If you are a commercial real estate agent considering the venture, then one of the most robust forms of lending on the table is the CMBS conduit loan. Frankly, most banks cannot afford (insofar as risk assessment) to lend the cash necessary for robust commercial real estate acquisitions, nearly all of which include residential apartment buildings, warehouses, self-storage units, etc. The millions of dollars necessary are feasibly acquired with CMBS conduit loans.
Understanding the Conduit Loan
CMBS conduit loans, as the name implies, are specifically for the acquisition of commercial real estate properties. The loan terms are highly favorable for such expensive buildings; running between 25 and 30 years; however, a balloon payment at the end of the loan repayment takes the traditional course. The mechanism is as follows: the conduit loan is protected by the trust and regarded as a (potential) collateral in the event of loan default. It is secured by a first mortgage.
CMBS Conduit Loans Have Many Benefits
The primary benefit is at the forefront: CMBS conduit loans enable investors to get into the commercial real estate space without necessarily possessing the physical resources (whether through hard cash or traditional bank loans) to acquire commercial self-storage units, warehouses, apartment buildings, or multifamily residential properties. Furthermore, they are a viable option even for those with the creditworthiness required for federal loans via the SBA; with conduit loans, there’s a startling lack of red tape as well as very manageable interest rates.
As for the primary applicants for conduit loans, you will find hotel managers among them, as well as owners of other substantial commercial buildings. No matter who they are, the conduit loan meets a couple of basic requirements: the sought-after leverage is up to 75%, and the required loan amount exceeds about $2 million.
Fortis Funding offers CMBS loans with higher amounts, better LTV, and more generous terms than traditional channels. Contact our offices today to learn more.