Commercial real estate financing
Property financing is two files in one. The lender underwrites the building, its income and its tenants, and then underwrites you as the borrower behind it. Both have to hold.
- Typical size
- Deal dependent, commonly $500,000 upward
- Typical time
- Six to sixteen weeks depending on appraisal, environmental and the lender.
- Security
- A registered charge on title
Trust Financials Limited prepares the file and refers it to a licensed Ontario mortgage brokerage. Arranging financing secured by real property in Ontario requires a licence under the Mortgage Brokerages, Lenders and Administrators Act, which this firm does not hold. The brokerage is named before anything moves.
When it fits.
- Buying the building the business already occupies.
- Refinancing at maturity or releasing equity from a stabilised property.
- Bridging a purchase before a longer term facility is in place.
- A development or major renovation with a costed schedule.
When it does not.
- A property whose income only works on projected rents.
- A file where the environmental history is unknown and untested.
- Anything we could arrange ourselves without a licence. We refer it.
The detail, if you want it.
Open only what applies to you. Nothing here is required reading before a first call.
How it actually works
For an income property, the number follows net operating income and the debt service coverage the lender requires, usually one and a quarter times or better, against a loan to value that varies by asset class. Multi residential sits at the strong end. Special purpose and single tenant industrial sit at the other.
For an owner occupied building the analysis blends the business and the property. The operating company pays the rent, so the covenant is the business, and the lender will want the operating financials as well as the property file.
Construction and land financing draw in stages against cost to complete, hold back for lien periods, and carry a quantity surveyor. They are not the same product as a term mortgage and should not be planned as though they are.
One point on regulation. Arranging financing secured by real property in Ontario is mortgage brokering under the Mortgage Brokerages, Lenders and Administrators Act. Trust Financials is not a licensed mortgage brokerage, so this work is referred to a licensed brokerage and we say so at the outset rather than after the fact.
What a lender will ask for7
- Rent roll and current leases
- Two years of property operating statements, and a current budget
- Existing mortgage statement and the maturity date
- Property tax statement and confirmation of arrears status
- Recent appraisal and any environmental report
- Corporate financials where the borrower is an operating company
- Personal net worth statement for each guarantor
And what they will ask you4
- What is net operating income after a realistic vacancy and management allowance?
- When does the largest lease roll, and what is the renewal probability?
- Are property taxes current?
- What is the exit: sale, refinance or amortisation?
Questions we get about this one3
- Do you arrange the mortgage yourselves?
- No. Mortgage brokering in Ontario requires a licence under the Mortgage Brokerages, Lenders and Administrators Act. We prepare the file and refer it to a licensed brokerage, and we tell you who before anything moves.
- How long does a commercial mortgage take?
- Plan for six to sixteen weeks. The appraisal and the environmental report set the pace more often than the lender does.
- Can the business and the property be financed together?
- Often, and it usually improves both. The property amortises longer than the business debt, which lowers the blended payment.
- Term loansA fixed sum advanced at closing and repaid over a set schedule, for growth, refinancing or a single large investment.$100,000 to $5,000,000 and above
- Private and alternative lendingNon bank capital for a deal that is time sensitive, asset backed, or does not fit a bank credit box, priced accordingly.$100,000 to $5,000,000
- Refinancing and debt restructuringConsolidating expensive or badly structured facilities into a schedule the business can actually carry.Matched to the existing debt, commonly $100,000 to $5,000,000
Is commercial property the right instrument for your deal?
Tell us the amount and the timing, and we will say which instrument we would reach for.
No lender hears your name until you say so.
A request emailed to twenty lenders leaves twenty records. The next one to see it reads the declines before they read the deal, and a file that looks shopped is priced as one. So the list is built with you, approved by you in writing, and nothing leaves this office before that.
- Call
- 416-841-8468
- Hours
- Weekdays, Toronto time