CMBS Loans vs. Portfolio Loans: What's the Difference?

CMBS Loans vs. Portfolio Loans: What's the Difference?

When it comes to commercial real estate lending, there are typically two major kinds of loans, CMBS loans, also known as conduit loans, and portfolio loans. Conduit loans and portfolio loans have several key differences— and borrowers should be aware of them before deciding which type of commercial real estate financing best fits their individual needs.

Conduit Lenders List: The Largest Conduit Lenders of 2018

Conduit Lenders List: The Largest Conduit Lenders of 2018

While in an earlier article, we looked at the top CMBS lenders of 2017, we’ll now take a look at some more recent data. As of the first quarter of 2018, the top conduit lenders included JP Morgan Chase Bank, Deutsche Bank, and Goldman Sachs, each which issued more than $3 billion of conduit loans during this time.

Yield Maintenance in Relation to CMBS Loans

Yield Maintenance in Relation to CMBS Loans

While many conduit loans require that borrowers engage in defeasance if they want to prepay their loan, some lenders permit borrowers to prepay using yield maintenance. Yield maintenance involves a borrower paying off the balance of their CMBS loan, plus an additional 1-3% fee in order to compensate the lender for the income they’ve lost as a result of loan prepayment.

CMBS Loans and Co-Working Spaces: What You Need to Know

CMBS Loans and Co-Working Spaces: What You Need to Know

If you own one or more office properties, and you want to get CMBS financing in the near future, should you rent space to co-working companies like WeWork? The answer is complex; while co-working has been growing at a breakneck pace, with approximately 23% industry growth for the last several years, it still presents certain risks that landlords should consider.

Can You Refinance Part of a Mixed-Use Property With a CMBS Loan?

Can You Refinance Part of a Mixed-Use Property With a CMBS Loan?

While in most cases, CMBS loans are only allowed for individual properties or groups of properties, in some cases, one part of a mixed-use property may be eligible for CMBS refinancing. For example, if a mixed-use property is divided into residential a residential section, featuring apartments, and a retail condominium section, each owned separately, a borrower may be able to get a conduit loan to refinance only one section of the property.

Lockouts in Relation to CMBS Loans

Lockouts in Relation to CMBS Loans

For borrowers, prepayment penalties can be one of the most challenging aspects of CMBS loans. In addition to prepayment penalties, however, most conduit loans have a lockout period, a period of time in which the loan cannot be prepaid at all.

Defeasance Definition: How Defeasance Relates to CMBS Loans

Defeasance Definition: How Defeasance Relates to CMBS Loans

Borrowers often consider conduit loans’ strict prepayment penalties to be one of their major downsides. Many CMBS loans must be prepaid in a process called defeasance, which involves a borrower purchasing alternative securities, often U.S. Treasury bonds, to replace the collateral and interest income that the lender will lose as a result of prepayment. Defeasance can be a complicated process, the details of which will typically be spelled out in a borrower’s loan agreement.

The CMBS Loan Securitization Process

The CMBS Loan Securitization Process

The CMBS securitization process involves a lender taking a variety of conduit loans, often up to 100 at a time, pooling them together, and selling them as bonds. Typical conduit lenders usually have between 3 and 8 securitizations each year.