Get Flexible CMBS and Conduit Financing for Self-Storage Properties
Self-storage facilities are increasingly in demand across the United States, with more than 10% of all U.S. households estimated to use self-storage. As of 2021, annual industry revenue was estimated to be nearly $40 billion, a massive increase from the $25 billion in revenue the industry collected in 2017.
All of this means that self-storage can be an incredibly lucrative option for real estate investors, particularly in areas with growing populations. A CMBS loan can be a great way to fund your self-storage facility, since they offer long-term, fixed-rate, non-recourse loans to investors of all types.
Common Uses for CMBS Self-Storage Property Loans
Property acquisition: Since demand for self-storage facilities is so high, now could be a great time to purchase a new self-storage property, whether it’s your first self-storage investment or one of many self-storage properties in your portfolio.
Rate or term refinancing: If you currently are financing your self-storage property with a high-interest or floating-rate bank or hard money loan, fixed-rate CMBS financing could be a fantastic alternative.
Taking cash out: If you have a lot of equity built up in your self-storage facility, a CMBS loan could be a great way to tap into it. You can use your new funds for anything you like, including putting a down payment on a new self-storage property or even making renovations to other properties in your portfolio.
Prospective Terms for CMBS Self-Storage Property Loans
Unlike bank loans or life insurance company loans for commercial properties, or Fannie Mae, Freddie Mac, and HUD multifamily financing for apartment properties, CMBS loans have relatively lenient borrower requirements.
CMBS terms and requirements typically include:
Loan Size: $2 million+, no maximum loan amount
Loan Terms: 5, 7, and 10-year fixed-rate terms, interest-only (I/O) financing available for well-qualified borrowers
Amortization: Generally 25-30 years
DSCR/LTV: 1.25x -1.35x, 75% LTV
Eligible Properties:
Buildings should generally have high-quality construction, with concrete block or brick structures optimally preferred
Assets should be located in high-density, high traffic areas, ideally in regions with high population growth
Metal buildings are not ideal, but may sometimes be financed with some restrictions
Loan Pricing: Pricing based on current swap rate or relevant U.S. Treasury rate, LTV and DSCR, as well as asset quality, rate buydowns available in some situations
Loan Assumption: Fully assumable pursuant to master servicer approval and a fee, generally 1%
Prepayment: Yield maintenance or defeasance
Recourse: Generally non-recourse with standard bad-boy carve-outs for issues like fraud, embezzlement, or international bankruptcy
Third-Party Reports: Third-party reports are paid for by the borrower, and typically include:
Full appraisal
Phase 1 ESA (Environmental Assessment)
Property Condition Assessment (PCA) is often required
Rate locks: Available at loan commitment, 30-day rate locks may also be available with lender approval
Replacement Reserves: Typically required and paid for by borrower on a per-year basis, may be waived or reduced in some situations, particularly for Class A assets
Lender Legal Fees: Generally $15,000 for smaller loans, larger for larger loans
Origination Fees: Generally 1%, can be higher in some scenarios