Terry Carroll and Kathryn Smith, partners in Seyfarth's real estate practice, will present a Strafford webinar on May 21, “Bridge Loans in Commercial Real Estate: Financing and Flexibility in an Uncertain Market.”
explanation
When used optimally, bridge loans provide a financing alternative for transitional properties that need to be renovated, repaired, or leased before a borrower can qualify for a “permanent” loan. Increasing borrowing costs, rising interest rates, and a weak commercial real estate market have created an opportunity in the bridge loan market.
The term of a bridge loan is usually short, ranging from a few months to a few years. Although bridge loans may have higher interest rates and costs than traditional permanent loans, there are several benefits to taking out a bridge loan, including speed and flexibility of execution. However, their usefulness also comes with risks, and a careful evaluation should be made to determine whether it is the right loan for the borrower's objectives and circumstances.
Bridge financing can take the form of senior, junior, mezzanine, or even preferred equity. Counsel must have a thorough understanding of each form of financing to best define the relationship of the bridge loan to other financings in the intercreditor agreement. Because bridge loans are typically floating rate transactions, special attention must also be paid to managing interest rate risk.
Our prestigious panel will discuss the structures and nuances of bridge loans and key points to consider when weighing the pros and cons of these short-term financing solutions, discussing questions such as:
What are some scenarios in which bridge loans are particularly useful? What are the advantages and disadvantages of bridge loans? Under current market conditions, what are the risks associated with bridge loans for both borrowers and lenders? What are the advantages and disadvantages of mezzanine financing and preferred equity financing?
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