Commercial loans pooled and sold as bonds — institutional, non-recourse, rigid.
A CMBS loan (Commercial Mortgage-Backed Security loan), also called a conduit loan, is a commercial real estate mortgage that the originating lender pools with hundreds of similar loans and sells as bonds to institutional investors. CMBS loans are typically non-recourse, fixed-rate, and 10-year term — built for large stabilized commercial assets.
CMBS exists to take individual commercial mortgages and turn them into something Wall Street can buy. A single $20M loan on a Chicago office building isn't a tradable security. But package 200 such loans together, slice the resulting cash flows into bond tranches (senior to junior), and you have a CMBS — institutional buyers can buy the slice they want.
For borrowers, CMBS offers non-recourse financing on stabilized commercial assets at competitive rates — typically 150–250 bps over the 10-year Treasury, fixed for 10 years (with 25–30 year amortization). The non-recourse feature, with standard bad-boy carve-outs, is the main draw — the borrower's personal balance sheet is protected outside of fraud, environmental, and bankruptcy carve-outs.
The trade-offs are rigidity. CMBS loans use defeasance (or yield maintenance) for prepayment — both expensive, complex processes that make early payoff prohibitive in most environments. Modifications to the loan terms post-closing are nearly impossible because the loan is now owned by hundreds of bond investors via a servicer. And special servicing — what happens if you default — is administered by parties with no relationship to the borrower.
CMBS is the right tool for long-hold, stabilized commercial assets where the borrower wants non-recourse and is confident they won't need to prepay early. It's the wrong tool for transitional assets, anything under $3–5M, or operators who want execution flexibility.
| Appraised value | $18,500,000 |
| Stabilized NOI | $1,425,000 |
| Implied cap rate | 7.70% |
| LTV test (70% max) | $12,950,000 |
| DSCR test (1.25 @ 6.5% / 30-yr) | $15,030,000 |
| Debt yield test (9.5% min) | $15,000,000 |
| Binding constraint: LTV | $12,950,000 |
| Final loan amount | $12,950,000 (70% LTV) |
Agency loans (Fannie / Freddie) are for multifamily only and tend to be more flexible on prepay and modifications. CMBS covers all commercial property types and is generally more rigid but offers more borrower types and asset classes.
Yes — outside of standard "bad-boy carve-outs" for fraud, misrepresentation, environmental contamination, voluntary bankruptcy filing, and certain other carve-outs. Operational and economic default doesn't trigger recourse.
A prepayment mechanism where the borrower replaces their loan's collateral with a portfolio of US Treasuries that produces the same cash flow as the remaining loan payments. Complex and expensive but lets the borrower exit the loan before maturity.
Typically $3–5M minimum, though some conduits go to $1–2M on small-balance programs. The deal cost (rating, legal, servicing) makes smaller loans uneconomic for the originator.
Generally no. Once securitized, the loan is owned by hundreds of bondholders and administered by a master servicer who has no authority to modify substantive terms outside of special servicing scenarios.
Matrix funds the bridge and value-add capital that gets your commercial asset stabilized for CMBS, agency, or life company permanent debt. We're the operator's capital partner through the transition.
