CMBS (Commercial Mortgage Backed Securities) Conduit, Wall Street firm
Commercial Mortgage Backed Securities Conduit, Wall Street firm; loans are a great option if you need higher leverage on non-recourse loan terms. While the process is more complicated and expensive than closing a loan with a portfolio lender such as an insurance company or bank you can often obtain higher loan dollars with a longer amortization. Most CMBS lenders will underwrite to a Debt Yield. Below are examples of property LTV’s and required Debt Yield*
*Debt Yield is: Debt Yield = Net Operating Income (underwritten NOI)_
If the underwritten NOI is $300,000 and the loan amount is $3,000,000 the Debt Yield would be 10.0%.
Term in Years: 5, 7, 10
Amortization: 20, 25 and 30-years
Minimum Loan Amount: $3 Million no stated upper limit
LTV & Debt Yield: Hotel: LTV 65% – 70% DY – 12%
Office: LTV 70%-75% DY – 8%-9%
Retail: LTV 70%-75% DY- 8%-9%
Multifamily: LTV 75% – 80% DY – 7%-8%
Light Industrial: LTV 70% – 75% DY – 8%-9%
Self Storage: LTV 70% -75% DY 9% – 10%
Mobile Home Park LTV 75% – 80% DY – 7% – 8%
Senior Housing LTV 70% – 75% DY – 8% – 9%
Prepayment Penalty: Most often, an option between Defeasance and for a small premium you could go with Yield Maintenance. In any case the loan will be Locked Out (closed) to prepayment for the first two years after the loan is Securitized. Call if you want to better understand the differences between Defeasance and Yield Maintenance. Also, call if you would like to understand how the penalties are calculated under either of these methods.
Escrows: Normally real estate taxes and insurance are escrowed. Unless the leverage is low and the property is in excellent good physical condition the lender will most likely establish and escrow for replacement reserves, tenant roll over (TI’s and Leasing Commissions for retail, office and industrial).
Entity Requirements: There is a significant amount of variation between CMBS originators on ownership structure requirements. Therefore, on loans over $10 million the lender will ask that the borrowing entity be Bankruptcy Remote, a Delaware Trust be established, a Lock Box will be established at closing. Lower leverage loans we can sometimes soften these requirements. Commercial Real Estate Loans under $10 million have less restrictions and requirements.
Non-Recourse: Yes, subject to Bad Boy Carve-outs.
Lender Fees: Appraisal, property condition report (PCR), phase one environmental, background check, Lender Legal, Flood Certificate, UCC Search, Zoning Confirmation, lender processing fee, plus typical title, recording costs. An estimate of the Closing costs will be included with the Application once issued.