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.
