry when his sequencing creates an uninspectable condition?