Financing Commercial Real Estate

Market Participants Capital Supply – Insurance companies – Pension funds – REITs – Investors Capital Demand – Investors – Developers

Financial Innovation Participation mortgages Securitization Commercial mortgage backed securities (CMBS)

Lending Process Application Underwriting Commitment Closing

Application Package Purpose Type of loan Information – Investor – Property

Underwriting “Analysis of Risk” Property analysis – Appraisal – Pro forma – Review of title Borrower analysis – Financials – Experience/relationship

Underwriting Cont. Lease analysis – Tenant credit/financial info. – Length of leases – Lease expirations – Tenant mix – Other clauses

Underwriting Criteria Underwriting ratios – LTV – DCR Property description – Use – Size – Quality – Age Recourse vs. non-recourse

Commitment Offer of loan Terms (depend on underwriting) – Maturity – Mechanics – Fees (late, prepayment, underwriting) – Other requirements Covenants – Negative – Financial

Closing Completion of deal Documentation – Promissory note – Mortgage Post-closing – Servicing of the loan – Payments