CMBS Loans

CMBS Loans are a perfect way to obtain investment funds quickly for commercial real estate acquisitions, recapitalization and cash out refinancing of stabilized real estate properties.

Free Consultation – No Obligation

CMBS Loans

What Is a CMBS Loan?

CMBS loans are conventional fixed-rate, first mortgage loans secured by stabilized income-producing commercial real estate properties that are leased to tenants. Once closed, CMBS loans are pooled together by Wall Street investment banks and sold as securities to investors. The borrower is not involved with this process. The market for CMBS loans started in 1992. The industry peaked in 2007 when $228 billion of CMBS loans were originated in the United States. More recently, the annual volume of CMBS loans closed is $75-$100 billion/year, representing roughly 20% of all commercial loans closed annually in the United States. The CMBS loan market is a significant source of financing for income-producing real estate.

How Do CMBS Loans Work?

All CMBS loans are fixed-rate and have a 5-, 7- or 10-year loan term. CMBS loans amortize on long 25- or 30-year schedules and can have interest-only payments during the first few years of the loan term. CMBS loans close fast — in as little as 30 days — and all CMBS loans are assumable.

CMBS loans can be approved and closed with borrowers who have credit blemishes such as prior loan defaults and property bankruptcies as long as the individual who owns the property being financed through a CMBS loan did not act in “bad faith.” In addition, individuals with poor personal credit scores can qualify for CMBS loans because the underwriting and approval for a CMBS loan is based primarily on the income from the property being financed, not the credit of the individual owner.

How Can I Use My CMBS Loan?

Many borrowers utilize the cash out feature of the loan for things such as:

  • Meeting an accelerated SBA payoff deadline
  • Replace long overdue infrastructure issue on a property
  • Invest in another property
  • Refinance a previous CMBS Loan

How Can I Qualify For a CMBS Loan?

CMBS loans are underwritten solely based on the income generated from the property being financed (i.e., the most recent 12 months’ income from tenants that occupy the property less property operating expenses during the same period).

CMBS loan underwriting does not consider any income the you, as the property owner, earn from other sources, such as salary income or net income from other real estate sources.

What Are The Advantages of a CMBS Loan?

The two most compelling benefits of CMBS loans?

  1. All CMBS loans are non-recourse (no personal guarantees), and
  2. CMBS loans allow for unrestricted cash-out on refinances in which the new CMBS loan amount is greater than the loan balance being paid off.

 

For example, if a shopping center worth $10 million is refinanced with a 75% loan-to-value CMBS loan ($7.5 million) and the existing loan balance is $5 million, the $2.5 million of excess loan proceeds are provided to the borrower without restriction on what the excess funds can be used for. Many commercial lenders do not allow for unrestricted cash out.

In regard to non-recourse, most commercial lenders require that a commercial loan be 100% guaranteed personally by all of the individual owners of the property. In the event of a default and foreclosure, if the lender does not recover the full loan balance through a sale of the property or the loan, each individual is personally responsible to repay the shortfall, and the lender can easily get a judgment to compel the individuals to pay. With a CMBS loan, the individuals do not have any personal liability to repay the loan in the event of default and foreclosure.

What Are The Disadvantages of a CMBS Loan?

Risk: because these loans are securitized, borrowers who have trouble repaying their loans are unlikely to get any form of forbearance or foreclosure/default prevention assistance. Instead, if the borrower cannot make their monthly payments, they will likely default on the loan relatively quickly.

Pros

Cons

How Do I Apply For a CMBS Loan?

The application process is a bit extensive as it requires submitting quite a few documents. Therefore, we suggest you give a call first to discuss your property and needs at which time we'll perform a preliminary review to see if you qualify. We will then provide you with a checklist of required documents.

What If I Am Declined For a CMBS Loan?

We offer a variety of commercial real estate loans using over 50+ lenders. There are several alternative options to choose. We will work with you to ensure you goals are met.

What Is a CMBS Loan?

CMBS loans are conventional fixed-rate, first mortgage loans secured by stabilized income-producing commercial real estate properties that are leased to tenants. Once closed, CMBS loans are pooled together by Wall Street investment banks and sold as securities to investors. The borrower is not involved with this process. The market for CMBS loans started in 1992. The industry peaked in 2007 when $228 billion of CMBS loans were originated in the United States. More recently, the annual volume of CMBS loans closed is $75-$100 billion/year, representing roughly 20% of all commercial loans closed annually in the United States. The CMBS loan market is a significant source of financing for income-producing real estate.

How Do CMBS Loans Work?

All CMBS loans are fixed-rate and have a 5-, 7- or 10-year loan term. CMBS loans amortize on long 25- or 30-year schedules and can have interest-only payments during the first few years of the loan term. CMBS loans close fast — in as little as 30 days — and all CMBS loans are assumable.

 

CMBS loans can be approved and closed with borrowers who have credit blemishes such as prior loan defaults and property bankruptcies as long as the individual who owns the property being financed through a CMBS loan did not act in “bad faith.” In addition, individuals with poor personal credit scores can qualify for CMBS loans because the underwriting and approval for a CMBS loan is based primarily on the income from the property being financed, not the credit of the individual owner.

How Can I Use My CMBS Loan?

Many borrowers utilize the cash out feature of the loan for things such as:

  • Meeting an accelerated SBA payoff deadline
  • Replace long overdue infrastructure issue on a property
  • Invest in another property
  • Refinance a previous CMBS Loan

How Can I Qualify For a CMBS Loan?

CMBS loans are underwritten solely based on the income generated from the property being financed (i.e., the most recent 12 months’ income from tenants that occupy the property less property operating expenses during the same period).

 

CMBS loan underwriting does not consider any income the you, as the property owner, earn from other sources, such as salary income or net income from other real estate sources.

What Are The Advantages of a CMBS Loan?

The two most compelling benefits of CMBS loans?

  1. All CMBS loans are non-recourse (no personal guarantees), and
  2. CMBS loans allow for unrestricted cash-out on refinances in which the new CMBS loan amount is greater than the loan balance being paid off.

 

For example, if a shopping center worth $10 million is refinanced with a 75% loan-to-value CMBS loan ($7.5 million) and the existing loan balance is $5 million, the $2.5 million of excess loan proceeds are provided to the borrower without restriction on what the excess funds can be used for. Many commercial lenders do not allow for unrestricted cash out.

 

In regard to non-recourse, most commercial lenders require that a commercial loan be 100% guaranteed personally by all of the individual owners of the property. In the event of a default and foreclosure, if the lender does not recover the full loan balance through a sale of the property or the loan, each individual is personally responsible to repay the shortfall, and the lender can easily get a judgment to compel the individuals to pay. With a CMBS loan, the individuals do not have any personal liability to repay the loan in the event of default and foreclosure.

What Are The Disadvantages of a CMBS Loan?

Risk: because these loans are securitized, borrowers who have trouble repaying their loans are unlikely to get any form of forbearance or foreclosure/default prevention assistance. Instead, if the borrower cannot make their monthly payments, they will likely default on the loan relatively quickly.

Pros and Cons of CMBS Loans

Pros

Cons

How Do I Apply For a CMBS Loan?

The application process is a bit extensive as it requires submitting quite a few documents. Therefore, we suggest you give a call first to discuss your property and needs at which time we’ll perform a preliminary review to see if you qualify. We will then provide you with a checklist of required documents.

What If I Am Declined For a CMBS Loan?

We offer a variety of commercial real estate loans using over 50+ lenders. There are several alternative options to choose. We will work with you to ensure you goals are met.

CMBS Loan Amount, Rate, Term and Time to Fund

Frequently Asked Questions

How do CMBS Loans Compare to Other Commercial Real Estate Loan Options?

Financing TypeFinancing AmountRateTermTime to Fund
Bridge Loan$500k – $20M10.25% – 15.25%12 months – 3 years2- 4 weeks
CMBS Loan$2M – $100M7.09% – 8.94%5-, 7-, 10-year fixed (25/30 year amortization)30 – 45 days
Construction Loan$50k – $20M10.25% – 11.99%18 months2 – 4 weeks
CPACE Financing$1M – $100M4% – 8%15 – 30 years30 – 45 days
Fix and Flip Loan$50k – $7.5M10.25% – 11.99%12 – 18 months2 – 4 weeks
HUD and FHA Loan$1M – $100M7.18% – 8.125%5-, 7-, 10-year fixed (20 – 30 year amortization)60 – 120 days
Long Term Rental Loan$55k – $5M10.25% – 11.99%5/7/10 year hybrid arms; 30 year amortization2 – 4 weeks
SBA 504 Loan$250k – $5M7.12% – 10.25%10 – 25 years45 – 60 days
USDA Loan$2M – $25M9.75% – 12.5%up to 30 years60 – 90 days
CMBS Loan
Financing Amount$2M – $100M
Rate7.09% – 8.94%
Term5-, 7-, 10-year fixed (25/30 year amortization)
Time to Fund30 – 45 days
Bridge Loan
Financing Amount$500k – $20M
Rate10.25% – 15.25%
Term12 months – 3 years
Time to Fund2- 4 weeks
Construction Loan
Financing Amount$50k – $20M
Rate10.25% – 11.99%
Term18 months
Time to Fund2 – 4 weeks
CPACE Financing
Financing Amount$1M – $100M
Rate4% – 8%
Term15 – 30 years
Time to Fund30 – 45 days
Fix and Flip Loan
Financing Amount$50k – $7.5M
Rate10.25% – 11.99%
Term12 – 18 months
Time to Fund2 – 4 weeks
HUD and FHA Loan
Financing Amount$1M – $100M
Rate7.18% – 8.125%
Term5-, 7-, 10-year fixed (20 – 30 year amortization)
Time to Fund60 – 120 days
Long Term Rental Loan
Financing Amount$55k – $5M
Rate10.25% – 11.99%
Term5/7/10 year hybrid arms; 30 year amortization
Time to Fund2 – 4 weeks
SBA 504 Loan
Financing Amount$250k – $5M
Rate7.12% – 10.25%
Term10 – 25 years
Time to Fund45 – 60 days
USDA Loan
Financing Amount$2M – $25M
Rate9.75% – 12.5%
Termup to 30 years
Time to Fund60 – 90 days

What Types of Income-Producing Commercial Real Estate Are Eligible For CMBS Loans?

The following types of leased income-producing real estate are eligible for CMBS loans:

  • Multifamily
  • Manufactured Housing Communities
  • Retail
  • Office
  • Industrial
  • Hotels
  • Self-Storage

Within these categories, the following sub-categories are also eligible:

Eligible Multifamily: Student Housing, Age-Restricted (Seniors) Multifamily, Furnished Multifamily, Multifamily with Section 8 voucher tenants, Multifamily with HAP contracts, and Multifamily with IRS Section 42 tax credits.

Eligible Manufactured Housing Communities (MHCs; also known as Mobile Home Parks): MHCs with up to 20%-25% landlord-owned homes and MHCs with single-wide homes.

Eligible Retail: Malls, Anchored Multi-tenant Retail, Neighborhood Multi-tenant Retail, Unanchored Multi-tenant Retail, Single Tenant Retail (with long-term lease — 5-plus years — to a credit tenant and high likelihood of lease renewal).

Eligible Office: Multi-tenant Suburban Office, Multi-tenant Urban Office, Single Tenant Office (with long-term lease — 5-plus years — to a credit tenant and high likelihood of lease renewal), Government Office with no lease cancellation clauses.

Eligible Industrial: Multi-tenant Warehouse/Distribution, Multi-tenant Light Industrial, Single-tenant Industrial (with long-term — 5-plus years — to a credit tenant and high likelihood of lease renewal), Multi-tenant office/warehouse (office in front/warehouse in rear).

Eligible Self-Storage: Independent and Franchised self-storage, climate controlled and non-climate controlled.

Eligible Hotels: Full-service, Select-service, Limited-service and Extended-stay hotels that are mid-scale and higher franchised hotels as defined by Smith Travel Research. Independent hotels located on/near beaches and Boutique hotels in urban/suburban locations with ADR over $100/night.

What Types of Properties Are Not Eligible For CMBS Loans?

Construction and substantial rehabilitation projects are not eligible for CMBS loans.

Healthcare (defined as real estate with meals and health services provided) are not eligible for CMBS loans. Properties with well below-market occupancy are not eligible for CMBS loans (but may qualify for a bridge loan).

What States Are Eligible For CMBS Loans?

All 50 states including Puerto Rico

Ready to take the next step and apply for a CMBS Loan?

Free Consultation – No Obligation

Give us a call to see how we can help your business