Chicago based Clopton Capital (https://cloptoncapital.com/), a national commercial mortgage broker, makes it mandatory for all its agents to understand the different commercial real estate leveraging options available to private investors, small/middle market real estate entities, and family offices everywhere in the US. Considering the availability of commercial mortgages, bridge loans, construction loans, mezzanine financing, preferred equity, and real estate private equity the one not so high on the awareness scale is the Commercial Mortgage-Backed Securities (CMBS) loan category. Now from a borrower’s viewpoint a CMBS loan looks and feels similar to any asset-backed commercial property mortgage offered in the normal course of business by the banks. A closer look will reveal that there are significant characteristics that identify this category and position it away from other forms of lending.
CMBS loan terms, structure, and accessibility
- Loan amounts from $1 million upward
- Every city, town, and rural area in the USA
- Property types include multifamily, retail, office, industrial, hospitality, etc.
- 5, 7, & 10 year fixed periods, ballooning or refinancing at the end
- Up to 30-year amortizations with interest-only periods a consideration
- Non-recourse, subject to bad-boy carve-outs
- Reserves for taxes, insurance, & cap-ex
- Yield maintenance OR defeasance prepayment
Like all lending in the commercial arena, it is a CMBS loan requisite to only fund industrial, commercial, hotels, and multifamily – never residential. Then too it has to be a first lien loan, thus canceling out 2nd lien advances from the equation. The interest rate is always fixed (i.e. never variable) and amortized generally over 25 – 30 years. However, the loan terms are ranged between 5 to 10 years, with 15 years considered extraordinarily long. Sometimes an interest-only period of payment is included. Now with amortization and term being unaligned, typically these loans end with a big balloon payment or otherwise need to be refinanced. It is adaptable to most borrower structures including partnerships, trusts, corporations, LLCs, Delaware Corporations, estates, and even foreign nationals. Properties in every USA city, town or country district qualifies for consideration.
There are 3 big differentiating features:
- No 2nd Lien loans found as in many other commercial mortgages (here).
- With amortization and term being unaligned (i.e. term up to 6x higher), typically these loans end with a big balloon payment or otherwise need to be refinanced. This is a big borrower awareness factor.
- The lender (generally a bank) has no intention of keeping the loan as described on its books, and that is why it is often referred to as a conduit loan. The way it works is that the bank parcels the CMBS loan with others resembling it and then sells the parcel with all its impending cash flows to 3rd parties, who essentially assume the rights and benefits as if it arranged the loan in the first place. From the original lender’s viewpoint the loan is removed from its balance sheet thus boosting liquidity, and at the same time, it takes a cut for being the originator.
Clopton Capital prides itself on its seamless ability to give borrowers on-demand access to the most competitive commercial mortgage lenders handling CMBS transactions in the business – and any other funding option for that matter. We can demonstrate several $ billion of closed commercial leveraging deals over the last 10 years built purely on trust and close relationships with primary lenders in every state. If anyone can make a CMBS facilitation possible for you, we can. When you connect with us you are sure to enjoy the uninterrupted and focused attention that our open-book communications policy is famous for.
To understand more about CMBS loans, or have CMBS loans explained, contact one of our commercial mortgage lenders by calling 866-647-1650 or using the Contact Us form available from the menu. We’re always happy to work with investors to find the right CMBS loan rates and repayment plans to suit your needs. And with low closing costs attached to a straightforward documentation and underwriting process, your commercial loan experience will be stress-free.