First time CMBS borrower


Have in hand a “Loan Application” for a CMBS loan. We like the general terms, ten year, fixed rate, 25/30 amor, however, lots of “ifs” to get to closing. Couple of questions, (1) 4.75% floor, but 300 basis point  spread over 10 year Swap rate, which ever is higher on day of closing.  We are hesitant about this hang out period. Swap rate today is 1.90 O.K.,  rate 4.90/5%;  but 60 days ago the Swap rate was 2.43, now we are at 5.5% +/-. who knows what it could be 60/90 days out. (2) Application fees of $5M Loan Processing; $10M Report Deposit; $17,500 Legal Deposit. All paid up front non refundable even before we have a “commitment”. . Are these usually enough to cover the expenses, or is it one of those “good to start” but then, oh darn we forgot about needing this or that and please send us another $$thousand to proceed. We are not nervous nellies, however, do not wish to be lead down a rabbit trail. We are refinancing a 2/3 star park but it is long time stable and has good bones, so we feel we can pass the engineering, seismic tests,etc.and have only a limit exposure to something bad coming out of the blue.The key element is we are dealing with a recognized reputable mortgage loan originator, so will you experienced CMBS borrowers just tell me; that’s the way its done today,  just sign the app, send your  money, accept the fact it is not going to be a 4.75% rate  and have faith in the loan broker and the process.Regret the length, but have a great respect for this opportunity to get input from knowledgable and experienced people in our industry.  


That is kind of the typical process.  Doesn’t matter if you don’t think you need engineering, the bank does.  The fees sound pretty standard.  And yes, they are typically non-refundable, so it is a bit of a gamble.  I would press or shop the rate.  Depending on the size/occupancy of the property a spread of 300 and 475 floor is pretty rich.  If the loan size is over $1MM with acceptable occupancy the spread should be 220. 


Tks for the quick response.  Knowledge is power and now I can negotiate over the spread. Was expecting the report requirements, just wanted to check the fee level.Loan is $1,650M,  we have a solid occupancy rate and, of course, we think our credit and cash flow is in the top level.


I just signed a term sheet for a park that is 80% occupied in the midwest.  The loan amount is $1.5mm.  I got a 230 spread with a 415 floor and 2 years of I/O to do any major capex items/bring in homes.  You can do better.  Shop around.  I would be hesitant using a broker though.  Not sure they will provide $16,500 of value.  There are the standard banks you should go to who will look at a loan of this size.  If you would like some references message me.


I got a 240 spread on a recent loan of the same size but the floor was much higher (4.65).  We used a broker.Brandon@Sandell


Thanks for the additional comment.  I am now pushing for better terms.  Both of you have given be confidence in the process.


Don’t know how this compares to CMBS loan, but secured a loan through a regional bank at 4.85% fixed for 7.5 yrs, 15 year amm. 1.5 DSCR. With construction loan the combined LTV will end up being 80.4%. I like every aspect of it except for the high DSCR.

I guess the benefits of going CMBS would be longer ammortization period and non-recourse.


Yes, that is why I am trying the CMBS  route. Like the ten year fixed, 25/30 amor.  I have now received a hard quote of 245/4.30 floor 30 year amor or 240/4.25 25 yr. amor.Thanks to you who have responded.  Your advise and council have saved us a lot of money over the coming ten years! 


Just keep in mind CMBS has a lot of fees.  We just closed a loan and fees ran to 5% in the end (1% to broker).Brandon@Sandell


I am in the process to get non-recourse loan from Starwood. There are a few things in the loan doc bothers us:

  1. pre-payment penalty. We are trying to get 1pt premium for pre-pay penalty 2) there are numerous requirement for quarterly financial statements and there is $1,000/item fine for failing to provide. 3) lender needs to approve CAPEX, big repair. 4) The LLC which holds the property are not allowed to give guaranty which makes very tricky to participate in the CASH program. 4) Fees like legal (we pay for both lender’s and borrower’s legal fee, ALTA survey (the most expensive kind of survey).

My concern is that the loan is so restrictive, and worry that it may limit how we manage the park. Brandon, what is your experience? We do our financial statements ourselves and we don’t like to pay a bunch of money to CPA or Attorney.

Please share your experience, do we worry too much?


If by “non-recourse” you mean CMBS then you will not be able to avoid significant pre-pay penalty (i.e. defeasance or yield maintenance) because the bonds that the loan is packaged into do not allow for any variation in the payment stream from individual mortgages.

I don’t know what “Starwood” is (other than the Marriott merged company). If you’re talking about a bank then of course it’s whatever you can negotiate with the bank.

Quarterly financials are typical. On of our loans has a $10,000/item fine for failure to provide. This is just a “scary stick” to make sure they can require you to send reports. Another has $500.

Lender will say they need to see all sorts of documents but in practice you can usually wait until they ask for specific items they want. In our case, there is a list of about 15 things we’re supposed to provide but they only really need P&L and sometimes the balance sheet plus some explanations.

Lender will certainly want to approve CAPEX if they are escrowing maintenance reserve, but this is typically not a big hassle. And if you have CAPEX that you want to invest without getting reimbursed, the lender is unlikely to care.

Prohibiting the Borrower from giving guarantee is probably typical. So you will NOT be able to use the CASH program. Tough.

Fees (and restrictions) – well, that’s the flip side to the lower interest rates that CMBS market provides.

Our loan docs require GAAP accounting “or other suitable method.” You’re probably fine unless you are in Default whereupon the Lender will take a closer interest in what they can.

Here’s some cut-and-paste from our loan docs.

6.3.3 Monthly/Quarterly Reports. Borrower shall furnish to Lender within fifteen (15) days after the end of each calendar month or calendar quarter (as indicated below) the following items:

(i) monthly and year-to-date operating statements, noting Net Operating Income and other information necessary and sufficient under GAAP (or other accounting method reasonably acceptable to Lender) to fairly represent the financial position and results of operation of the Property during such calendar month, all in form satisfactory to Lender; (ii) a balance sheet for such calendar month; (iii) a comparison of the budgeted income and expenses and the actual income and expenses for each month and year-to-date for the Property, together with a detailed explanation of any variances of ten percent (10%) or more between budgeted and actual amounts
for such period and year-to-date; (iv) a statement of the actual Capital Expenses made by Borrower during each calendar quarter as of the last day of such calendar quarter; (v) a statement that Borrower has not incurred any indebtedness other than indebtedness permitted hereunder; (vi) an aged receivables report; and (vii) rent rolls identifying the leased premises, names of all tenants, units leased, monthly rental and all other charges payable under each Lease, date to which paid, term of Lease, date of occupancy, date of expiration and a delinquency report for the Property.

Each such statement shall be accompanied by an Officer’s Certificate certifying, to the best of the signer’s knowledge, (1) that such items are true, correct, accurate, and complete and fairly present the financial condition and results of the operations of Borrower and the Property in accordance with GAAP (or other accounting method reasonably acceptable to Lender) (subject to normal yearend adjustments), (2) whether there exists a
efault or Event of Default, and if so, the nature thereof, the period of time it has existed and the action then being taken to remedy it, (3) that as of the date of such Officer’s Certificate, no litigation exists involving Borrower or the Property in which the amount involved is $162,500 (in the aggregate) or more or in which all or substantially
all of the potential liability is not covered by insurance, or, if so, specifying such litigation and the actions being taken in relation thereto and (4) the amount by which operating expenses incurred by Borrower for such period were greater than or less than the operating expenses reflected in the applicable Annual Budget. Such financial statements shall contain such other information as shall be reasonably requested by Lender for purposes of calculations to be made by Lender pursuant to the terms hereof. Notwithstanding anything to the contrary set forth in this Section 6.3.3, after the occurrence of a Secondary Market Transaction, Borrower shall no longer be required to provide the items set forth in this Section 6.3.3 on a monthly basis (and consequently, references herein to “month”, “monthly” and “calendar month” shall then mean and refer to, respectively, “quarter”,
“quarterly” and “calendar quarter”).

another loan

3.10 BOOKS AND RECORDS. (a) Each Borrower (i.e., each of Borrower 1 and Borrower 2
separately) shall separately keep adequate books and records of account in accordance with sound accounting
principals, consistently applied, and furnish to Lender:
(i) such Borrower’s respective monthly operating statements of the Property, prepared and
certified by the respective Borrower in the form reasonably required by Lender, detailing the revenues
received, the expenses incurred and the net operating income before and after debt service (principal and
interest) and major capital improvements for that month and containing appropriate year to date
information, and containing a comparison for such month with the annual budget delivered pursuant to
Subsection 3.10(a)(v), within thirty (30) days after the end of each calendar month, provided however,
upon the transfer of the Loan in connection with a securitization, such financial statements shall be due
quarterly within thirty (30) days after the end of each applicable calendar quarter; and for each month a
monthly statement of account of the Property Account (as defined in the Cash Management Agreement)
produced by Bank (as defined in the Cash Management Agreement) during each month when the
Property Account, if any, exists pursuant to the terms of the Cash Management Agreement;
(ii) such Borrower’s respective monthly certified rent rolls for the preceding month signed
and dated by the respective Borrower, detailing the names of all tenants of the Improvements, the portion
of Improvements occupied by each tenant, the base rent and any other charges payable under each Lease
and the term of each Lease, including the expiration date, and any other information as is reasonably
required by Lender, within thirty (30) days after the end of each calendar month, provided however, upon
the transfer of the Loan in connection with a securitization, such certified rent rolls shall be quarterly
within thirty (30) days after the end of each applicable calendar quarter, provided however, upon the
transfer of the Loan in connection with a securitization, such certified rent rolls shall be quarterly within
thirty (30) days after the end of each applicable calendar quarter;


Hi, Brandon,

This is REALLY helpful. Thank you very much! This is a CMBS deal. My major concern is the loan does not give us enough room to operate the park efficiently. There are a little more than a dozen lots vacant and I need to bring in homes (either used or new using the CASH program). In the case of using CASH program to bring home, if the park (community) can not guarantee to pick up the mortgage payment, I wonder if park owner can personally guarantee or our other LLC like the retailer LLC can guarantee to make the CASH program to work?

How do you fill vacant lots for your CMBS deal? It will be super helpful to get some tips.

Thank you again!


One at a time, slowly…


thank you again. How about the insurance requirement? They are asking for insurance against terrorism and loss of income etc. Does that make the insurance premium extremely high for you or it is marginally higher? Sorry for the the many questions…


I just got a new financial reporting requirement notice. Presumably everyone who is serviced by Wells Fargo got the same one. In years past it specifically asked for a rent roll, a P&L and sometimes a Balance Sheet, along with explanation of any one-time charges. This one asks for pretty much everything – and some poor analyst is getting paid the big bucks to review everything I submit and thousands of other properties just like it (and all kinds of commercial not just MHP’s) and then check some box. If they check the “wrong” box then another letter will come giving me a big WARNING that SOMETHING IS WRONG and THEY NEED SOME DOCUMENTS and then those get submitted and usually there’s a deafening silence after that. So provide what you think some peon is going to have to check some box for and hope for the best. And do it to the best of your own analysis and if they come calling well go ahead and explain whatever there is to explain.

WF financial reporting req’t notice.pdf (384.2 KB)


peakblu & Brandon,

I apologize for being nosy, but I have a sincere question, and I am always looking for new and better ways to do things. Why would you want, or choose to use CMBS to finance a park? It is the most expensive, and restrictive form of non-recourse financing I can think of. Here is a quick background on me so you can see the perspective of the question. I primarily broker non-recourse financing in the 4 major CRE food groups (Multifamily, Office, Industrial, Retail). Outside of the 4 I also do Hotel, USDA, and MHP non-recourse loans. The only product we use CMBS for is Hotel, because Life doesn’t like it, and gov’t doesn’t either. Other than having to use CMBS on Hotel there are cheaper less restrictive types of non-recourse financing available. I don’t spend a lot of time on message boards so I may be out of line here by giving my email, and cell phone. I would love to hear from you on why you guys chose to use CMBS. or 801-599-1878.
Thanks, Aubrey