small balance conduit CMBS

Based on the most helpful WSO content, CMBS loans are typically more common for "medium-sized" deals, but it's not unheard of for smaller loans, including those under $5 million, to get done. However, these smaller loans might face challenges due to the complexity and costs associated with securitization.

For smaller balance conduit CMBS loans, the following factors are often considered:

1. Property Type: CMBS loans can cover various property types, but stable, "core" properties are more likely to qualify. Multifamily and industrial properties are often in the "strike zone" for lenders.

2. Loan Terms: CMBS loans are generally non-recourse, which can be attractive to sponsors. However, they may come with stricter underwriting standards, especially in uncertain lending environments.

3. Market Conditions: The current lending environment is challenging, with banks on the defensive and focusing on relationship lending. Rates for CMBS loans have been higher compared to agency loans, often in the mid-3% range or higher, depending on the market and property specifics.

4. Challenges for Smaller Loans: Smaller loans might not be as attractive for securitization due to the fixed costs involved in structuring and issuing CMBS. However, they can still be done if the property and borrower meet the necessary criteria.

If you're exploring this space, it might be worth reaching out to lenders or brokers specializing in CMBS to understand the specific requirements and feasibility for loans under $5 million.

Sources: So you want to work in CRE Debt? Here are the options..., Math Checks Out | The Daily Peel | 3/24/23, https://www.wallstreetoasis.com/forum/real-estate/state-of-the-cre-debt-markets?customgpt=1, https://www.wallstreetoasis.com/forum/investment-banking/how-to-position-for-a-recession?customgpt=1