A loan with a date on it
Bridge & value-add
Twelve to thirty-six months of interest-only debt against a business plan and a defined exit.
A bridge loan is not cheap permanent debt. It is a dated instrument that exists to fund a plan — lease-up, renovation, a partner buyout, a transitional period between two stabilised states — and it is underwritten on the exit that retires it, not on today’s income.
What this programme covers
- Twelve to thirty-six months, interest-only, extension options for a fee
- Loan-to-cost including a funded capital budget, not loan-to-value on as-is
- Interest reserve funded at closing so the asset does not have to carry itself
- Sized against a stabilised exit tested at both LTV and DSCR
Loan-to-cost caps the funding; the exit test caps the sensible size. They are different numbers and the smaller one wins.
Test it on your numbersWhat underwriting actually reads
The business plan
A schedule with dates and dollars: units renovated per month, rent achieved, downtime assumed. A plan without a schedule is a hope.
The exit
Stabilised NOI, an exit cap rate, an exit interest rate and the coverage floor the take-out lender will apply. If that arithmetic does not retire the bridge, the bridge is too big.
The carry
Interest reserve sized for the full term including one extension, so a slow lease-up does not become a default.
Sponsor track record
Executions of this specific plan, on this asset class, in this market.
Who it suits
- A value-add multifamily renovation
- Lease-up of a newly completed building
- A partner buyout on a timetable
- Not this programme: Deals with no identified exit, or where the exit depends on cap rate compression alone.
Illustrative scenarios in this class
- S-05 — illustrative68-unit value-add, 24-month plan$6,360,000 · Loan-to-cost binds80% of a $7.95M total cost including a $1.35M capital budget. Interest is reserved for the full term plus one six-month extension. The exit test at a 5.75% cap and a 1.25× floor retires the bridge with roughly $900K to spare.
Questions on this programme
What happens if the plan runs late?
Extension options exist and cost a fee, usually with a paydown or a fresh reserve deposit. That is the reason to size the reserve for the extension at the outset.
Can the bridge convert to permanent debt?
A bridge-to-permanent structure is possible. It is still two credit decisions, and the second one is made against the property that actually exists at stabilisation.