Rate: 2.75%
to 3.5% over 10 Yr SWAP index or the
10 Yr Treasury
The
spread is determined based on factors such as the quality of the hotel,
the sponsorship, loan amount, and the market. The 5 or 7 year loans are based on corresponding SWAP or Treasury indexes
Minimum
Loan: 2 million
With the cost and the limitations of this loan type, it is very much
recommended that loans smaller than 5 million not be considered for
CMBS loans unles the hotelier is keen on the non-recourse feature in
which case, Scientific Capital is able to place loans as small as 2
million
Loan
to Value: Up to 70% for hotels
On exceptional
project, it may be possible to push to 75%. Any higher loan to value
need to be achieved by stacking a Mezzanine loan behind the CMBS loan.
In the current market, most originators like to be in the 65% to 70%
Debt
Yield: 12%+
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
Debt
Service Coverage Ratio (DSCR): 1.35
Reserves: 4% minimum for FF&E
The
FF&E reserve is determined
for each hotel depending on the hotel's characteristics, age.
Generally, the minimum reserve for the FF&E is 4%
Initial
Deposit: $35K
to $50K
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
Amortization: 25 to 30 years
Standard amortization is 25 but 30 year is available for stronger markets and newer hotels
Prepayment: Defeasance for 10 years
The
prepayment penalty in these loans are significant and variable
depending on the note rate and the SWAP or Treasury index at the time the
prepayment is being calculated. If at the time of prepayment, the
market rate is higher, then the
prepayment penalty is lower, if the rates drop below the note rate, the
prepayment penalty is much higher
Costs: $67K
to $80K on the average
The closing statement may have any or all of the following items:
Lender Estimated Fees and Costs
|
|
CMBS Originator Fee
|
$7,000 to $10,000
|
Service set up fee
|
$350
|
Site visit and inspection
|
$2,500
|
Issure regulation AB II review
|
$2,500
|
Search and Report Fee
|
$300
|
Appraisal
|
$8,000 to $12,000
|
Engineering and Environmental
|
$3,000 to $4,500
|
Zoning
|
$600
|
Insurance review
|
$2,500
|
Lien searches, Lexis
|
$4,000
|
Underwriting Fee
|
$15,000
|
Originator Legal Fees
|
$28,000 to $33,000
|
Appraisal Review
|
$800
|
Environmental Review
|
$400
|
Wells Fargo Lockbox Setup
|
$2,500 to $5,000
|
TOTAL Estimated Originator Related Costs
|
$67,600 to $80,600
|
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
|
