Debt Folks, have a question- Is there a science behind the loan term chosen by the lenders? For example, a deal I am involved with is a single tenant industrial deal where there are four years left in the lease. Tenant is B+ rated tenant, solid tenant. Will any lender be willing to lend on a long term 5, 7 or 10 year term? Or is the only option a short term 2 year bridge loan and once it gets stabilized with a longer term lease, then refinance with a longer term loan? I have a 2 year loan term quote from a national bank, so I was wondering whats the reasoning that goes behind a lender choosing a a 2 year loan vs 5 or 7 years? Because even with a 2 year loan, there is a chance that the tenant does not renew the lease and there is not a lot of interest from lenders wanting to refinance this loan at the 3rd year with the tenant not renewing, so why a 2 yr loan and not a longer term loan? I am failing to see how the lender is minimizing risk by offering a 2 yr loan. I was thinking a 5, 7 or 10 year loan with reserves held back for a possible shortfall in year 3 or 4 can still be worthwhile for a lender. Thank you for any help, appreciate it!
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