How do lenders look at commercial property that are about to expire ?
I understand that banks/lenders judge commercial based on the lease

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I see a lot of listing of commercial property with +/-4 years left on the lease

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what happens to these ?  does the lender require more down payment ?  

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does the lender just flat out reject to provide finance for these ?
[{"id": "g4q8y70", "text": "They assume it will be released at market", "replies": [], "depth": 1}, {"id": "g4qbixv", "text": "Definitely less favorably than properties with a long time left on the lease.  Its not an ironclad formula of X years left equals Y more down-payment... for example apartments have dozens or hundreds of 1 year leases; you just assume some vacancy &amp; collection loss in your underwriting.  However, fundamentally additional equity further protects the lender from loss so outside of collateral above and beyond the subject property its the main lever you pull.", "replies": [], "depth": 1}, {"id": "g4qdf6y", "text": "There are a few different ways to still get a loan on a property with a lease maturing in +/- 4 years, but it\u2019s challenging to provide advice on your specific situation without more details. I\u2019ll give a few general examples of different ways. \n\n**What is the likelihood of the existing tenant vacating?**\n\nA tenant who completed substantial TIs is unlikely to move (medical office or a bank with a drive-through teller window are two property types that come to mind)\n\nA tenant who has occupied the property for many years is also less likely to vacate. \n\nAlternatively, tenants in industries impacted by COVID are very likely to vacate, so that would probably kill the financing under current market conditions. \n\n**Are the current rents below market?**\n\nLet\u2019s say the existing tenant rents are 25% below market. The loan would be sized based on current income with the implied assumption that another tenant could easily be secured at the same rents or higher.\n\n**Does the lease include extension options?**\n\nMost CRE leases include extension options beyond the current lease maturity. \n\n**What type of tenant?**\n\nSome industries/companies are thriving right now, so properties leased to these lucky folks are much more likely to get a loan with a maturing lease. \n\nOther tenants, like office with everyone now working from home, are highly unlikely to renew. Challenging\n\n**How much are you willing/able to put down?**\n\n30% LTV, cakewalk\n\n60% LTV+, tricky but possible depending on the situation", "replies": [{"id": "g4thzfb", "text": "Off campus MOBs move out with frequency, they aren\u2019t nearly as sticky as you\u2019d think - those guys like getting cut into deals, sign a 20 year lease with a developer, and participate in the flip and get a new surgery center. If they\u2019re not affiliated they\u2019ll drag all of the tenants in the ecosystem with them. If it happens it\u2019s really really tough to re-lease the building.", "replies": [{"id": "g4u8kp4", "text": "Concur.  I've never met a doctor that didn't also want to be a real estate investor.", "replies": [{"id": "g5gxo4b", "text": "True Story!", "replies": [{"id": "g5gxu70", "text": "We should all be as self-confident in our abilities!", "replies": [], "depth": 5}], "depth": 4}, {"id": "g5gy498", "text": "All joking aside one of the most successful real estate investors and largest landowner in our county is a doctor, a brain surgeon by trade.  He's made more money on his real estate side business than just about any other real estate investor in our area.  He buys large parcels of land in the path of development and holds onto them for 10 years or more, he will even down zone properties to avoid paying the property taxes while he waits to ring the resister.", "replies": [], "depth": 4}], "depth": 3}, {"id": "g4uh6ri", "text": "My point was providing examples of tenants less likely to bounce, specifically tenants who complete substantial custom TIs out of their own pocket. Of course, some MOB are interchangeable and not really applicable to my comment.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "g4scmdk", "text": "If it is a single tenant property, the general rule is that you want 5 years of lease term remaining at loan maturity. If it's a multi-tenant office building the analysis gets exponentially more complex. \n\nPre-covid you could model it out as existing tenants having a 65% to 75% renewal probability, you have to bake in dark time, negotiating time, abatements, TI, LC, expense reimbursement structures etc. Now, who the hell knows", "replies": [], "depth": 1}, {"id": "g4tqfjh", "text": "For retail and Office, we relied a lot on the market information and absorption numbers provided by the appraisal as well as third-parties like CoStar. In normal times with a multiple unit property you could make assumptions about the tenants. You also have levels of stickiness with the type of tenant and the length of time they have been in the building.\n\nAlso remember that the deal will probably have debt service and occupancy covenants so that would be an opportunity for the lender to control these types of situations. We would look at the sponsor to cure it in a manner that would be satisfactory to us. Be it a reserve, or even right sizing the loan.  \n\nFor Apartment buildings, it is normal to have 1 year leases so it is a matter of market information and how the property is positioned.", "replies": [], "depth": 1}, {"id": "gf40bkk", "text": "If you're looking for a 60-65%+ LTV, it'll be difficult. For a single-tenant lease that is coming to expiry, it's even more difficult. As many others here said for multi-tenant properties, it becomes more complicated and things like market leasing assumptions and weighted average unexpired lease terms are looked at more scrupulously.", "replies": [], "depth": 1}]