When a bridge loan matures in six months and the refinance comes up short

Pike, if the lender adds back reserves, does that mean the borrower pays for the roof twice, once in the NOI haircut and once when the roof actually goes? Worth clarifying how the paper side treats this before signing anything.

Seven units at 41k for a sewer line seems high to me unless you went street to building under pavement. Was that a full replacement or a spot repair someone talked you into?

Numbers check. 1.1M at 6.75 on 30 year amortization is about 77.8k a year in debt service per million, so 987k of loan is roughly 76.8k, and yes, 1.25x on 96k. The arithmetic is right. The sizing test isn't the real problem though, the real problem is three unrenovated units occupied at 850 that could be finished in six months if the plan moved from modeling to scheduling. Run this: four turns at, say, 18k each is 72k of capex. Four units moving 850 to 1,140 is 13.9k a year of additional gross, call it 13k of NOI after the small expense increase. That takes NOI from 96k to 109k. At 1.25x that's 87.2k of allowable debt service, which sizes to about 1.12M, enough to clear the balance. So the real decision is whether there's 72k of capex available to avoid a 113k paydown, and whether the lender will underwrite the new rents on three months of collections rather than twelve. That second question is worth putting to the perm lender this week, because the whole plan turns on it. If they need T12 on the new rents, none of this works and the choice becomes the extension versus the sale. On the reserve question: the reserve add-back reduces underwritten NOI, and separately many lenders escrow real dollars monthly. The term sheet would show which is happening. It isn't double counting so much as the lender refusing to treat deferred capex as income.

The GC walking mid-summer is the line worth sitting with. Six months from maturity with four more turns contemplated and no contractor named is a real gap. Who is doing that work, and are they bonded or just available? Two operators have been seen losing a refi window because the crew they had penciled in took a bigger job in April. If the Ledger route gets used, signed scopes and a start date should exist before telling the lender anything about the shortfall.

I'd take the extension seriously rather than as option one of three. Run the 1.20x test with actual numbers: what's your bridge debt service today at current SOFR plus 350 on 1.1M interest only? If SOFR is around where it's been, you're paying somewhere near 8 percent all-in, which is about 88k a year, and 96/88 is 1.09. You'd fail. That's worth confirming today, because if the extension isn't really available then you have two options, not three, and one of them is a sale into a market where vacancy is still elevated.

The cycle argument for holding is real, absorption is expected to overtake deliveries and rents should firm entering 2027, so selling now at a round trip is selling into the softest part of the window. I've been on the LP side of two bridge deals that ran out of runway and the sponsor who wrote the check kept the asset and the one who sold didn't. But a 113k paydown that leaves you with zero reserve on a 1974 roof isn't patience, that's a different kind of maturity risk. Is there a partner who'd take a preferred position for the 113k? Anything like that needs a securities attorney before you have the conversation, and I mean before.