Value-add investment

Bridge finance & permanent takeout

Can the stabilized asset repay the temporary facility?

Overview · What & why

A decision, before a calculation.

Bridge debt funds a period when a property is changing and may not qualify for long-term financing. Permanent takeout depends on the eventual value, income and lending terms. A plan that works only if refinancing is generous is exposed to both operating and capital-market risk.

A concrete example

A $7M bridge payoff against a $10M stabilized value and 65% maximum LTV allows at most $6.5M before coverage limits and fees. At least $500K of new capital is needed if no other cash is available.

What to remember

Test the takeout as a separate financing decision.

Before using this in a project: Bridge maturity and extensions, projected stabilized NOI, takeout terms, fees and payoff balance.