Almost every major bank had, or will have, massive lossesresulting in write-downs of historic proportions. By the end of2007, the credit markets all but shut down for new real estateprojects and investments.

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This national problem has been exacerbated in states such asFlorida due to massive overbuilding in the residential housingmarket. Add to that the ripple effects from the halt on newconstruction that has forced some industry-related businesses tolay off workers, or shut down completely in some cases.Furthermore, rising gas prices and the devaluation of the dollarare resulting in one of the tightest credit markets we have seen ina long time.

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Many are now asking whether the situation will drag out, getworse or improve—and if it will improve, when? But speculating whenthe markets will turn around is foolish. A better approach is tofind out what financing vehicles are available in the market now,rather than waiting in paralysis for a rebound.

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One viable alternative is "bridge lending," a business that wasnearly dormant during the past seven years. A bridge loan is usedto help bridge the developer or real estate owner over to a timewhen rates will be more affordable.

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Time is the key element in any real estate investmenttransaction. At this point, we do not know how long it will takefor the lending market to stabilize, so bridge lenders are workingwith real estate owners and developers to bridge these projects outfrom a range of two to five years. Depending on the nature of theloan, bridge loans cost about 20% annually, and more in somecases.

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Why are these bridge loans becoming more common in today'scommercial real estate sector? Lenders offering bridge loans aresophisticated enough to understand, and willing to take, theassociated risks for the price they are charging.

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Bridge lenders consider the track record of the owner ordeveloper and how loan applicants have handled problems in thepast, in good and bad times. These lenders are not simplyunderwriting the specific project they are going to bridge; theyare also putting their faith into the people borrowing from them.They could be a good source for money until the marketstabilizes.

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The views expressed here are those of the author and not ofReal Estate Media or its publications.

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Seth Werner is chairman and CEO of Cypress Creek Capital Inc.in Fort Lauderdale, FL. He can be reached [email protected].

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