CMBS Loans
BENEFITS OF CMBS LOANS
- Available to those who may not be able to obtain traditional financing
- Non-recourse loans, which protects the borrower
- Offers a high leverage percentage with a 75% loan to value ratio (LTV), or some even offer up to 80% LTV
- Often lower rates than comparable traditional bank loans
- CMBS loans are assumable, so borrower can exit property before end of loan term
- Permit cash-out refinancing
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.
