# Industrial rollover: a bank structure versus a bridge

Canonical: https://commercialdebtadvisory.com/cases/industrial-rollover-bank-versus-bridge/
Status: Published
Publisher: Jaken Finance Group

**This is a hypothetical educational case, not a completed Jaken Finance Group transaction or an actual lender offer.** It isolates how two financing structures behave on the same industrial operating plan. Availability, recourse, closing conditions and lender acceptance are assumed for comparison; the case does not claim a bank would approve these facts.

The property costs $3 million. The sponsor budgets $400,000 for tenant and building work plus $120,000 of transaction costs, for $3.52 million before operating liquidity. Both structures use the same property assumptions and transaction-cost allowance. Different actual fees would need to be entered separately.

## Two indicative structures and different initial equity

The bank model advances $1.95 million at 7% with 25-year monthly amortization. The bridge model advances $2.3 million at 10% interest only. Both are fully funded at closing in this exercise. A $50,000 bank-case cash reserve and $95,000 bridge-case cash reserve are funded by sponsor equity and held for operating deficits.

| Closing sources and uses | Bank model | Bridge model |
|---|---:|---:|
| Purchase | $3,000,000 | $3,000,000 |
| Work budget | $400,000 | $400,000 |
| Transaction costs | $120,000 | $120,000 |
| Operating liquidity | $50,000 | $95,000 |
| Total uses | **$3,570,000** | **$3,615,000** |
| Funded debt | $1,950,000 | $2,300,000 |
| Sponsor equity | **$1,620,000** | **$1,315,000** |

The bridge requires $305,000 less initial equity after accounting for its larger liquidity reserve. It does not save $350,000 of equity, which would ignore the reserve difference. Work-budget cash is assumed segregated and spent as planned; it is not counted as available operating liquidity.

## The same cash-flow recovery under both structures

Assume monthly property NOI is $10,000 for months 1–6, $25,000 for months 7–12 and $30,000 for months 13–24. NOI here is after operating expenses but before debt service and the separately budgeted $400,000 of capital work. Total two-year NOI is $570,000.

Bank monthly debt service is $13,782.19. Bridge monthly interest is $19,166.67. The initial NOI does not cover either payment, which is why this case explicitly models sponsor liquidity. It is not a statement of stabilized underwriting eligibility.

| Operating phase | NOI total | Bank debt payments | Bank cash after debt | Bridge debt payments | Bridge cash after debt |
|---|---:|---:|---:|---:|---:|
| Months 1–6 | $60,000 | $82,693 | −$22,693 | $115,000 | −$55,000 |
| Months 7–12 | $150,000 | $82,693 | $67,307 | $115,000 | $35,000 |
| Months 13–24 | $360,000 | $165,386 | $194,614 | $230,000 | $130,000 |
| Total | **$570,000** | **$330,773** | **$239,227** | **$460,000** | **$110,000** |

Tables are rounded to whole dollars; calculations retain full precision. Assume positive operating cash remains in the property rather than being distributed. At the end of month six, cash reserves are approximately $27,307 in the bank case and $40,000 in the bridge case. At month 24, initial reserve plus accumulated operating cash equals $289,227 and $205,000, respectively.

## Model the loan balances independently

After 24 bank payments, outstanding principal is approximately $1,888,181. The bridge balance remains $2.3 million because interest-only payments do not reduce it. The bank’s $61,819 principal reduction is already reflected in its debt payments and lower payoff; it must not be added again as a separate cash distribution.

The [OCC refinance-risk bulletin](https://www.occ.treas.gov/news-issuances/bulletins/2024/bulletin-2024-29.html) provides the rationale for testing repayment under future conditions. This case supplies its own assumptions rather than attributing the following terms to OCC or to a lender.

Assume the property reaches $360,000 of accepted annual cash flow at month 24. A 7% cap rate implies a modeled value of $5,142,857. The prospective takeout uses 65% LTV, 1.30× DSCR, 7.5% interest, 25-year amortization and 10% debt yield.

## Reconcile the common takeout and different cash recovery

| Takeout ceiling | Amount |
|---|---:|
| LTV | $3,342,857 |
| DSCR | $3,122,760 |
| Debt yield | $3,600,000 |
| Modeled new loan | **$3,122,760** |
| Net after assumed 2% refinancing costs | **$3,060,305** |

The takeout loan is identical because the future property and lender assumptions are identical. The prior financing changes what is left after payoff.

| Cash reconciliation at month 24 | Bank model | Bridge model |
|---|---:|---:|
| Net new-loan proceeds | $3,060,305 | $3,060,305 |
| Existing principal payoff | −$1,888,181 | −$2,300,000 |
| Cash after principal payoff | $1,172,124 | $760,305 |
| Retained property cash | $289,227 | $205,000 |
| Total modeled cash available | **$1,461,352** | **$965,305** |

This assumes all retained cash can be released and no further reserves, payoff interest, penalties or unpaid costs apply. Those are material exclusions, not promises. The investor still owns the property and has new debt after refinancing. The cash shown is therefore not a final investment return or sale profit.

## What would change the decision

The bridge conserves $305,000 initially but leaves approximately $496,047 less cash available at the modeled refinance. An investor may still value that initial liquidity, especially if the bank structure is unavailable or cannot meet the closing conditions. The comparison makes the cost visible rather than deciding the tradeoff for every sponsor.

Test slower leasing, higher capital cost, a delayed refinance and lower accepted cash flow. Under the first six months’ assumptions, an extra month costs $3,782 after debt in the bank case or $9,167 in the bridge case. Those figures exclude changes in expenses and work costs.

The decision requires both execution feasibility and economics. An unapproved bank indication is not a substitute for a deliverable bridge commitment, while a larger bridge is not automatically safer because it requires less initial equity. Keep the evidence of lender acceptance beside the reconciled cash model.


## Source references
- [OCC Bulletin 2024-29 — Refinance Risk](https://www.occ.treas.gov/news-issuances/bulletins/2024/bulletin-2024-29.html) — Transaction-Level Risk Management and Risk-Rating Considerations · Checked 2026-10-21 · Provides refinance-risk context; every property, loan and return figure in this case is hypothetical.