CMBS Turndowns & Alternatives

www.arrivatollc.com – The CMBS Market was a popular choice for many commercial real estate operators over the past few years of the real estate recovery.   With vulnerabilities beginning to emerge in the commercial mortgage bond market and concerns of the market cycle beginning to turn towards the down cycle in the next couple years, many issuers of CMBS loans are scaling back their production.

With this being said, there is an increasing number of circumstances where borrowers are getting turned down for a CMBS loan, and leaving them in scenarios where they need to close quickly.

There are many reasons why borrowers are getting turned down for a CMBS loan.  Among the traditional factors were assets that did not have enough credit tenants or borrowers who might have been a little too “mom & pop” operationally.  Now we are seeing circumstances where the assets are not stable enough, the borrowers have weaknesses, especially a bankruptcy or legal issue.   We are also seeing assets in secondary markets getting turned down.

What are the options?

Fortunately, there are many…both fairly conventional and quick close.

If you are looking for a comparable option to the CMBS, there are options with interest rates as low as 4% and semi-conventional options with interest rates between 6% and 9%.

These loans range from small balance loans to very large loan amounts up to a few hundred million dollars with leverage between 65 – 80% for terms up to 10 years.

There are also quick close options when a borrower needs to close in 10-21 days with interest rates between 9 – 12% with leverage up to 80% LTC/LTV.

We have seen a number of scenarios ourselves.   We worked with a retail property owner who had bankruptcy issues and was in the process of filling multiple anchor spaces that went vacant.   We helped this borrower through a transition period with a three (3) year term with an interest rate in the 6.5% range while the borrower prepared the asset for disposition.

We also worked with a student housing operator who was turned down by the CMBS while attempting to re-capitalize his large portfolio because some of the assets were located in tertiary markets.   We helped secured a loan exceeding $100 million with an interest rate of 5.15%.

If you have a scenario involving multi-family, retail – especially strong grocery anchored, office, industrial, senior living, student housing, hospitality, medical office buildings, self-storage, and mobile home parks – let’s discuss your options and determine the best short-term and long-term solutions.

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