Eligible Property Types for CMBS Loans
CMBS loans, also known as conduit loans, can finance commercial, retail, industrial, self-storage, warehouse, mixed-use and office properties, as well as hotels, apartments and multifamily developments.
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CMBS loans aren’t limited to hotels, apartments, and office buildings— in fact, almost any kind of revenue generating commercial real estate asset is eligible. This includes a diverse array of property types, including retail properties, self-storage and mini-storage facilities, marinas and boatyards, parking garages, industrial properties, and more. Below, we’ll dive a little bit deeper into some of the most popular CMBS-eligible property types. Then, we’ll explain their specific eligibility requirements.
Apartments: While agency loans such as Freddie Mac and Fannie Mae still dominate the market for multifamily properties, CMBS loans are once again expanding in popularity due to their relaxed credit requirements. However, CMBS financing isn’t just available for traditional apartments; it’s also available for student housing, senior care facilities (including independent living, skilled nursing homes, and assisted living facilities), and mixed-use properties.
Hotels: Hospitality properties are no stranger to CMBS financing, and, while CMBS lenders typically require a higher DSCR for hotels than other CRE property types, these loans are still a popular way for hotels to get the funds they need to make necessary renovations and improvements. Eligible hotel property classes include branded hotels and resorts, boutique hotels, and budget/value hotels and motels.
Offices: Office properties have long been a stalwart of the CMBS loan market, and they continue to remain so today. Eligible office property types include traditional high-rises, low-rise and single-story office parks, large medical offices, and mixed-use industrial buildings (properties that combine light manufacturing facilities, R&D areas, and office spaces.) Generally, only Class A and Class B office properties are eligible for CMBS financing.
Mixed-Use Properties: Across the U.S., mixed-use properties are on the rise— and CMBS loans are a great way to finance them. CMBS lenders are issuing loans to a variety of mixed-use properties, from small apartment buildings with just a few spaces for commercial tenants, to large mixed-use complexes that combine living spaces with retail stores, restaurants, and entertainment businesses.
Self-Storage Facilities: Self-storage is a growing industry, and CMBS loans can provide financing for several different classes of self-storage businesses, from urban mini-storage facilities to suburban self-storage/warehouse space intended primarily for commercial clients. In most cases, CMBS-eligible self-storage properties must have high-quality construction, and be located in relatively high-density areas.
Retail Properties: While it’s true that retail properties have had their challenges in recent years, well-positioned assets in the right markets can still be a boon for investors. From small strip malls in busy suburban areas, to power centers and regional shopping malls, CMBS loans can finance them all. In general, CMBS lenders prefer retail properties with strong anchor tenants that have long-term leases, and those that are under competent, experienced management.
Industrial Properties: Industrial properties can range from warehouse and distribution centers, to heavy manufacturing properties, and refrigeration and cold storage facilites, all of which are eligible for CMBS financing. Other CMBS-eligible property types include mixed-used industrial (combining office and industrial space), and data/communications centers.
Parking Garages: When it comes to commercial real estate, parking garages may not be the first thing that comes to mind— but in the right location, they can generate a significant amount of revenue. CMBS-eligible parking garages are typically well-positioned, multi-story properties in high-density areas.
Marinas: Just like parking garages, marinas may not be the most common type of asset to use CMBS financing, but as income-generating properties, they’re certainly eligible. Sp, whether you want to purchase a new marina or boatyard, or refinance one you currently own, a CMBS loan could be a smart way to do it.
Mobile Home Parks: There’s never been more need for affordable housing througout the U.S., and mobile home parks are a fantastic way to provide the lower-cost living solutions that so many Americans need. Eligible mobile home parks typically have 50+ pad sites, have 90% or more resident-owned homes, and do not include any option for residents to purchase pad sites.
Hospitals: CMBS loans can be a great way to fund hospital and healthcare property acquisitions, but in the vast majority of cases, the hospital or healthcare firm itself cannot be the borrower, since CMBS loans are not generally available for owner-occupied properties (though there are some exceptions). Instead, a real estate firm will have to take out a CMBS loan on the property, which it can then lease to a hospital or healthcare firm.
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