CMBS Loan Program

CMBS loans are institutional grade commercial mortgage loans that are pooled with other CMBS loans and then securitized into a bond. Generally, loan amounts must be in excess of $2.5 Million and the property types are generally limited to multi-tenant properties such as multifamily properties (5+ units), office buildings, retail properties (e.g., shopping centers), self-storage facilities, or industrial properties (e.g., flex space or warehouses). Flagged hotels are also eligible for CMBS financing, as are single, credit tenant properties. CMBS loans typically carry a maximum LTV of 75% and amortizations can stretch up to 30-years. Terms are typically 10-years, offering fixed rates that are comparable to banks and credit unions. Notably, all CMBS loans are non-recourse. Loan proceeds may be used to purchase or refinance, and cash-out is available. The loan structure is tailored to the specific needs of transaction.

Program Overview

Loan Amount: $2,500,000 +
Term Length: 5, 7 and 10-years fixed
Max LTV: Up to 75% (80% for Multifamily)
Amortization: Up to 30 years
Interest Rate: Starting in the 4%'s
Closing Time: 4 - 8 weeks
Purpose: Purchase, Refinance &
Cash Out
Recourse: None; subject to bad-boy
carveouts

Pros And Cons Of Fannie Mae
Small Balance Loans

Pros

  • Low Rates & Costs
  • High Leverage (80% LTV)
  • Long Amortizations (30-yrs)
  • Cash Out Available
  • Variety of fixed rate products
  • Non-recourse
  • Limited Personal Financial
  • Flexible Prepayment Options
  • Assumable & Streamlined

Cons

  • Conservative Underwriting
  • Sponsor Liquidity
  • Requirement
  • Longer Closing Process
  • Property Must be Stabilized
Image

Pros and Cons

Pros

  • Non-recourse
  • High leverage
  • Low rates
  • Flexible property types
  • Loans may be assumed
  • Flexible underwriting

Cons

  • High min. loan amount
  • Net worth requirements
  • Liquidity requirements
  • Higher grade properties only
  • Prepayment penalty

What Do I Need To Qualify

  • Good credit score for sponsor
  • 1.25x DSCR (1.20x for Multifamily)
  • Income producing property with stable cash flows

Disclaimer: These are general qualifications. Other information might be considered during your application.

Eligible Properties

office

Office

Multifamily

Multifamily

Retail

Retail

Industrial

Industrial

hospitality

Hotel (Flagged)

Other eligible properties include: Self storage

Common uses include: Purchase, refinance, cash out

Required Documents

Personal Documents

  • Personal Financial Statement
  • Bio / Resume

Property Documents

  • Rent Roll
  • Last 3-Years of Operating Statements (P&L)
  • Trailing 12-month Operating Statements

Required Documents

Property Documents

  • Current Rent Roll
  • Last 3-Years of Operating Statements (P&L)
  • Trailing 12-month Operating Statements

Personal Documents

  • Personal Financial Statement
  • Real Estate Owned Schedule
  • Bio / Resume
  • Proof of Liquidity (Bank Statements)

Underwriting Guidelines

  • Debt Service Coverage Ratio: Min. 1.25x (1.20x for Multifamily).
  • Occupancy: Property must have 80% occupancy.
  • Replacement Reserves: Typically $225-$250 per unit or $0.15 per square foot.
  • Management Fee: 3% of Effective Gross Income, except 4% for hotels and 5% for self-storage.
  • Escrows: Typically escrows for taxes and insurance are generally required.
  • Replacement Reserve Escrows: Generally required.
  • Subordinate Financing: Generally not allowed but may be allowed in certain circumstances. All CMBS loans must be 1st position.
  • Experience: Prior experience managing investment real estate assets is preferred, but not required.
  • Property Location: The property may be located in primary, secondary or tertiary markets; property location may affect pricing and leverage amounts.

Fees and Costs

  • Application Fee: $5,000 - $10,000, depending on the loan amount
  • Origination Fee: Negotiable (generally 0.5% - 1% of the loan amount)
  • Deposit: Lender will typically require a deposit of $20,000 - $40,000, depending on the size of the transaction Deposit will cover Third Party Reports, such as appraisal and property inspection, legal fees and document collection, and other due diligence costs.

Fees and costs are estimates and may differ based on various factors, such as risk, property type and location, and loan programs, among others.

Prepayment Provisions

  • Borrowers can choose either a standard yield maintenance or a defeasance provision.

Prepayment provisions are chosen by the borrower and may affect the rate or other terms based on the provision selected.

Borrower Entity

Generally, the borrower entity must be a single asset, single purpose entity. The typical structure is a limited liability company. For purchases, the sponsor will typically form the entity in connection with the closing process.

Recourse

All CMBS loans are non-recourse, subject only to standard “bad-boy” carveouts for all individual owners with at least 20% equity ownership interest in the borrower entity.

Third Party Reports

In connection with underwriting, the lender will order (at borrower’s cost) an appraisal, an environmental report (Phase I), and a property inspection report.

Approval Process

1. Create loan request here.
2. Supply preliminary documents.
3. Select a loan program and product.
4. Receive preliminary approval.
5. Review and accept term sheet; remit application fee.
6. Lender completes underwriting and orders appraisal.
7. Loan approved. Final terms reviewed and accepted.
8. Loan closed and funded.