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A Closer Look at the Extra Space Storage Bridge Loan Program

As the nation’s largest third-party self storage management company, Extra Space Storage is always looking to provide its partners with innovative solutions. That’s why the company launched a Bridge Loan Program in 2019 to complement its existing ManagementPlus solution. This unique and innovative program provides short-term capital to current and prospective third-party management partners.

Now in its third year—and with projected originations of $400 million in bridge loans for 2021—it’s safe to say the program continues to be a tremendous success for the self storage company. Here’s a look at commercial bridge loans and what Extra Space Storage can offer prospective borrowers.

What Is a Commercial Bridge Loan?

Commercial bridge loans are short-term loans, most often used in real estate, that provide temporary financing during the lease-up or stabilization period. In self storage, owners and operators will typically utilize a bridge loan to pay off capital partners, a construction loan, or recoup equity. Bridge loans exist to meet immediate cash flow needs while working out longer-term funding.

How Do Extra Space Storage Bridge Loans Work?

Commercial bridge loans are for short-term needs to “bridge the gap” between other funding opportunities. Extra Space Storage offers three to five-year interest-only, non-recourse loans, up to 80% of the loan-to-value ratio (LTV). Additional conditions include a Certificate of Occupancy and Extra Space Storage as the property manager. Extra Space Storage also offers forward commitments to make construction lenders more comfortable providing a construction loan.

Bridge Loans in Action

Due to COVID-19, traditional banks became more conservative with construction lending. This year, Extra Space Storage provided a 12-month forward commitment for a ground-up construction project, making the bank comfortable to approve a construction loan knowing there is a take-out. Once the project reached Certificate of Occupancy, Extra Space Storage closed on the bridge loan, allowing the partner to repay the construction loan and recoup a portion of their equity. The bridge loan gave the owner up to five years to stabilize the project before securing permanent financing.

Frequently Asked Questions About Commercial Bridge Loans

Why would a self storage property owner or operator choose a bridge loan?

Owners and operators will typically utilize a bridge loan to pay off capital partners, construction loans, or recoup equity. Also, this allows time for lease-up or net operating income (NOI) stabilization before placing permanent financing on the property.

What is the typical timeframe for closing a bridge loan with Extra Space Storage?

Approximately 45 days for a first-time borrower.

What is the average term length of a bridge loan with Extra Space Storage?

Three years, plus the option for two one-year extensions.

How does Extra Space Storage determine the bridge loan amount?

The loan amount is based on the value of the property, not cost.

How do Extra Space Storage bridge loans differ from other lenders?

Extra Space Storage lends up to 80% loan-to-value (LTV), non-recourse, interest-only during the entire loan term.

Learn more about Extra Space Storage’s Bridge Loan Program.

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