The last few years have witnessed many changes in the arena of finance, and self-storage financing has been no exception. In September 1998, the finance world was rocked by the collapse of the CMBS (commercial mortgage backed securities) market. Interest rates were at an all-time low. I remember closing a loan for a client at nearly 6 percent, fixed, for 10 years--and with rates that low, the securitization of loans became a very unprofitable proposition. Just a few months earlier, loan note rates were in the low 7 percent range, and the conduit lenders had to take a negative position. They wrote loans at 7 percent and were having to sell them at less than 6 percent in the secondary market. This caused them to write loans with floor rates (which are still in place today). Some lenders did not even fund commitments they had made when the interest rates were "upside down."
Loan expenses don't vary greatly from lender to lender. The borrower can usually expect the following closing costs:
|Bank Loan||Conduit Loan|
R.K. Kliebenstein, owner and founder of Coast-To-Coast Storage in Boca Raton, Fla., is a mortgage banker and broker. Coast-To-Coast makes self-storage loans exclusively. For more information, call 561.367.9241.
Glossary of Terms
Debt Service Coverage Ratio (DSCR):
Margin (or Spread):