Debt
Bridge loans
Short-term commercial real estate financing for acquisitions, value-add business plans and properties that are not yet ready for permanent debt.
Bridge lenders finance a property on its business plan rather than on its current cash flow alone: a lease-up, a renovation, a repositioning, or a timing gap before a sale or a permanent loan.
Bridge loans are typically floating rate, with an initial term and extension options that carry conditions. Many include a future-funding component that pays for capital improvements and leasing costs as they are incurred.
We prepare the business plan, the capital budget and the cash flow projections with the sponsor, and run the request past lenders whose appetite fits the property and the plan.
Used for
- Acquisitions
- Value-add and repositioning plans
- Lease-up after construction
- Refinancing a maturing construction or bridge loan
- Recapitalizations and partner buyouts
Lenders
Debt funds, mortgage REITs, banks and other private lenders.
How bridge loans are structured
Bridge loans typically have an initial term of two to three years with one or more extension options. Each extension usually has conditions, such as a minimum debt yield or debt service coverage, no defaults, and an extension fee.
Where part of the loan pays for future capital improvements or leasing costs, that portion is typically held back at closing and advanced in draws as work is completed or leases are signed, much like a construction loan. On floating-rate loans, lenders commonly require the borrower to buy an interest rate cap for the initial term and to extend it with each extension.
Because a bridge loan is usually expected to be repaid from a sale or a refinancing, often into a permanent loan, bridge lenders look closely at the exit: the business plan and leasing assumptions, the projected stabilized income, and whether that income and the resulting value will support the sale or refinancing the plan assumes.
What bridge lenders look at
- The business plan and the capital budget
- In-place cash flow and projected stabilized cash flow
- The sponsor’s record executing similar plans
- The exit: a sale or a permanent loan, and the tests for each extension
- Interest rate hedging on floating-rate loans
How a financing runs
- 01
The loan request
We build the request with the sponsor: the business plan, sources and uses, the budget or operating history, the pro forma and the sponsor’s financial information.
- 02
Lender selection
Lenders are chosen with the sponsor by property type, market, loan size and structure before anyone is contacted.
- 03
Quotes
Lenders receive the request under confidentiality and return indicative terms. We lay the quotes side by side on leverage, pricing, recourse, prepayment, reserves and covenants.
- 04
Term sheet
The sponsor selects a lender, and we negotiate the term sheet and the application.
- 05
Closing
We coordinate the appraisal and third-party reports, answer the lender’s underwriting questions and work with counsel on the loan documents through closing.
Loan terms depend on the property, the sponsor, the lender and market conditions, and a financing may not close.
Request financing
Send us the property, the business plan and the capital you need. We will tell you how we would approach it.