CMBS & Conduit Loans

CMBS loans, sometimes known as conduit loans, have become a very popular source of capital for commercial real estate investors. CMBS stands for commercial mortgage backed security — a fitting name, as these loans are pooled with other loans and securitized so as to be sold off to investors for a return. In practice, hundreds of similar loans varying in size, rate, collateral (property type), etc. are bundled together. Once bundled, a blended rate of return is established, and investors may buy shares of that bundle of mortgages. CMBS investors may elect to invest in various CMBS bonds depending on property types, risk aversion, geographic location of the properties in the portfolio, the credit rating, and so-on.