Office Building Financing – Single or Multi-Tenant Loans Phoenix, AZ

Office Building Financing - Single or Multi-Tenant Loans Phoenix, AZ

What are Office Complex Loans?

Multi-Tenant or Single Tenant Office Complexes are estates with single or multiple offices owned by various individuals and corporations within one building or complex. These complexes may be constructed by a builder and sold as piece or whole – depending upon the buyer’s capacity.  These individuals or corporations usually buy real estate for offices on Commercial Real Estate (CRE) loans. The lenders give out loans to partnerships, corporations, trusts, Real Estate Investment Trusts (REIT), developers, corporations and funds.

Office spaces are also more expensive because they are used to generate money and employment. But the market may be variable due to the general economic performance. This affects the returns from the property which usually appreciate in the times of prosperity. Investing in Office space is profitable as they are demand and bring in regular income by rents. Over time the rental rates increase thus they not only cover their cost but also pay dividends soon.

Period of Financing

Banks, private or hard money lenders, pension funds, insurance companies and government offer money at reasonable interest rates to for urban development (U.S. Small Business Administration’s 504 Loan Program). Obviously, all these money lenders have varying lending rates, like our retail loans, depending on the location of the property and the trends I the job and real estate market. Usually these CRE mortgages term to 5-20 years which amortize over a longer period.

Suppose you get a loan for 7 years that amortizes over 30 years. You will pay a certain amount per month for 7 years. At the end of 30 years, you will conclude the agreement with a balloon payment, which is the balance amount. To explain this further, if you borrowed a million dollars at the rate of 7%. You will make a monthly repayment of 6,653 dollars for the next7 years. And conclude the arrangement with a balloon payment of $918,127 to cover the borrowed amount.

Types

There are 4 types:

  • The traditional commercial mortgage is repaid over 5-25-year The interest rates vary from 4.5% – 7.5% and conclude with a balloon payment at amortization.
  • The SBA 7(a) loan for commercial real estate can be repaid over 10-25-years when fully amortized. They have a variable rate of interest between 5.5% – 6.75%, minus the balloon
  • A syndicated loan is offered by a group of lenders such as hedge funds, institutional lenders, banks, etc. A typical repayment term is 3-6 years for short term and 10 years for long term loans. The rate of interest may be variable and primed according to LIBOR.
  • The CDC/SBA 504 loan for commercial real estate term out over 10 – 20 years. They may have fixed or the variable rate at 4 to 5.5%. While the loan is made in two parts;
    • The 1st mortgage is at a fixed or variable rate of interest, there may be a balloon payment.
    • The 2nd mortgage comes from the CDC at a fixed rate to be fully amortized.

How to qualify for these loans?

When evaluating your case as an individual, the lender will consider;

  • The collateral
  • Your business should be at least 3 years old
  • Your credit score should be 680 plus
  • No recent foreclosures, tax liens or bankruptcies
  • Financial statements from 3 – 5 years
  • Down payment of at least 10% of property value
  • IRS returns
  • Financial ratios such as loan to value and debt service coverage
  • The business should have a DSCR of 1.15 plus

Capital Market Funds

8442 E Chaparral Rd
Scottsdale, AZ 85250
(480) 351-4472

Email: [email protected]

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