Office, Retail and Industrial Property Loans
These property types are financed by the widest range of commercial lenders including:,
conduit lenders, life insurance companies, banks, investment banks, and more.
(for loans over $2,000,000)
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Loan to Value
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| 10 Year Fixed Rate
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4.1%
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4.2%
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4.3%
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4.5%
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| 3 Month Adjustable Rate
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5.5%
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5.6%
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5.7%
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5.9%
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| 5 Year Fixed Rate
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3.0%
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3.0%
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3.2%
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3.4%
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More rates...
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Typical Commercial Property Financing Terms (e.g. retail, industrial, office)
Note: These are not terms of any specific lender. They represent terms that we frequently
see in the marketplace and are not to be relied on as a commitment to provide any
specific terms for any specific deal.
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Maximum loan to value:
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Most lenders will loan up to 75% of value or cost (whichever is lower).
For loans under $2M, there are a few lenders who will go to 80% or 90% or will allow
secondary financing for a combined loan to value of 85% to 90%.
For long term fixed rate loans a small "mezzanine" piece can be added to the loan
to yield an 80% to 85% LTV.
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Debt service coverage:
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The cash flow from operations must be at least 1.25 times the mortgage payment.
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Term:
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5, 10, 15 year terms are most common.
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Amortization:
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20, 25 or 30 years if building is in good repair. Typically 15 and 20 year loans
are full amortizing.
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Typical Rates:
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- 10 year fixed = 10 yr US Treasury bill rate + 1.1% to 2.0%
- 15 and 20 year fixed = 10 yr Treasury + 1.6% to 2.5%>
- 5 year fixed = 5 yr Treasury + 1.6% to 2.5%
- ARM = LIBOR + 1.7% to 2.5%
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Prepayment terms:
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- 10 year fixed rate loans - typically have prepayment based on "yield maintenance"
or "defeasance". This kind of prepay can make it prohibitive to refinance or sell
the property (prepayment fees can easily exceed 10% to 15% of the loan).
- 5 yr fixed rate loans - typically have a decreasing prepayment each year (e.g. 5%,
4%, 3%, 2%, 1%).
- Adjustable rate loans - typically have a decreasing and smaller prepay (e.g. 3%,
2%, 1%).
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Allowable vacancy:
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Generally lenders expect the vacancy to be near the local market vacancy. This is
generally in the 5% to 10% range.
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Recourse:
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Longer term loans (typically from life insurance companies or conduits) are generally
non-recourse. Bank loans are typically recourse.
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Closing costs:
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Borrowers are responsible for all due diligence and closings costs (e.g. Appraisal,
Phase 1 Environmental, site inspection, title, etc)
- Loans under $3M - costs range from $6,000 to $12,000
- For loans over $3M - costs can be $20,000 or more
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Information You Will Need For Your Application:
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