Bridge lending will become more aggressive going forward with more entrants coming into the space, as well as a wall of maturities set to come due. Around $875B is expected to come due in 2026 alone. Lenders are done extending and pretending, assets are getting taken back and forced sales are accelerating. That combination will be a major setup for bridge lending over the next 12 to 36 months. The lack of available equity is also leading to more borrowers looking for bridge money. There will be a focus on transitional business plans and volatility in fixed-rate markets. The availability of capital still outpaces demand leading to sustained or competitive bridge loan terms offered. Borrowers will see more aggressive underwriting because of the amount of liquidity in the sector.
Leverage will be between 65% and 80%. Spreads will be between 250 and 600 basis points depending on if the deal is a light value-add versus distressed. All-in rates will be around 6% to 10%. Count on lenders to remain consistent and disciplined in underwriting. Debt yield requirements have seen some tightening, which is likely to be sustained. Bridge lenders will be more focused on trying to solve capital problems/workouts versus true value-add deals. Lenders will concentrate less on peak-cycle valuations and more on current basis, in-place cash flow and the refinance market as it actually exists.
Count on Mesa West, ACRE, Ladder Capital, Fortress, Benefit Street Partners, Brookfield, MF1 Capital, Pearlmark, Bloomfield Capital, Crestline Investors, Balbec Capital, D2, LoanCore Capital, LaSalle Debt Investors, Pensam, Obra Real Estate, Thorofare Capital, Emerald Creek Capital, BridgeInvest, 3650 Capital, Red Oak Capital Holdings, CrossHarbor Capital, A10 Capital, Arbor Realty Trust, W Financial, Edgewood Capital and Avant Capital to be some of the biggest players. Life companies such as Barings, Guardian Life and Security National Commercial Capital, along with banks such as Bank OZK, Regions and Banc of California, will also be active.
RRA Capital seeks transitional multifamily, lease-up stories, recapitalizations and situations where the asset is good, but the capital stack is broken. Select industrial and niche assets will also be considered where the basis makes sense. The lender sees a 60% to 70% LTC sweet spot with meaningful sponsor equity behind the deal. Pricing for quality bridge executions will land somewhere in the SOFR+ 350 to 550 basis point range depending on leverage, market, sponsorship and business plan complexity. RRA likes markets with long-term population growth, job formation and diversified economies. Texas, Florida, parts of the Southeast and select Mountain West markets will be sought after. Greystone will target multifamily and health care assets nationwide, primarily for agency or HUD exits. Borrowers will see 250 to 600 basis point spreads over SOFR depending on property type and 60% to 80% stabilized LTV. Greystone will look for borrowers with related experience, net worth, liquidity and equity in a transaction.
Avatar Financial seeks situations where the collateral is understandable, the basis is supportable and the sponsor has a realistic business plan. The lender sees opportunities in multifamily, industrial, select retail, hospitality and special situations where the borrower needs speed, certainty or flexibility. Loans will fall around mid-50% to low 60% LTV, depending on the collateral, sponsorship, cash flow, recourse, business plan and exit strategy. Avatar lends nationally except for Nevada and will focus on markets with durable demand drivers, diverse employment, liquidity and a borrower base that understands how to execute in that market. Forman Capital targets $10M to $150M bridge loans with 8.5% to 11.5% rates and 75% leverage. The lender will work with all property types nationwide, with a focus on multifamily.
Count on bridge lenders to target multifamily and industrial. Hotel properties with a major flag and grocery-anchored retail will also see capital. There will also be more interest in office, especially Class A deals going forward. Look for continued demand for new construction lease-up projects, mark-to-market value-add and deals with meaningful new equity investments.
Bridge lenders will look toward the major MSAs and secondary markets. Texas, New York, Florida, California and Mountain West will be some of the most active areas. Count on increased interest in Chicago and San Francisco going forward. The biggest bridge opportunities will come from markets that saw the most aggressive capital formation and refinancing assumptions during the low-rate era — Sun Belt multifamily in particular. Some Texas cities, Southwest markets and more tertiary areas remain challenging. Supply dynamics, property operations or binary demand generators are some drivers making these areas challenging. Bridge lenders are increasingly cautious on office-heavy markets and areas with weak population growth, declining business formation or political/regulatory overhang. Markets with heavy new supply pipelines and weak absorption will continue to struggle.
Bridge lenders will be more aggressive on liquidity and will be trying to solve 50% net worth. Experience matters and lenders will want sponsors with real operating capability, meaningful liquidity and enough net worth to survive volatility. Sponsors need real skin in the game and alignment with lenders. Recourse will increasingly return on transitional or higher-risk deals.
