Overview

Commercial Lending Solutions arranged $5,500,000 in bridge financing for a multi-tenant retail center in Los Angeles currently in lease-up. The property had signed letters of intent but limited executed leases, a pending tenant improvement buildout, and zero in-place cash flow sufficient to satisfy conventional underwriting. The assignment was to find capital that would underwrite to where the property was going, not where it stood on closing day.

The Deal

The sponsor controlled a well-located neighborhood retail center in Los Angeles and needed gap capital to carry the asset through the lease-up and tenant improvement phase. The objective was straightforward on paper: fund the acquisition or refinance, cover the TI and leasing commission obligations as new tenants built out their spaces, maintain an interest reserve to service the debt before stabilized rents hit the income statement, and exit into permanent financing once the rent roll was seasoned and a conventional lender would underwrite the cash flow.

The sponsor was not looking for a complicated structure. They needed a lender who understood that a retail center mid-lease-up is a construction-adjacent credit, not a stabilized income credit, and who would price and structure accordingly.

The Challenge

The fundamental problem was the same one that kills retail bridge deals before they get to term sheet: the property could not demonstrate the debt service coverage a bank credit committee requires, and it was nowhere near the occupancy history and lease seasoning a life company or CMBS conduit expects. The deal lived in a gap that conventional capital does not fill.

There were several layers of complexity sitting underneath that headline problem.

  • Tenant concentration risk. The rent roll at close was thin. Several tenants were represented by letters of intent rather than executed leases. A lender underwriting to as-stabilized value had to get comfortable with the lease-up plan, the sponsor's execution history, and the market fundamentals supporting projected rents, rather than leaning on signed documents that would have made the credit easy.
  • TI and LC draw mechanics. Tenant improvement allowances and leasing commissions had to fund on pace with individual tenant buildouts, which do not happen on a uniform schedule. A single holdback funded at close would have created mismatches between when the sponsor needed capital and when it was available. A lender unwilling to manage milestone-based draws was not a real option here.
  • Interest reserve sizing. With limited in-place income, the facility needed a fully funded interest reserve sized to carry debt service through a realistic stabilization timeline. Getting that number right required modeling the lease-up sequentially, tenant by tenant, rather than assuming a single stabilization date.
  • Los Angeles retail sentiment. Bank appetite for retail in any form has been conservative since 2020, and Los Angeles adds a layer of regulatory complexity that makes institutional lenders more cautious regardless of market fundamentals. The reality is that well-located strip and neighborhood retail in supply-constrained LA submarkets has tightened, but that nuance does not move a bank credit committee that has a blanket retail caution flag in its underwriting guidelines.

The combination of an incomplete rent roll, pending buildout obligations, and a market that conventional lenders treat with suspicion meant the deal had to be positioned and packaged precisely, or it would simply price too wide to work for the sponsor.

The Solution

Trevor Damyan at Commercial Lending Solutions brought the deal to private debt funds and bridge lenders with active retail bridge programs, specifically excluding any lender whose underwriting process starts with in-place NOI. The target capital stack was a lender priced off pro forma cash flow at stabilization, sized to 60 to 65 percent of as-stabilized value, with a structured holdback rather than full proceeds at close.

The facility was structured with three distinct components: a funded loan amount at close sufficient to cover the acquisition or refinance basis, a TI and LC holdback released against executed leases and completed construction milestones on a per-tenant basis, and a fully funded interest reserve calculated against a conservative lease-up timeline with a buffer built in for delays. The term was set at 24 months with extension options tied to leasing milestones, giving the sponsor time to execute without being forced into a refinance before the rent roll was strong enough to support permanent financing.

The milestone-based draw structure was the piece that made the economics work for both sides. The lender managed concentration risk by releasing capital only as leases were signed and buildouts were confirmed. The sponsor avoided carrying TI costs out of operating capital while tenants were still in buildout.

The Outcome

The sponsor closed a $5,500,000 bridge facility structured to match the actual lease-up timeline rather than a simplified funding schedule. The interest reserve provided runway without forcing premature decisions. The holdback structure aligned lender and sponsor incentives around execution. When the rent roll seasons and coverage metrics normalize, the path to a conventional permanent loan is clear. That was the goal from day one.