From the May issue: Real estate experts are speculating that some
form of gap financing may be integral to the recovery of the commercial
mortgage-backed securities (CMBS) market, and ultimately the overall
real estate market. Gap loans were originally used to cover (or
“bridge”) the difference between a construction loan and a permanent
loan. Then, in recent years, it became common for developers to put up
only one small piece of the equity in a deal, with at least one other
entity putting up the remainder, or “gap” piece, on top of the senior
debt. Companies have been forming in recent months to provide various
forms of gap financing, experts said. For example, Basis Investment
Group formed in February as a provider of both gap equity and of
mezzanine loans, among other classes of debt. [more]