Definition: Refers to the tax and legal structure of a CMBS such as a pass-through structure, a bond structure, a Collateralized Mortgage Obligation (CMO) or a Real Estate Mortgage Investment Conduit (REMIC). The “structure” can determine the tax benefits, or penalties, and the rights of the CMBS holders and the issuer in the event of a failure or default within the terms of the security. Most CMBS are senior/subordinated, multiple class passthroughs classified as REMICs.
Many members of the so-called “millennial” generation (1982-2004) entered into the job market during one of the most difficult times in US history—the Great Recession. Loaded with student debt, no savings, big dreams, and the skills learned during internships, we had to come out of school and try to make a living when most companies were not only not hiring, but letting go some of their most seasoned employees. This difficult economic environment paired with the technological savviness of our generation has combined to make a meaningful and unique contribution to the growth of commercial real estate, which has been long overdue. One of the most interesting ways this creativity has expressed itself has been the establishment of alternative investment structures in commercial real estate, especially crowdfunding. Created by millennials for millennials, crowdfunding allows for comparatively small monetary investments to be made in commercial real estate, something that was previously off-limits for those that didn’t have substantial liquidity readily available.
Last year, some government officials began to realize the fallout that the original structure of the Securitization Safe Harbor Rule (i. e. risk retention) would have on the commercial real estate market. Because of that, some representatives started to look for a way to soften the original regulations while still protecting the public. On March 2nd of 2016, the House Financial Service Committee proposed an amendment called the Access to CRE Capital Act (meant to ease some of the original restrictions) that is supposed to be put up for consideration in the House and Senate this year. Let’s take a look at how this bill could change the current structure.
The Federal Housing Administration (FHA) Division of the US Department of Housing and Urban Development (HUD) offers government-insured loans for multifamily properties with experienced (and patient! ) investor/owners. It also offers loans for healthcare facilities (i. e. hospitals and residential care facilities) as well as special needs facilities for the elderly or disabled. Although FHA apartment loans have longer closing times and higher fees than any other mainstream multifamily product, this is a strong go-to product for long-term investors with large loan requests because of the long fixed term and amortization, non-recourse structure, low interest rates, and high leverage point.
Section 207 mortgage insurance can be used to finance the substantial rehabilitation or construction of individual, semidetached, row, walk-up, or elevator type structures with 5 plus units.
Fannie Mae’s Multifamily Mortgage Business offers long term financing with a very competitive variable interest rate that is convertible to a fixed rate.
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Fannie Mae provides loans for residential real estate developments where the borrower owns the mobile housing sites and associated common amenities and infrastructure.
