CMBS Conduit Loans
CMBS conduit loans are a core product for ValueXpress. We’ve originated over $2.5 billion CMBS conduit loans since 1995, closing over 400 CMBS transactions for our clients.
Corpus Christi, TX
$7,200,000 CMBS Conduit Loan
WHAT ARE CMBS CONDUIT LOANS?
CMBS conduit 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 conduit 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 conduit loans started in 1992. The industry peaked in 2007 when $228 billion of CMBS conduit loans were originated in the United States. More recently, the annual volume of CMBS conduit loans closed is $75-$100 billion/year, representing roughly 20% of all commercial loans closed annually in the United States. The CMBS conduit loan market is a significant source of financing for income-producing real estate.
$4,150,000 CMBS Conduit Loan
$5,500,000 CMBS Conduit Loan
How Are CMBS Conduit Loans Underwritten?
CMBS conduit 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 conduit loan underwriting does not consider any income the property owner earns from other sources, such as salary income or net income from other real estate sources.
What Is the Structure of a CMBS Conduit Loan?
For Quick Reference Guide to CMBS Conduit Loan Rates and Terms, click here
What Types of Income-Producing Commercial Real Estate Are Eligible for CMBS Conduit Loans?
The following types of leased income-producing real estate are eligible for CMBS conduit loans:
- Manufactured Housing Communities
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 (click here to pre-qualify a hotel for a CMBS conduit loan). 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 Conduit Loans?
Construction and substantial rehabilitation projects are not eligible for CMBS conduit loans.
Healthcare (defined as real estate with meals and health services provided) are not eligible for CMBS conduit loans. Properties with well below-market occupancy are not eligible for CMBS conduit loans (but may qualify for a bridge loan).
What Loan Amounts Are Available for CMBS Conduit Loans?
CMBS conduit loans are available for loan amounts from $2 million to $100-plus million. Loan amounts from $1 million-$2 million are available on a case-by-case basis.
Can Mezzanine Financing Be Added to a CMBS Conduit Loan to Increase Leverage?
Yes. In instances where the CMBS conduit loan proceeds are insufficient to pay off existing debt in a refinance or the sponsor desires 5%-10% more leverage, a mezzanine loan can be seamlessly added to achieve the desired loan proceeds.
What Property Condition Is Required to Be Eligible for a CMBS Conduit Loan?
Class A, Class B or Class C properties are eligible for CMBS conduit loans.
Classifying commercial property is subjective, but some general criteria that would qualify for a CMBS conduit loan include the following: less than 20 years old or recently renovated; limited or no deferred maintenance; and/or competitive within its market. The best way to qualify a property is to contact your ValueXpress representative with the property address. Together, you can use Google Earth to look at the property and determine its eligibility.
What Is the Demographic Criteria for CMBS Conduit Loans?
CMBS conduit loans are available for properties in all 50 states and Puerto Rico. Properties must be located in major metro, secondary or tertiary locations.
Properties located in a rural area (except for hotels located on a major highway) are generally ineligible for CMBS conduit loans. Determination of a rural area is subjective, but one general criteria is a population of less than 20,000 persons. Please contact your ValueXpress representative with the property address to determine if the property is ineligible for a CMBS conduit loan due to a potential rural location.
What Are the Costs to Obtain a CMBS Conduit Loan?
The majority of the costs to obtain a CMBS conduit loan is the fees for an appraisal, property condition report, and Phase I environmental site assessment and lender’s legal charges.
In addition, typical commercial real estate loan closing costs include title insurance costs, survey charges and borrower counsel fees. The typical expense deposit to cover these costs is $35,000-$50,000. Should the borrower cancel the loan during the underwriting and closing process, any unspent deposit will be returned to the applicant.
If costs are a concern, please consider our Fixed-cost program. Contact us for more information about this program
What Are the Prepayment Penalties for a CMBS Conduit Loan?
The prepayment penalty for a CMBS conduit loan is Treasury Defeasance or Yield Maintenance. To learn about Treasury Defeasance, visit defeasewithease.com.
Corpus Christi, TX
$10,000,000 CMBS Conduit Loan
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