Real Estate Rewind: What 40 Large-Sponsor Deals Say About Prevailing CMBS, LifeCo, PE, and Bank Standards
December 30, 2025
For this year's Real Estate Rewind, we looked at primary negotiated terms in 40 mortgage loans that we originated in recent years with 8 sophisticated borrower clients, including 4 public REITs. The purpose of this analysis was to better understand prevailing standards. The aggregate loan amount of the 40 loans exceeded US$9.5 billion, and the average loan size was US$239 million. The largest loan was US$1.5 billion and the smallest loan was US$45 million. Given the loan sizes and the nature of the borrowers, the reader should understand that the “prevailing standards” outlined below are primarily applicable to the most sophisticated borrowers and you may be met with resistance on smaller loans for non-institutional borrowers. Additionally, there will be variances depending on the loan type, lender, and asset class, although we have found that for these primary terms such differences tend to be less meaningful than in prior periods (standards are converging), except as indicated. Finally, a few terms are dictated by third parties, such as specific rating agency standards in CMBS, and nothing herein is intended to suggest those items are negotiable, though such standards are often stated in ranges and serve as guidelines rather than disqualifying parameters.
We hope this is helpful to you. If you have questions or would like us to test this same population of loans (or your own loans) for these or other terms, please reach out. We are happy to discuss the same and/or undertake such additional analysis (without disclosing confidential client information, loan parties, etc., of course).
Mid-Sized to Large Loans - Prevailing Standards
|
Parameter |
Standards (by loan count) |
Comment |
|
Type |
22 – CMBS 7 – Lifeco 6 – Private Equity 5 – Bank / Balance Sheet |
|
|
Asset Class |
19 – Retail 13 – Office 4 – Industrial / Logistics 4 – Multifamily |
|
|
Term |
15 - 10 years 11 - 5 years 14 - 0-5 years |
|
|
Fixed or Floating
|
28 – fixed 12 – floating |
|
|
Prepayment with Yield Maintenance (YM) (Fixed Rate) |
Yes – as to all fixed rate (FR) loans |
|
|
Open Window (no YM upon prepay)
|
13 of 28 at 90 days 12 of 28 at 120 days 3 of 28 at 180 days |
|
|
Defeasance Right (in addition to YM prepayment) |
Yes – 20 of 28 FR Loans |
Will not apply to LifeCo or Bank loans. |
|
Succeeding / Preceding Date Conventions |
Succeeding Business Day – 25 Preceding – 15 |
For loans with payment dates between 1st and 6th day of a month. |
|
Interest Period / Monthly Payment Date Conformity |
Yes – 36 No – 4 |
If non-conformity - creates potential for additional yield to lenders. |
|
Permitted Trade Payable Debt Tolerance (as % of loan amount) |
24 at 4% 6 at 3% 5 at 2% 1 at 1% 4 – not specified |
Negotiated exclusions from the % cap, can result in agreement to a lower % cap. |
|
Permitted Alterations Threshold (as % of loan amount)
|
11 at 10% 10 at 7.5% 10 at 5% 9 at 3% or less |
LifeCo loans will have lower tolerance. |
|
Major Lease Thresholds
|
Office (most common thresholds): 25% of rentable area, or 1 full floor Retail: 15,000-25,000 sf: 8 loans 25,001-35,000 sf: 6 loans 50,000-99,000 sf: 3 loans > 100,000 sf: 3 loans |
LifeCo loans will have lower thresholds. |
|
Maximum Insurance Deductible Permitted (property/casualty)
|
9 at US$100,000 4 at US$250,000 10 at US$500,000 10 at US$1,000,000 to US$1,500,000 4 – not specified |
Lower thresholds appear in oldest debt (3 years ago). Deductibles are increasing. Highest amounts are in office loans. |
|
Mandatory Business Interruption Coverage |
21 at 24 months 11 at 18 months 6 at 12 months 4 – not specified |
|
|
Cash Trap Triggers based on Debt Yield (DY) or Debt Service Coverage Radio (DSCR) |
DSCR: 20 loans DY: 12 loans Typical DSCR Trigger: < 1.10 to 1.25 to 1. Range of DY Triggers: 6% to 11%. |
DY Triggers are highly specific to the asset and going-in underwriting (for instance, specific tenant-related triggers, see below for tenant going dark as trigger for cash management). |
|
Mandatory Reserves for Taxes prior to Cash Management Period |
7 – Yes 30 – No 3 – Not applicable |
|
|
Mandatory Reserves for Insurance prior to Cash Management Period |
5 – Yes 32 – No 3 – Not applicable |
|
|
Mandatory Reserves for TI/LC / rollover prior to Cash Management Period |
11 – Yes 26 – No 3 – Not applicable |
|
|
Mandatory Reserves for CapEx (replacements) prior to Cash Management Period |
9 – Yes 28 – No 3 – Not applicable |
|
|
Major Tenant Going Dark as a Trigger for Cash Management |
6 loans (3 retail; 2 office; 1 industrial) |
|
|
Dark Tenant rent absolutely excluded from NOI (without regard to whether rent continues to be paid, or IG rating) |
15 loans mention dark tenancies in the calculation of NOI. If the tenant (a) continues paying rent (8 mentions), (b) is IG rated (3 mentions), or (c) is otherwise a specified tenant, rent is included. |
|
|
Is the Loan assumable (without consent)? |
33 – Yes 7 – No |
If permitted "without consent," objective criteria must be satisfied by assuming borrower (see below). |
|
What is the fee for a loan assumption?
|
18 at specified amounts ranging from US$15,000 to US$500,000 with 13 instances at US$250,000-US$350,000, and 5 instances at US$500,000. 5 at 0.1% to 0.25% of OPB 1 at 0.5% of OPB 4 at 1% of OPB |
|
|
Does the loan have pre-approved qualifying criteria for permitted transferees (as to control transfers or loan assumptions) Qualified Real Estate Investors (QREI) |
39 – Yes 1 – No |
This applies to permitted transfers as well, not just loan assumptions. |
|
Minimum Total Assets and Net Worth of QREI |
US$350 million / US$150 million – 1 loan US$550 million / US$200 million – 1 loan US$600 million / US$200 million – 1 loan US$600 million / US$250 million – 9 loans US$600 million / US$300 million – 1 loan US$650 million / US$350 million – 8 loans US$750 million / US$400 million – 1 loan US$ 1 billion / NA – 1 loan US$ 1 billion / US$200 million – 1 loan US$ 1 billion / US$400 million – 1 loan US$ 1 billion / US$500 million – 5 loans US$ 1 billion / US$650 million – 1 loan US$1.2 billion / US$600 million – 1 loan US$1.5 billion / US$400 million – 1 loan Other – 7 loans (experience, NW of borrower pre-transfer, etc.) |
Net Worth N/A to pension advisory and similar firms. |
|
Non-recourse Carveout Guaranty |
32 – Yes 8 – No |
Lack of non-recourse carveout guaranties is not limited to office (prior experience). |
|
Stipulated Special Servicing Fees |
25 at 0.25% per annum
|
CMBS mostly; some applications where private equity uses CMBS documents. |
|
Stipulated Loan Workout Fees
|
22 at 0.5% of future collections of principal and interest. |
Same; "workout" is a misnomer; this is a fee that special servicers charge when you have entered and then exited special servicing – without regard to whether a workout or loan modification was granted. |
Parts 2 and 3 will be forthcoming shortly:
Part 2: Prevailing Standards and Advanced Concepts in Guaranties
Part 3: Servicing Shenanigans and Solutions
Email is the best means by which to reach us:
Michael Hamilton: mhamilton@omm.com
Jessica Fluehr: jfluehr@omm.com
This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Michael Hamilton, an O’Melveny partner licensed to practice law in California; and Jessica Fluehr, an O’Melveny partner licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.
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