CMBS acquisition loans

A CMBS acquisition loan finances the purchase of a stabilized commercial property with a fixed-rate, non-recourse conduit loan. The loan is the smallest of the loan-to-value, coverage and debt yield limits; the buyer funds the rest of the price, closing costs and upfront reserves. The purchase contract has to allow time for the lender’s reports and documents.

What acquisition loans look like in practice

Three of the largest loans in the BANK5 2025-5YR14 pool financed purchases. Their sources and uses, from the prospectus:

Loan	Property	Loan	Price	Sponsor equity	Upfront reserves	Closing costs	Loan to appraised value
1401 H	357,252 SF office, Washington, DC	$88.0M	$118.1M	$49.2M	$13.0M	$6.1M	65.7%
Las Olas City Centre	410,561 SF office tower, Fort Lauderdale, FL	$145.0M	$221.0M	$91.2M	$12.4M	$2.9M	65.1%
Atlanta Galleria Hotel Portfolio	Two hotels, Atlanta, GA	$47.0M	$66.0M	$25.6M	$4.4M	$2.2M	64.4%

What the table shows:

• Equity was a third or more of total sources in each case (35.9%, 38.6% and 35.3%).
• Reserves are a real use of cash on acquisitions. The 1401 H buyer funded, among other reserves, $3.75 million for free rent and concessions; the hotel buyer funded $4.0 million for a property improvement plan required by the franchise, 125% of its estimated cost.
• Loan to price and loan to value differ. 1401 H appraised at $134.0 million against a $118.1 million price, so the loan was 65.7% of value but about 75% of price. Lenders weigh both.

How the loan is sized on a purchase

The same three tests as any CMBS loan, applied to the property as you will own it:

1. Loan-to-value on the new appraisal. Lenders also look at loan to total cost (price plus closing costs and reserves) to see the sponsor’s real equity.
2. Debt service coverage on the lender’s underwritten net cash flow. On a purchase, the lender underwrites the seller’s history and the in-place rent roll, not your pro forma.
3. Debt yield on underwritten net operating income.

Recent leverage by property type is on CMBS loan requirements. Run your purchase through the CMBS loan calculator before you bid, and remember that a price above what income supports is equity, not debt.

Fit the purchase contract to the CMBS timeline

The most common acquisition problem is a contract that does not leave room for the lender’s process. Before you sign:

• Financing period. Allow time for the appraisal, Phase I, property condition report, credit committee and loan documents before your deposit goes hard. Ask the lender for a realistic schedule in writing.
• Seller cooperation. Require the seller to deliver operating statements, rent rolls, leases, service contracts and existing third-party reports promptly, and to request tenant estoppel certificates and SNDAs in the lender’s form.
• Access. The lender’s appraiser and engineers need site access, and the lender inspects the property and market itself.
• Closing date. Leave room for the rate lock and document negotiation. A rate lock usually ties you to a closing window.
• Existing financing. If the seller has a CMBS loan, decide early whether you are assuming it or the seller is defeasing it; the seller’s prepayment cost can affect price.

New loan or assume the seller’s?

	New CMBS loan	Assume the seller’s CMBS loan
Rate	Today’s market	The seller’s existing rate
Proceeds	Sized to your price and today’s income	The existing balance; any gap is equity or junior debt
Term	A fresh 5 or 10 years	Whatever is left
Cost	Origination, reports, lender legal	Assumption fee, servicer legal, rating agency confirmation where required
Timing	Lender’s full process	Servicer review, which can take as long or longer

The BANK5 prospectus lists typical conditions for an assumption: the servicer’s consent, rating agency confirmation where required, an assumption agreement with legal opinions and title endorsements, and payment of the assumption fee (prospectus, pp. 225 to 226). Details: CMBS loan assumption and the assumption calculator.

What the buyer signs

• A new single-purpose entity to take title and borrow. Non-recourse CMBS loans explains why.
• The guaranty of recourse obligations and environmental indemnity, by a guarantor with real net worth and liquidity.
• The loan agreement, note, mortgage or deed of trust, assignment of leases and rents, and, where required, a cash management agreement.

Who should not use CMBS for a purchase

• Value-add or repositioning buyers. CMBS lends on in-place income with fixed reserves. Use a bridge loan and refinance later. CMBS vs bridge loans.
• Owner-users. A business buying its own building belongs in an SBA loan (13 CFR 120.131).
• Buyers who may sell within a few years. The prepayment lock will cost more than the rate saves. CMBS prepayment penalties.

Gather the purchase package with the CMBS loan checklist, compare offers with the loan offer comparison tool, and see the full process in how to get a CMBS loan.