CMBS Loans Part 2: Interest Rates and Key Structural Elements
CMBS loans for commercial multifamily and hospitality real estate feature interest rates priced as spreads over swap rates (e.g., 10-year swaps for 10-year loans), typically fixed for the full term with options for interest-only, amortizing, or hybrid structures. Amortization is usually 30 years, though hotels use 25 years and single-tenant net leases match remaining lease terms.
Common CMBS Loan Structures
| Structure Type | Details |
|---|---|
| Interest Rates | Fixed over swaps; 5-10 year terms common in 2025 |
| Amortization | 30 years standard; 25 years hotels; lease-term for net leases |
| Loan Flexibility | IO periods, hybrids (e.g., 2-year IO + 8-year P&I) |
Essential Reserve Requirements
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Rollover Reserves: Fund tenant improvements/leasing commissions for expiring leases; upfront + monthly deposits based on rollover schedule.
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Free Rent Reserve: Covers concessions burning off existing leases or projected for new tenants.
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Deferred Maintenance: Funded at closing for immediate property repairs.
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Replacement Reserves: Monthly deposits ($/sq ft commercial, $/unit multifamily, % revenue hospitality).
Cash Management and Assumability
Cash sweeps activate on triggers like major tenant loss, trapping cash flow in lender accounts until resolved (e.g., reletting space). CMBS loans are assumable for a fee with master servicer approval of new guarantors.
These elements ensure securitization compliance while protecting lenders, making CMBS suitable for stabilized income properties.
Contact Randy Efron at randy.efron@skylatus.com for CMBS financing at Skylatus Property Capital.
