Commercial Mortgage-Backed Security (CMBS)
A commercial mortgage-backed security (CMBS) is a type of debt security that is secured by a mortgage on a commercial property. CMBS are typically issued by a special purpose entity (SPE) that is created to hold a portfolio of commercial mortgages. The SPE then issues bonds that are backed by the mortgages in the portfolio. The bonds are sold to investors, who receive interest payments from the SPE. The SPE uses the proceeds from the bond sale to pay off the mortgages in the portfolio.
History of CMBS
The first CMBS was issued in 1987 by the Government National Mortgage Association (GNMA). Since then, the market for CMBS has grown significantly, with more than $1 trillion in CMBS outstanding as of 2019. CMBS are now a major source of financing for commercial real estate, and are used to finance a wide variety of properties, including office buildings, shopping centers, hotels, and multifamily housing.
Comparison of CMBS to Other Types of Financing
| Type of Financing | Interest Rate | Loan Term | Loan-to-Value Ratio |
|---|---|---|---|
| CMBS | 4-6% | 5-10 years | 65-75% |
| Bank Loan | 4-6% | 5-10 years | 65-75% |
| Mezzanine Loan | 8-12% | 3-5 years | 75-85% |
Summary
Commercial mortgage-backed securities (CMBS) are a type of debt security that is secured by a mortgage on a commercial property. CMBS are typically issued by a special purpose entity (SPE) that is created to hold a portfolio of commercial mortgages. The SPE then issues bonds that are backed by the mortgages in the portfolio. The bonds are sold to investors, who receive interest payments from the SPE. CMBS are a major source of financing for commercial real estate, and are used to finance a wide variety of properties. For more information about CMBS, visit the websites of the Government National Mortgage Association (GNMA) and the Commercial Mortgage Securities Association (CMSA).
See Also
- Government National Mortgage Association (GNMA)
- Commercial Mortgage Securities Association (CMSA)
- Mortgage-Backed Security (MBS)
- Real Estate Investment Trust (REIT)
- Real Estate Mortgage Investment Conduit (REMIC)
- Real Estate Investment Banking (REIB)
- Real Estate Investment Group (REIG)
- Real Estate Investment Fund (REIF)
- Real Estate Investment Trusts (REITs)
- Real Estate Investment Banking (REIBs)
