Self-storage owners certainly have many choices for the financing of their properties. Debt capital providers range from the community, regional and mega banks to CMBS, life insurance companies and other private lenders. While interest rate, proceeds (LTV) and recourse are typically the big three drivers of lender selection, there is often more to making this decision. Consideration should also be given to finding a lender who is familiar with self-storage, the investment objectives of the ownership, and the attributes of the property being financed. Not all transactions are suited for long-term financing; sometimes a more interim arrangement is the best course of action. Something we would call in the industry… a bridge loan.
This type of loan is designed to “bridge” a gap or time period that calls for a different type of financing vehicle than a more permanent type of loan.
Bridge loans are utilized for some of the following scenarios:
- Acquisition or refinancing of an underperforming property
- Shorter term investment holding period
- Additional development opportunities