cmbs-loan-properties.jpg

CMBS Real Estate Loans

Loans for Stabilized Commercial Properties $3 Million+

 

CMBS Loans for Commercial Real Estate

CMBS (commercial mortgage backed securities) loans can offer rates below 4% with a long amortization period (25 or 30 years). CMBS loans are typically a fit for borrowers seeking fixed-rate loans of $3 Million or more, on stabilized office, industrial, retail, hospitality, or multifamily assets. 

There are 2 types of CMBS loan types for commercial real estate -- Conduit loans and SASB loans. Choosing the right CMBS loan type depends on the property being financed, however both types of CMBS loans are non-recourse (subject to industry standard "bad-boy" carve-outs), meaning the borrower is not responsible for the full loan amount out of pocket in the case of a default.  Because the loan maturity is typically 5 or 10 years after origination with a much longer amortization period, the sponsor should expect to make a large balloon payment at the end of the loan.

By choosing a CMBS loan, borrowers can often obtain financing at a lower rate and higher LTV than conventional lending. However, CMBS loan terms are more standardized with strict payment and minimum DSCR requirements, which will not be as flexible as conventional lenders, such as banks and credit unions.  The borrower is also less able to negotiate changes to the loan or prepay the loan balance (which requires a process called Defeasance).

Loan Amount:

$3 Million to $100 Million+

Typical Term:

5 or 10 years

Interest Rates

3.5% - 5%

Max LTV:

75%

Highlights

  • Low Fixed Rates
  • Long amortization (usually 25 or 30 years)
  • Up to 75% LTV
  • Non-Recourse

Considerations

  • Expensive to refinance
  • Strict payment and DSCR requirements
  • Property must have long-term leases
  • Conservative underwriting based on existing NOI
  • Property owned by a single purpose, bankruptcy-remote entity

Required Documents for Underwriting

  1. Current rent roll
  2. Last 2 years operating statements
  3. Schedule of Real Estate Owned
  4. Personal Financial Statement (for Guarantors)
 
 CMBS Loans Commercial Real Estate

How to Get a CMBS Loan

CMBS loans are typically issued by large commercial banks or investment banks. These lenders look for stabilized assets that meet their underwriting guidelines, so it's important to thoroughly review the financials of your property before approaching these banks.  Working with your StackSource Capital Advisor can help you score a loan from top national CMBS issuers within the StackSource lender network.

 

Guide to CMBS Loans for Commercial Real Estate

Conduit Loans

Conduit loans are the most common type of CMBS loan. One loan is pooled with other commercial mortgages and then securitized and sold to bond investors.  Conduit loans are available for loan amounts over $3 Million. By creating a security, these mortgages are given a higher credit rating and seen as lower risk compared to an individual mortgage.  This means that the CMBS loan rate will be calculated by the treasury rate plus a spread based on the underwriting of the property.

SASB Loans

Single-asset, single-borrower (SASB) loans are a fit for much larger loan sizes, typically $100 Million or more.  These loans are for institutional investors with trophy assets in major markets.

 

Learn More About CMBS Loans

 

Borrower’s pros and cons of a CMBS conduit loan

CMBS loans often have a very attractive “sticker price” for assets with stable cash flow. If a sub-4% fixed rate is all you need to know, you’ll want to check on the CMBS market for your deal.  CMBS loans can leverage an asset up to 75% of the appraised value, which can be higher loan proceeds than local capital sources in many markets across the country, particularly secondary and tertiary markets.

Factors that affect your commercial mortgage rate

There are several factors which will affect the rate of your commercial mortgage (loan for commercial real estate). While the underwriting practices of lenders vary, there are several key factors that will determine which lenders are your best bet, and how competitive your rate will be.