From a 16% Bridge to an 11.99% Bank Loan: Refinancing a Movie Theater

Bridge debt is a tool, not a destination. We're currently working on a refinance for a leased-investment property anchored by an operating movie theater, with a connected restaurant already in occupancy and a second restaurant lease pending. The sponsor owns the real estate and leases to the operators — so the underwriting rides on contractual rent, not box-office receipts. Today the asset carries a bridge loan at roughly 16% all-in. Our job is to move it into permanent bank debt at 11.99% and rebuild the cash flow profile of the asset.

This piece walks through how we underwrote the take-out, why banks will touch multi-tenant entertainment product in this cycle, and what any sponsor sitting on expensive bridge debt should be doing right now.

Why the sponsor ended up at 16%

Entertainment-anchored real estate fell out of favor with traditional lenders after 2020, and most banks still flinch when they see the word 'theater' in the collateral description. When this sponsor needed to close on a recapitalization, the only capital that would move in time was a debt-fund bridge. It closed the deal, but the coupon was punishing.

• All-in rate: ~16% (SOFR + wide spread, plus fees)
• Term: 24 months, extension options with fees
• Recourse: partial, with springing full recourse triggers
• Cash flow: DSCR compressed to break-even after debt service

What made a bank take-out possible

Three things had to be true for a regional bank to underwrite this. First, the rent roll had to prove itself — the theater operator's trailing twelve, the in-place restaurant lease, and a signed LOI on the second restaurant space. Second, the underlying operations at the theater had to show recovery, not a one-quarter blip, so the bank could stress the anchor tenant's ability to keep paying rent. Third, the sponsor had to bring a credible story on the real estate: lease-up plan for the pending restaurant, reserve posture, and personal balance sheet.

We spent the first three weeks on the underwriting package before we ever sent it to a lender. That work is what turns a 'no' into a term sheet.

The underwriting narrative we built

• Rent roll with in-place theater and restaurant leases, plus pending restaurant LOI and market comps
• Anchor-tenant TTM with normalized run-rate at the theater operator — the story behind the rent check
• Concession and premium-format margin walk at the theater vs. peer benchmarks
• DSCR on contractual rent stress-tested at +200 bps and at pending-lease-fails scenario
• Reserve structure — capex, TI, and interest reserve — sized for cycle risk and second-restaurant fit-out
• Sponsor liquidity and contingent liability schedule current to the month

The structure we're closing into

Term sheet is a five-year fixed bank loan at an 11.99% coupon, 25-year amortization, with a modest interest reserve and a hard cash management trigger if DSCR slips below 1.20x. Recourse steps down as the asset performs. Prepay is a step-down burn-off, so the sponsor can refinance again into a lower rate environment without a yield-maintenance penalty.

What sponsors on bridge debt should do now

• Run the take-out math today — not 60 days before maturity.
• Rebuild your underwriting package before you approach lenders. First impressions close deals.
• Get a real read on which lender bucket (bank, credit union, life co, agency) actually fits the asset and the sponsor.
• Model the reserve and recourse asks — banks will trade rate for structure.
• Have an advisor run a competitive process. One term sheet is a data point; four is leverage.

Where FCAP fits

We specialize in multifamily refinance, but this movie theater deal is a good example of the broader mandate: sponsors sitting on expensive short-term debt who need a disciplined path back to permanent financing. If that's you — on any asset class over $5 million — we should be talking before your maturity clock forces the conversation.