Office Building Loans

Owners evaluating office building loans have some of the best finance options available in the market.  This is a broad category and finance options vary widely based on such factors as loan amount, owner occupied or investment, strength of owner, etc. In addition, the type of office building itself, dictates options as well.  For example, a commercial condo loan will differ from a medical office building or multi - story class A office property loan.

Office Property Mortgage 

Below is a brief discussion on the underwriting criteria found with most office building loans.  Note though that each situation is different and this is only meant to be an overview.  Feel free to call to discuss your specific situation.   

LTV

Loan to value restrictions on office property refinances are normally capped at 80% on a rate and term refinance and 75% loan to value on cash out refinances.  Higher LTV’s are available, but come at a steep price for the borrower.  Lower loan to value requirements should be expected for office investment properties, normally a reduced by 5% off the above. 

On office purchases LTV restriction will be as high as 90% financing with both SBA as well as Non SBA options.   

DSCR

Debt Service Coverage Ratio restrictions are typically set at 1:1.2 for both investors and owner occupants of office properties.  Meaning that for every $1.20 of net income (income after taxes, insurance etc have been paid) the property/business produces, the mortgage payment will not exceed $1.00.  Said in another way, after all expenses and the mortgage has been paid, the owner will need to net $.20 to qualify.

Many exceptions are made with this rule on office building loans.  For example, stated income loans can be an outstanding option for owners that have low debt coverage ratios due to either overstated expenses, current high levels of vacancy, or understated income. Also note that the our Fixed Rate SBA 7a loanwill allow projections as well as DSCR as low as 1.1

Tenant Evaluation

Tenant evaluation is not as important within the office property category as others (like single tenant NNN properties) but still important. Lenders scrutinize the time left on the current lease and other relevant information.  Of particular concern on an office property refinance is the time remaining on the current lease(s).  For example on multiple unit properties lenders prefer the lease expirations to be staggered and most banks/ lenders want to see at least 3 years left on the current leases.  Some traditional banks will not allow the fixed period of the loan to exceed the time left on the lease.

Property Analysis

Market value and market rent is very important and will be evaluated and compared to the subject property.  Age, appearance, location, accessibility, and local market conditions, as well as other factors are considered. 

Credit Worthiness

The personal credit worthiness of the borrower will be scrutinized.  680 credit score is normally the minimum for the best finance options.  Exceptions can be made on this as well with some conventional lenders considering scores as low as 600.  The overall strength of the property, tenants, DSCR, and LTV can offset concerns on low credit scores. For corporations, business performance and credit rating will be evaluated.

We have some of the best office building loan options in the market today.  For example we have a 30 year fixed program and a no cost office refinance program. 

Get pre approved now  or call 248 885-8797 to discuss. 

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Commercial Finance Advisors, Inc.
(248) 885-8797 Phone
(866) 337-3141 Fax
http://www.cfa-commercial.com/
261 E Maple Rd
Suite 13
Birmingham, Michigan 48009

 

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