Retail and shopping center bridge loans

What lenders look at

Anchor tenants

Who the anchors are, their lease terms and whether they own or lease their space. Anchors drive traffic for the rest of the center.

Co-tenancy clauses

Clauses that let inline tenants reduce rent or terminate if an anchor leaves or occupancy drops. Lenders read these closely because they can turn one vacancy into several.

Dark anchors

An anchor that still pays rent but has closed its store. Lenders look at the remaining term, the tenant's right to sublease and what happens at lease end.

Lease structure

NNN, modified gross or gross leases, recovery of taxes, insurance and common area maintenance, and how much expense the landlord actually carries.

Sales per square foot

Where tenants report sales, lenders use them to judge whether rents are sustainable and whether tenants are likely to renew.

Rollover and re-tenanting cost

Leases expiring during the loan term, plus tenant improvements and leasing commissions needed to fill vacancies.

How leverage works

Many asset-based bridge lenders lend around 60–70% of as-is value on retail, and less for centers with a dark anchor, heavy near-term rollover or high vacancy. When the plan involves re-tenanting, some lenders size to loan-to-cost and fund tenant improvements and leasing commissions from a holdback. Single-tenant buildings are often sized off the tenant's credit and remaining lease term as much as the real estate.

Use the commercial bridge loan sizer to see whether LTV or LTC decides your loan. The deal form asks for square feet, occupancy today and current NOI, so lenders see the numbers they size on.

Documents lenders ask for

• Rent roll with lease start, expiration, options and recovery terms
• All leases and amendments, including co-tenancy and exclusive use clauses
• Tenant estoppel certificates
• Trailing 12-month operating statement and CAM reconciliations
• Tenant sales reports, where provided
• Leasing plan and TI/LC budget for vacant space
• Purchase contract or current loan payoff statement
• Site plan showing tenant layout and parking
• Insurance declarations and loss runs
• Entity documents and sponsor real estate schedule

How fast it closes

Retail bridge loans commonly close in about 21–30 days. Lenders usually require a Phase I environmental, which on retail often looks closely at current or former dry cleaners and gas stations, plus a property condition report and, on larger centers, a survey and zoning report. Collecting tenant estoppels is often the slowest step, especially with national tenants that route requests through corporate real estate.

Common bridge scenarios

Dark anchor replacement

Acquire or refinance a center where an anchor has gone dark, and fund the re-tenanting and build-out.

Re-leasing a vacant center

Buy a center with high vacancy at a basis that supports leasing it back up.

Maturing loan payoff

Pay off a CMBS or bank loan that can't be refinanced because of rollover or vacancy.

Pad site and outparcel work

Bridge the period while outparcels are leased or sold to improve the center's value.

Typical exit

Stabilized retail typically refinances with a bank, CMBS or life company, or is sold; single-tenant net lease properties are often sold to net lease buyers.