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CRE lending library
Structures & lifecycleFoundation10 min

CRE products and lending lifecycle

Connect acquisition, construction, bridge and permanent financing to the property’s operating stage.

Purpose

Understand why repayment source, property stage and loan purpose shape the operating lifecycle of a CRE facility.

Foundation

Key concepts

Acquisition loan

Finances purchase of an existing property, normally with borrower equity and controlled closing funds.

Construction loan

Funds approved project costs in stages as work, equity and other conditions are verified.

Bridge loan

Provides shorter-term financing while a property is acquired, improved, leased or prepared for permanent financing.

Permanent loan

Longer-term financing generally supported by stabilized property cash flow and scheduled debt service.

Operational sequence

Workflow and controls

01

Origination and screening

Identify sponsor, property, purpose, requested structure and expected repayment source.

Control point: The transaction is classified by actual risk and purpose, not only collateral type.
02

Underwriting and approval

Assess property cash flow, leverage, sponsor support, market, tenants, construction or lease-up risk.

Control point: Approved terms, exceptions and conditions are explicit and traceable.
03

Due diligence and closing

Complete valuation, title, environmental, insurance, legal and funding conditions.

Control point: No funding occurs before required conditions and payment instructions are independently verified.
04

Servicing and monitoring

Process payments, draws, reserves and changes while monitoring property performance and covenants.

Control point: Financial reporting, exceptions and future events have clear ownership.
05

Payoff, refinance or workout

Settle obligations through sale, refinance, maturity payment or an approved accommodation.

Control point: Cash, collateral release, accounting and system closure occur in the correct order.

Property and structure

Metrics in context

LTV

Loan amount compared with property value.

LTC

Loan amount compared with total eligible project cost.

DSCR

Property cash flow available for debt service compared with required debt service.

Debt yield

Property net operating income compared with loan balance.

Risk and quality

Control checklist

  • Legal borrower and property match approval
  • Repayment source and exit strategy are documented
  • Equity and funding sources reconcile
  • Monitoring requirements reflect the property and loan stage

Exception handling

Common breaks and response

Loan purpose changes after approval

Controlled response: Stop treating the change as routine servicing; reassess structure, risk, documentation and approval.

Property is not stabilizing as expected

Controlled response: Escalate current occupancy, cash flow, budget and exit assumptions through portfolio and credit review.

Practical context

Scenario: acquisition-to-permanent financing

A sponsor acquires a partially vacant office property using bridge financing, completes improvements and lease-up, then refinances into a permanent loan after cash flow stabilizes. Each phase has different controls, reporting and repayment assumptions.

Knowledge check

Check your understanding

Why can two loans secured by similar buildings require different operations?Show answer
Their purpose, property stage, repayment source, construction or lease-up risk, structure and monitoring conditions may be entirely different.

Next guide

Closing, due diligence and collateral controls

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