A Bird’s Eye View
Monthly Newsletter
How Successful Owners are Navigating a Complex Bridge Debt Market
May 2025
Key Highlights
Bridge debt remains available across commercial real estate asset classes, but we have observed some variation in lender appetite across market tiers.
Cash-neutral bridge executions are valuable to owners. They remain achievable when asset performance, location, and the business plan generate bids, however, they have become more difficult to achieve when asset performance is less robust.
The Talonvest team has received competitive bridge quotes in recent weeks on a variety of asset types, though execution of a competitive bidding process depends heavily on lender relationships and experience managing the process.
Bridge Debt Underwriting in 2025
As we approach the halfway mark in 2025, bridge capital remains available to owners across commercial real estate asset classes, and it continues to be a vital tool that owners are using to address a variety of scenarios. Those who place a focus on procuring bids are sourcing loan programs with satisfactory pricing and loan terms. At the same time, there are nuances that owners should be aware of long before they go to market.
In recent months, dynamics that emerged in the post-pandemic environment have become more pronounced. Perhaps most notable is the heightened level to which the availability of bridge debt and the structure of loan packages has come to depend on geography. Bridge lenders continue to issue loans across regions, but there is a clear bifurcation in how deals are being underwritten.
Primary markets, typically characterized by large, robust economies and diverse employer bases, are attracting interest from many capital providers. Owners with assets in these markets are, on average, seeing higher proceeds and more advantageous pricing, especially when the property has strong in-place performance or a credible path to stabilization.
Conversely, deals in secondary and tertiary markets are being met with greater scrutiny. Underwriting standards are somewhat tighter, with lenders favoring more cautious operating assumptions. Even when an asset shows reasonable performance, questions around durability are prompting lenders to reduce leverage or adjust terms.
The resulting dynamic is a two-speed bridge lending market. In primary markets, owners are securing bridge financing on satisfactory terms and under expeditious timelines. Those in smaller markets are still obtaining financing but tend to face more conservative loan sizing and extended closing timelines to accommodate lender information requests.
In recent months, dynamics that emerged in the post-pandemic environment have become more pronounced. Perhaps most notable is the heightened level to which the availability of bridge debt and the structure of loan packages has come to depend on geography. Bridge lenders continue to issue loans across regions, but there is a clear bifurcation in how deals are being underwritten.
Primary markets, typically characterized by large, robust economies and diverse employer bases, are attracting interest from many capital providers. Owners with assets in these markets are, on average, seeing higher proceeds and more advantageous pricing, especially when the property has strong in-place performance or a credible path to stabilization.
Conversely, deals in secondary and tertiary markets are being met with greater scrutiny. Underwriting standards are somewhat tighter, with lenders favoring more cautious operating assumptions. Even when an asset shows reasonable performance, questions around durability are prompting lenders to reduce leverage or adjust terms.
The resulting dynamic is a two-speed bridge lending market. In primary markets, owners are securing bridge financing on satisfactory terms and under expeditious timelines. Those in smaller markets are still obtaining financing but tend to face more conservative loan sizing and extended closing timelines to accommodate lender information requests.
Cash-Neutral Execution Hinges on Market Fundamentals
Across the industry, owners have shown an increased interest in cash-neutral bridge loan packages where financing is extended without requiring the owner to bring additional equity to the project. While many owners have succeeded in rolling into a bridge product without additional equity funding, this is another area where the market is showing signs of a split.
In recent months, cash-neutral executions have most frequently been observed in primary markets, especially when the owner has an extensive operating history with the asset. Bridge lenders gain comfort in these scenarios because they can underwrite based on proven results, and oftentimes, stronger submarket trends. For owners of assets that fit this profile, a cash-neutral execution can be a meaningful boon to the business plan and position the project for success.
On the other hand, bridge lenders have become increasingly wary of accommodating cash-neutral executions in cases where the asset exhibits weaker fundamentals. Sponsors seeking to bridge financing for assets with softer in-place cash flow or slower-than-expected lease-up timelines are encountering resistance from lenders, and some lenders are focusing discussions on potential equity injections as a prerequisite for moving forward. As alluded to above, equity injections have become more common in secondary and tertiary markets, where lenders perceive greater volatility in leasing velocity and long-term asset performance.
When reviewing business plans that show signs of stress or are believed to include heightened risk, lenders are demonstrating a strong inclination towards tighter underwriting standards that may result in reduced loan sizing or equity top-ups. Unfortunately, this can result in a stalled transaction, and impacted owners have been forced to reevaluate business plans as well as capital strategy.
In recent months, cash-neutral executions have most frequently been observed in primary markets, especially when the owner has an extensive operating history with the asset. Bridge lenders gain comfort in these scenarios because they can underwrite based on proven results, and oftentimes, stronger submarket trends. For owners of assets that fit this profile, a cash-neutral execution can be a meaningful boon to the business plan and position the project for success.
On the other hand, bridge lenders have become increasingly wary of accommodating cash-neutral executions in cases where the asset exhibits weaker fundamentals. Sponsors seeking to bridge financing for assets with softer in-place cash flow or slower-than-expected lease-up timelines are encountering resistance from lenders, and some lenders are focusing discussions on potential equity injections as a prerequisite for moving forward. As alluded to above, equity injections have become more common in secondary and tertiary markets, where lenders perceive greater volatility in leasing velocity and long-term asset performance.
When reviewing business plans that show signs of stress or are believed to include heightened risk, lenders are demonstrating a strong inclination towards tighter underwriting standards that may result in reduced loan sizing or equity top-ups. Unfortunately, this can result in a stalled transaction, and impacted owners have been forced to reevaluate business plans as well as capital strategy.
Observations on Recent Bridge Quotes
Recent bridge quotes procured by the Talonvest team shed light on the state of the capital market. Quotes are being extended across asset classes, including multifamily, storage, and light industrial. It is possible to run a competitive bidding process to obtain several quotes over multiple bidding rounds, but it requires a strong lender network and experience managing the process and the stakeholders.
In one example, the Talonvest team worked with the owner of a multifamily asset to procure two quotes. One lender, a debt fund, offered a cash-out bridge package up to $22.4 million over a three-year term. The quote was structured with a 400-basis point spread over 1-month SOFR and included a 12-month option to extend in return for a 25-basis point fee. Terms also included a 1% origination fee and a 50-basis point exit fee upon prepayment.
A second lender designed a cash-neutral package up to $21.4 million over a 3-year term. The spread on this quote was 310 basis points over 1-month SOFR. The lender offered an option to extend for an additional twelve months at a cost of 25 basis points. Additional terms included a 100-basis point origination fee and a 25-basis point exit fee. This package was designed to finance a multifamily asset in a strong submarket within a major city, and it is instructive that it included more advantageous pricing compared to the cash out option noted above.
In another example, Talonvest worked with the owner of a storage asset to obtain a bridge quote from a life company. The quote allowed for loan proceeds up to $25.25 million with a four-year term and a one-year extension at the owner’s option. Pricing was based on a 325-basis point spread over 1-month SOFR.
In one example, the Talonvest team worked with the owner of a multifamily asset to procure two quotes. One lender, a debt fund, offered a cash-out bridge package up to $22.4 million over a three-year term. The quote was structured with a 400-basis point spread over 1-month SOFR and included a 12-month option to extend in return for a 25-basis point fee. Terms also included a 1% origination fee and a 50-basis point exit fee upon prepayment.
A second lender designed a cash-neutral package up to $21.4 million over a 3-year term. The spread on this quote was 310 basis points over 1-month SOFR. The lender offered an option to extend for an additional twelve months at a cost of 25 basis points. Additional terms included a 100-basis point origination fee and a 25-basis point exit fee. This package was designed to finance a multifamily asset in a strong submarket within a major city, and it is instructive that it included more advantageous pricing compared to the cash out option noted above.
In another example, Talonvest worked with the owner of a storage asset to obtain a bridge quote from a life company. The quote allowed for loan proceeds up to $25.25 million with a four-year term and a one-year extension at the owner’s option. Pricing was based on a 325-basis point spread over 1-month SOFR.
Final Thoughts
Bridge debt remains a viable and often necessary financing tool, but success in today’s market hinges on an owner's ability to navigate lenders and market dynamics. As capital providers sharpen their focus on asset performance, location, and sponsor experience, owners should begin planning and holding strategy discussions well in advance of going to market to procure quotes. As lender sentiment has widened between primary and secondary markets, owners may consider the value of engaging the right partners to review business plans and understand how to present the project to prospective capital providers. Owners who understand these market realities, and adapt accordingly, are best positioned to secure bridge financing that supports the business plan and long-term objectives.
Talonvest Capital specializes in structuring and negotiating comprehensive capital solutions for owners of industrial, self-storage, multifamily, office, and retail assets. We create tailored capital solutions for our clients by sourcing cutting-edge lending programs and advising on capital markets trends.
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