Bridge Loans: Everything You Wanted To Know

As the name implies, bridge loans carry through a critical need for active developers by giving life to a new undertaking in the calendar months before lenders experience confident adequate to do available a building loan, or a repositioning loan in the lawsuit of an existent project. But existent estate bridge loans have got other uses, both tactical and strategic, that do them indispensable in today's New House Of York marketplace.

For new development projects, bridge loans supply funding for property assemblages, land site acquisition, and development expenses. Not only make such as loans provide the developer with the finances to get a site, they also supply the external respiration room that the developer needs to make the architectural designings and analyses for new building projects. Just as important, bridge loans offer an chance to polish the developer's property repositioning or acquisition program in the lawsuit of an existent project.

During the development--or repositioning--planning stage, the developer's financial advisor have the clip to arrange senior building and first balcony loan financing. For example, in recent calendar months our firm have arranged highly competitory funding for undertakings under the 80/20 Chemical Chemical Bond Financing Program, and other undertakings under the recent Autonomy Bond Program for business district Manhattan. Still others have got got been condominium or office undertakings in which the fiercely competitory New House Of York marketplace necessitates developers to travel extremely rapidly to get control of desirable locations.

Bridge loans have other strategic usages for developers. By enabling building to commence before a formal building loan is in place, a developer may clock building to avoid a heavy wintertime agenda with the attendant extra costs, or program the completion of building to cooccur with the primary rental and sales calendar calendar months beginning in the springtime and continuing into the summertime season.

A typical bridge loan have a term of 12 months or less, with spreadings ranging upwards from 225 over 30-day LIBOR depending upon the lender's position of the location, viability of the project, and repute and financial strength of the developer. Committedness fees of 1% are common, although lower fees can sometimes be negotiated. In some instances, committedness fees on bridge loans can be credited against fees on subsequent loans from the same lender. Guarantees required for such as loans are highly negotiable.

Our firm, The Singer & Bassuk Organization, have recently arranged over $250 million in bridge loans for seven separate transactions. In each instance, these loans have got enabled developers such as as The Moinian Group; Nathan Berman; a joint venture consisting of Basis Real Number Estate Advisers, a wholly owned subordinate of Bay State Mutual Life Insurance Company and Adellco LLC; and a joint venture comprised of Jeffrey Levine's Douglaston Development and Continental Properties owned by the Fisch family, to get land site control and arrange for the orderly start of construction.

I anticipate bridge loans to play an increasing function in New House Of York funding and see a tendency where lenders providing the ultimate funding for a project's development to supply bridge loans in order to cement the business and the human relationship at an early stage in an increasingly competitory market.