Bridge loans are becoming a new standard as the N.Y.C. property market has gotten so competitive that the need for immediate access to debt has risen greatly. Bridge loans are short-term loans that by definition, is not the type of loan product or origination source, but the use of the loan itself. Bridge loans can be procured from various lenders, ranging from REITs to debt funds to private lenders, and with that comes a large spectrum of interest rates, albeit getting lower and lower recently.
Bridge loans have become the answer to real estate investors and developers’ prayers. The bridge loan is a concept not considered by many real estate investors until recently, mostly because until recently, the capital was far too expensive to make sense. But, as more and more borrowers begin to jump on board to the concept of the bridge loan, the market has become increasingly competitive, and rates have begun to drop significantly. In addition to the rapidly falling rates, bridge loans can very often be tailored to the specific needs of the borrower, and can generally be closed within two weeks.
Michael Korine, managing director of the finance & capital markets group at Berko & Associates, said, “We have seen rates continue to drop profusely, and some lenders will now conduct some of their due diligence ‘post-closing’ in order to expedite the transaction.” As a brokerage with a notably large lender network, we have the unique ability to sort through some of the more avaricious lenders and only address lenders willing to work with us at below market rates. The best finance advisory professionals have the ability to procure the most optimal financing for their clients, and it is absolutely necessary to seek out the correct match for their borrowers. Certain lending groups are only attracted to specific assets, while others offer a broad array of products. Although it borders on the impossible to track the aggregate amount of bridge loans in N.Y.C. over the past couple years due to private lenders and international funds dispensing funds so quickly, we can see that this trend is continuing, and speed is the name of the game. Lee Silpe is the senior analyst at Berko & Associates, New York, N.Y.