Commercial Property Mortgage Loans

 

 

 

 

We are experts at finding the best long-term financing for commercial properties including, retail, office, industrial and mixed-use properties. We present your loan request to multiple lenders to find the lenders who are most willing to compete for your loan. Each commercial lender has a slightly different need for their portfolio at any single time. We find the lenders who are looking for a project just like yours right now – and therefore, are willing to stretch to get your business.

Typical Rates

(for loans over $2,000,000)

 

Loan to Value (%)

50

60

70

80

10 yr fixed

6.1

6.1

6.3

6.5

5 yr fixed

6.0

6.0

6.2

6.4

3 mo ARM

5.4

5.4

5.6

5.8

 

 

 

Types of Lenders

We shop loan requests to all types of commercial lenders including:

 

Conduit Lenders

 

Life Insurance Companies

Banks

Investment Banks

And more

Typical Commercial Property Financing Terms (e.g. retail, industrial, office)

Note: These are not terms of any specific lender. They represent terms that we frequently see in the marketplace and are not to be relied on as a commitment to provide any specific terms for any specific deal.

 

Maximum loan to value:

Most lenders will loan up to 75% of value or cost (whichever is lower).
For loans under $2M, there are a few lenders who will go to 80% or 90% or will allow secondary financing for a combined loan to value of 85% to 90%.
For long term fixed rate loans a small “mezzanine” piece can be added to the loan to yield an 80% to 85% LTV.

Debt service coverage:

The cash flow from operations must be at least 1.25 times the mortgage payment.

Term:

5, 10, 15 year terms are most common.

Amortization:

20, 25 or 30 years if building is in good repair. Typically 15 and 20 year loans are full amortizing.

Typical Rates:
  • 10 year fixed = 10 yr US Treasury bill rate + 1.1% to 2.0%
  • 15 and 20 year fixed = 10 yr Treasury + 1.6% to 2.5%>
  • 5 year fixed = 5 yr Treasury + 1.6% to 2.5%
  • ARM = LIBOR + 1.7% to 2.5%

Prepayment terms:
  • 10 year fixed rate loans – typically have prepayment based on “yield maintenance” or “defeasance”. This kind of prepay can make it prohibitive to refinance or sell the property (prepayment fees can easily exceed 10% to 15% of the loan).
  • 5 yr fixed rate loans – typically have a decreasing prepayment each year (e.g. 5%, 4%, 3%, 2%, 1%).
  • Adjustable rate loans – typically have a decreasing and smaller prepay (e.g. 3%, 2%, 1%).

Allowable vacancy:

Generally lenders expect the vacancy to be near the local market vacancy. This is generally in the 5% to 10% range.

Recourse:

Longer term loans (typically from life insurance companies or conduits) are generally non-recourse. Bank loans are typically recourse.

Closing costs:

Borrowers are responsible for all due diligence and closings costs (e.g. Appraisal, Phase 1 Environmental, site inspection, title, etc)

  • Loans under $3M – costs range from $6,000 to $12,000
  • For loans over $3M – costs can be $20,000 or more