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Bridge Loans in Commercial Real Estate: Financing and Flexibility in an Uncertain Market

A live 90-minute premium CLE video webinar with interactive Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Tuesday, May 21, 2024 (in 3 days)

1:00pm-2:30pm EDT, 10:00am-11:30am PDT

(Alert: Event date has changed from 11/28/2023!)

or call 1-800-926-7926

This CLE webinar will discuss the use and structuring alternatives for bridge loans in the current commercial real estate market. The panel will examine the advantages and disadvantages of bridge loans and provide guidance on balancing their utility versus the risks associated with this form of short-term financing.

Description

When used optimally, bridge loans provide a financing alternative for transitional properties where renovations, repairs, or leasing need to be done before a borrower can qualify for a "permanent" loan. Increased borrowing costs, higher interest rates, and a distressed commercial real estate market have created opportunities within the bridge loan market.

Bridge loans typically have shorter terms--between a few months and a few years. While these loans might have higher interest rates and costs than traditional, permanent financing, there are several advantages to using a bridge loan, including speed of execution and flexibility. However, with their utility also comes risk that must be carefully evaluated to ensure the loan makes sense for a borrower's goals and circumstances.

Bridge financing can take the form of senior, junior, mezzanine, or even preferred equity. Counsel should have a thorough understanding of each form of financing, and how best to define the relationship between the bridge loan and any other financing in any intercreditor agreement. Because bridge loans are typically floating rate transactions, special attention must also be paid to managing interest rate risk.

Listen as our authoritative panel discusses the structuring and nuances of bridge loans and provides key considerations when weighing the advantages and disadvantages of these short-term financing solutions.

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Outline

  1. Overview of bridge loans
    1. Structure: senior, mezzanine, and/or private equity
    2. Rate: short term vs. floating rate
    3. Impact on intercreditor agreements
  2. Current market conditions and reasons for the current rise in bridge loans
  3. Advantages of bridge loans
    1. Fast funding
    2. Flexibility
    3. Prepayment is simple
    4. Interest-only payments
  4. Disadvantages of bridge loans
    1. Higher costs
    2. Loans need to be refinanced quickly
  5. Key considerations for borrowers and lenders

Benefits

The panel will discuss these and other key issues:

  • What are some scenarios in which a bridge loan would be particularly useful?
  • What are the advantages and disadvantages of bridge loans?
  • What are some of the risks associated with bridge loans for both borrowers and lenders under current market conditions?
  • What are pros and cons of mezzanine vs. preferred equity financing?

Faculty

Carroll, Terry
Terry Carroll

Partner
Seyfarth Shaw

Mr. Carroll’s practice is centered on representing lenders in real estate financing matters. His work includes...  |  Read More

O'Donnell, Siobhan
Siobhan O'Donnell Sachs

Partner
Ballard Spahr

Ms. O'Donnell is Team Leader of the firm’s CMBS Loan Origination Team who focuses her practice in the area of...  |  Read More

Smith, Kathryn
Kathryn Smith

Partner
Seyfarth Shaw

Ms. Smith returns to Seyfarth after spending more than four years as senior vice president and general counsel at the...  |  Read More

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