Property One Group
18. November 2021

Bridge Loans – When Things Have to Get Done Quickly

In today’s market environment, anyone wishing to achieve good returns from real estate has to respond quickly and flexibly to opportunities, which means “striking while the iron is hot”. This is precisely where so-called “bridge loans” come into play. They have a term of only a couple of months and are set up and drawn down within a short space of time. The aim is to tide over the period between the time when real estate is purchased and the disbursement of the bank financing. This enables investors to purchase real estate quickly, which can have major advantages when looking for properties. A long-term loan can then be set up in parallel without any time pressure, thereby structuring an optimal financing solution. Optimising the long-term financing structure means that the costs of the bridge loan can be offset over the term.

 

Increasing Significance of Bridge Loans
An attractive property at an affordable price – this is what every real estate investor looks for, but only a few actually find. Due to pressure to invest and the negative interest rate environment, real estate investors have to content themselves with ever lower returns. However, someone looking for a good return has to seek out alternatives to offering the highest price. Other factors such as speed, transaction security and discretion are important when successfully bidding to purchase a property. Bridge loans allow investors to act quickly, and thus to gain an advantage when competing for attractive properties.

As a result, bridge loans are more important than ever, and are being used by professional real estate investors with increasing frequency to complement their financing structure. At the same time, traditional lenders are becoming more cautious and risk-averse, resulting in longer processing times for loan applications. As a result of this, the small number of potential lenders are confronted with high and steadily rising demand.

 

Optimal Financing As the Goal

A bridge loan also gains time for a real estate investor to put in place an optimal financing structure. As there is no time pressure, offers can be obtained from various lenders and compared with one another, making it possible to negotiate the most favourable financing terms. The savings that can be achieved by securing optimal terms for long-term financing make up for the costs of the bridge loan, in most cases by far.

 

Short-Term Liquidity Squeezes
It does not make any sense for real estate investors to hold large liquidity reserves, especially during times of negative interest rates. However, if an opportunity arises to increase the portfolio size at short notice, or if one property has to be sold to finance another, often sufficient liquidity is not available over the short-term in order to act quickly. Bridge loans offer the optimal solution to these short-term liquidity squeezes.

 

The Right Partner for Bridge Loans
Setting up a bridge loan requires lean processes, a highly practical approach and a deep knowledge of real estate in order to be able to secure swift, smooth and professional implementation. In Switzerland, only a few financing partners have these characteristics and can bring the necessary liquidity to the table. Due to their frequently protracted credit decision making processes, traditional lenders such as banks, insurers and pension funds are in most cases not geared towards acting urgently.

Property One brings together under one single roof a long-standing, thorough knowledge of the market, comprehensive real estate expertise and financing know-how. The ONE Real Estate Debt Fund of Property One was launched in order to offer borrowers alternative, professional access to financing.

 

The fund offers short-term loans and comes into play wherever traditional mortgage institutions are unable to accommodate a high level of lending or where time is of the essence. A swift turnaround of applications is essential, especially for bridge loans in order to make a lending decision. The loans granted are always linked to a parcel of land and/or a property, which serves as collateral.

However, thanks to Property One’s real estate DNA, the company can draw on in-depth market knowledge and combine our real estate expertise with financial market know-how for the benefit of borrowers.

Property One Is Your Partner for Real Estate Loans
Property One Investors Ltd. has been authorised by FINMA as a manager of collective assets since December 2020. Property One launched the ONE Real Estate Debt Fund in February 2021. This fund was created to allow real estate investors access to more financing opportunities using mostly subordinated loans.

The loans granted by the ONE Real Estate Debt Fund are secured by mortgage certificates. The amount of the loans ranges between CHF 1 million and CHF 30 million, and the maximum term of the loan is 36 months. Loans are granted for investment properties, bridge financing and construction projects (including those intended for sale), for commercial and residential use (excluding owner-occupied housing). All kinds of commercial uses are included (offices, sales, logistics, manufacturing, industry, hotels, etc.).

 

 

Property One’s offering is aimed at professional players in the Swiss real estate market, including property owners, architects, project developers, building contractors, etc., and offers an additional option alongside conventional real estate financing.

 


Get in touch with us:

 

Manuel Frei

Immobilien-Kreditspezialist

T +41 41 552 51 03 M +41 79 533 29 31 E-Mail

The granting of credit requires an in-depth assessment and approval of the counterparty, the security and the transaction as a whole.

Share: