CMBS Loans Part 1: Fundamentals for Multifamily and Hospitality Real Estate
CMBS (Commercial Mortgage-Backed Securities) loans finance stabilized commercial properties intended for 5+ year holds, where originators pool loans into securitizations—chopping them into bonds with varying risk/return profiles sold to fixed-income investors. Post-closing, a master servicer handles borrower interactions, replacing the originator.
Key Advantages of CMBS Loans
-
Long-term fixed rates for rate stability.
-
High leverage (up to 75% LTV for multifamily).
-
Non-recourse structure limits personal liability.
-
Lower net worth/liquidity requirements than banks.
Notable Disadvantages
-
Higher rates than bank recourse loans.
-
Elevated closing costs from complex docs.
-
Burdensome financial reporting.
-
Master servicer dealings (not originator).
-
Strict prepayment penalties.
-
Rate locks near closing only.
-
Mandatory reserves reducing cash flow.
Loan Structure and Sizing Metrics
CMBS loans are senior liens with 5-10 year terms. For stabilized assets, sizing uses as-is LTV and debt yield (vs. bridge loans‘ as-stabilized metrics):
| Property Type | Max LTV | Min Debt Yield |
|---|---|---|
| Multifamily | 75% | 7.5% |
| Hotels | 60-65% | 10-12% |
This reflects current income, suiting stabilized multifamily, hospitality, and commercial properties.
Contact Randy Efron at randy.efron@skylatus.com for CMBS strategies at Skylatus Property Capital.
