Case Study: $9.2M Bridge Loan for a 48-Unit Value-Add in Philadelphia — Full Renovation Funded Through ARV

The deal arrived as most good deals do — through a relationship. A repeat borrower called with a 48-unit mid-rise in West Philadelphia's University City submarket. The property had been owner-operated for 30 years with zero capital improvements. Half the units were occupied at $950/month. Market rent for renovated units in the area: $1,650-$1,800. The seller wanted $5.8M and a 30-day close.

The Challenge

This was a gut renovation play. New kitchens, bathrooms, flooring, electrical, plumbing risers, common areas, and building envelope work. The renovation budget came in at $3.4M — roughly $71,000 per unit. Total project cost: $9.2M before carry. The borrower had $3.0M in equity capital available.

A conventional bridge lender underwriting at 65% of the $6.1M as-is value would have offered approximately $3.97M — less than the purchase price alone. The borrower would have needed to raise an additional $5.2M in equity or bring in a capital partner, fundamentally changing the deal economics.

The Structure

The after-repair appraisal came in at $12.3M, supported by recent sales of renovated multifamily in the University City corridor. Riverside Park Capital structured a $9.2M bridge loan — 74.8% of ARV — in three tranches:

• $5.8M acquisition — funded at closing
• $3.4M renovation holdback — disbursed in six scheduled draws against verified completion
• 12-month interest reserve built into the loan

24-month term with two 6-month extensions available. Interest-only. Rate: SOFR + 475bps. The borrower's total equity contribution was $3.0M — approximately 25% of total project cost.

Execution

Renovation began immediately after closing. The borrower vacated occupied units on a rolling basis — four units at a time — renovating and re-leasing before moving to the next set. This approach maintained cash flow during the renovation period and provided real-time market validation of the projected rents.

First renovated units leased at $1,725/month within two weeks of completion. By month 16, 44 of 48 units were renovated and occupied. Average rent: $1,690/month. NOI run rate: approximately $720,000 annually.

The Exit

At month 18, the borrower refinanced into a 5-year DSCR loan at 65% LTV on the stabilized value. Appraised value at stabilization: $11.8M. Permanent loan amount: $7.67M. After paying off the bridge balance and closing costs, the borrower recovered approximately $1.5M of the original $3.0M equity — while retaining full ownership of a property generating over $700K in annual NOI.

Created equity: approximately $4.1M. Cash-on-cash return at stabilization: 24%. Total return on equity including refinance proceeds: 137% over 18 months.

Why This Deal Required ARV Underwriting

There is no version of this deal that works with as-is value lending. The gap between as-is value ($6.1M) and total project cost ($12.2M including carry) was too large for conventional bridge capital to bridge. ARV underwriting at 75% LTV was the structural solution — it allowed a single senior loan to fund the entire business plan without mezzanine, preferred equity, or LP capital.

For operators who can execute renovations on time and on budget, this is the most efficient capital structure available in the multifamily bridge market. One lender. One loan. One closing. Full business plan funded.

What I'm watching next:

• University City and West Philadelphia multifamily rents are still climbing — the University of Pennsylvania's expansion is creating sustained demand that value-add operators can underwrite with confidence
• Rolling renovation strategies (vacate/renovate/re-lease in phases) are becoming the preferred execution model for bridge-funded deals, reducing carry costs and providing real-time rent validation
• Borrowers who close their first ARV bridge deal successfully are coming back for their second and third within 12 months — the capital efficiency creates a compounding portfolio strategy