Hotel CMBS Conduit Loan
Review of the non-recourse
CMBS Conduit hotel loan program
The Debt Yield is probably the most examined parameter by the CMBS loan originators
Example of calculating Loan amount for a specific Debt Yield:
If the Net Operating Income (Before depreciation, interest, and amortization) is $800,000 and the Gross Revenue is $2,700,000, then the maximum loan at the Debt Yield of 10.5, FF&E reserves of 4%, and Management of 3% is calculated as follows:
Net NOI = NOI – FF&E reserves – Management reserves
Net NOI = $800,000 – Gross Revenue x 4% – Gross Revenue x 3%
Net NOI = $800,000 – $108,000 – $81,000 = $611,000
Maximum loan amount allowed by this Debt Yield = NOI/DY = $611,000/10.5% = $5,819,047
Each originator collects a different amount of initial deposit and any unused portion is returned to the borrower in case the loan is declined or the borrower cancels the application. It is expected that at the minimum, the application fee in the range of $5K to $10K would be non refundable.
Originators do immediately involve their attorney in processing the loan, order third party reports, and perform site visits which does exhaust the good faith deposit
Lender Estimated Fees and Costs | |
CMBS Originator Fee | 5,000 to 10,000 |
Service set up fee | 0 to 350 |
Site visit and inspection | 200 to 2500 |
Regulation AB II review | 0 to 2,500 |
Search and Report Fee | 300 |
Appraisal | 5,000 to 12,000 |
Engineering and Environmental | 3,500 to 5,200 |
Zoning | 600 to 1,200 |
Insurance review | 2,000 to 2,500 |
Lien and credit searches | 1,200 to 4,000 |
Underwriting Fee | 8,000 to 15,000 |
Originator Legal Fees | 25,000 to 33,000 |
Appraisal Review | 500 |
Environmental Review | 400 |
Wells Fargo sweep account Setup | 2,500 |
TOTAL Estimated Originator Related Costs | 64K to 86K |
Other Expected Costs | |
Borrower’s Council | $5,000 to $20,000 |
Escrow and Title | Depends on the transaction, size of the loan, the market, etc. |
Escrow accounts | The Originator will escrow the taxes for the months remaining to the property tax due date. It also escrows certain number of months for the insurance premium. PIP is escrowed at 125% of the total estimated cost |