Financing a Commercial Property: Information Required for Underwriting

Sheridan Bibo

One of the first questions I get from potential clients is “can you tell me what terms you can get for me?”. Although we can provide a rough estimate based on a brief overview of the asset and the sponsorship, however, in order to produce a quote that is accurate we require solid information to underwrite. 

A major component of our role as your commercial mortgage broker is to underwrite a deal and to offer guidance and advice throughout the process. We are able to provide you with the best results when we have a full picture of both the deal and sponsors involved. 

To begin underwriting an acquisition loan:

On the property side: On the sponsorship side: 
  • A purchase agreement for the acquisition   
  • Three years of historical financial information on the property, T12, and a current rent-roll.
  • Any additional information you may have such as an OM or an old appraisal etc.
  • Leases (not necessarily needed at first, but we will need to review these).
  • Net worth and liquidity of each sponsor with a share of 20% or more submitted in the form of a personal financial statement (PFS)
  • A real estate owned (REO) schedule and information about experience in commercial/multifamily investing.* Please note that even if the loan will be non-recourse, we still require sponsor information to underwrite. 

To begin underwriting a refinance loan we require:

On the property side: On the sponsorship side:
  • Loan amount required: Payoff amount and information on cashout amount if that is requested.   
  • Three years historical financial information on the property, T12, and a current rent-roll.
  • Any additional information you may have such as an OM or an old appraisal etc.
  • Leases (not necessarily needed at first, but we will need to review these).
  • Net worth and liquidity of each sponsor with a share of 20% or more submitted in the form of a personal financial statement (PFS)
  • A real estate owned (REO) schedule and information about experience in commercial/multifamily investing. * Please note that even if the loan will be non-recourse, we still require sponsor information to underwrite. 

To begin underwriting a construction loan we require:

On the property side: On the sponsorship side:
  • A purchase agreement for the land (if applicable).
  • A proforma on the completed value, 
  • A proforma profit and loss statement.
  • A proforma rent roll.
  • A construction budget that includes a breakdown of soft and hard costs.
  • Renderings/drawings of the project
  • An appraisal if one has been completed.
  • Leases/LOI’s (if in place).
  • Net worth and liquidity of each sponsor with a share of 20% or more submitted in the form of a personal financial statement (PFS)
  • A real estate owned (REO) schedule and information about experience in development.

I have been told in the past that other brokers or lenders will provide terms without this information, indeed people out there that will say “we can get you a 4% rate with full term I/O and non-recourse!” and they blanket it and then, once you get a real quote, that is completely inaccurate!

Once this information is received, our job is to thoroughly underwrite it to make sure that the deal makes sense for you and for your company. 

I hope this clarifies things for both new and seasoned investors alike! If you have any additional questions regarding underwriting, please reach out to us and we can have a chat. 

Written by  Sheridan Bibo and Cassandra Sampson.