CMBS loans offer several benefits when it comes to refinancing part of a mixed-use property. CMBS loans typically have five- to 10-year terms, so borrowers can avoid paying a balloon payment at the end of the term. Additionally, CMBS financing is one of the few commercial refinancing options that offer cash out, making it attractive for borrowers who wish to extract equity from their property. In addition, CMBS financing generally has longer terms and longer amortizations than bank financing, which often has five-year terms with 10- to 20-year amortizations. Finally, CMBS loans are far more focused on a property's financials than a borrower's credit, which makes them easier to get approved. Source and Source and Source

The risks associated with refinancing part of a mixed-use property with a CMBS loan include the possibility of having to resolve credit issues or insufficient collateral before becoming eligible for bank financing, as well as the potential for having to pay a balloon payment at the end of the loan term. Additionally, CMBS loans may have somewhat strict prepayment penalties and a general prohibition on supplemental financing.

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. However, if the borrower owns both parts of the property and currently has a loan that covers both, they would not be able to refinance only part of it with a CMBS loan. In addition, lenders typically require a borrower to have a net worth of at least 25% of the entire loan amount, and a liquidity of at least 5% of the loan amount. Source

CMBS loans can be a great way to refinance part of a mixed-use property. The advantages of using a CMBS loan to refinance part of a mixed-use property include:

• The ability to take out cash from the property, as long as the loan's minimum LTV requirements are met.
• The potential to reduce interest rates and/or extend the loan term.
• The potential to purchase a mixed-use property, even if the borrower has less-than-perfect credit or a low net worth.

For more information, please visit cmbs.loans/mixed-use-cmbs-loans and cmbs.loans/blog/mixed-use-partial-property-cmbs-refinancing.

The disadvantages of using a CMBS loan to refinance part of a mixed-use property include:

• Less autonomy in the operation of the property and limited flexibility to deviate from the terms of the loan documents.
• Difficulty in releasing collateral.
• Expensive to exit.
• Lock outs often prevent prepayment or up to two years.
• Reserves required.
• Secondary financing (i.e. mezzanine debt or preferred equity) not always allowed.

Source: www.multifamily.loans/multifamily-cmbs-loans