Office Lending Overview
High quality office properties have traditionally been a sought after asset class for commercial real estate lenders. It is important to understand the pros and cons of different lending categories before making a decision on your office finance needs. The following is a summary of pros and cons for each category of office lenders.
Life Companies
Pros:
- Aggressive long term fixed rates (rates as low as 3.90% for 10 years)
- Can fix a long term rate for up to 20 years
- Portfolio execution
- Can do loans from $1M and up
- Rate lock at application (may require deposit)
- Most aggressive terms are on low leveraged high quality assets
Cons:
- Conservative underwriting
- Loans typically require prepayment penalties with yield protection
- Heavy due diligence
Banks
Pros:
- High LTV’s (up to 75%)
- Aggressive shorter term loans (floating, 3, 5, and 7 year terms)
- Interest rates can be very competitive
- Minimum loan amounts as low as $500,000
- Flexible (step-down) prepayment penalties
- Inexpensive execution
- Rate lock at application (may require deposit)
Cons:
- Most require personal guarantees
- Typically cannot offer long-term fixed rates
- May require banking relationship
CMBS Lenders
Pros:
- Non-recourse
- High LTV’s
- Can offer 10 year fixed rates
- Interest only available
Cons:
- Yield maintenance or defeasance prepayment penalties
- Expensive execution
- Servicing related issues (post-closing) may be cumbersome
- Rate lock occurs very late in process
At Barry Slatt Mortgage, we have long standing relationships with lenders in each of these categories, through which we craft financing solutions for our clients. There are many choices to be made when seeking financing for your office property. It can be helpful to consult with your full service mortgage banking professional to assist in the decision making.
Daniel Friedeberg
President
danf@slatt.com