Investment Grade Loans: CRE Debt, Refinancing and Acquisitions

Investment Grade arranges commercial real estate financing for acquisitions, rate-and-term refinancing, cash-out refinancing and maturing loans. A note on terms: in this service, “Investment Grade” is our firm’s name. Commercial mortgage loans are not credit-rated the way investment grade bonds are, and every loan carries risk. Lenders set terms based on the property’s cash flow and value, the leverage requested, and the borrower’s experience and financial strength. Where a property is leased to a tenant with an investment grade credit rating, that tenant’s credit is one of the strongest supports a lender can underwrite. For how ratings work, see the investment grade guide.

What Lenders Evaluate

The property

• Debt service coverage ratio (DSCR): net operating income divided by annual debt service. Minimums commonly fall around 1.20x to 1.35x and vary by lender and property type.
• Loan-to-value (LTV): the loan divided by appraised value. Many permanent loans are sized at roughly 55% to 75% LTV, with lower limits for riskier property types.
• Debt yield: net operating income divided by the loan amount, a measure of risk that does not depend on interest rate or amortization.
• Tenancy and leases: tenant credit, remaining lease term, rollover schedule and occupancy.
• Location and condition: market fundamentals, physical condition and any deferred maintenance.

The borrower

• Experience owning and operating similar property, especially for value-add or construction loans.
• Credit history, net worth and post-closing liquidity, often expressed as months of debt service or a percentage of the loan amount.

Worked Example: Sizing a Loan on a Net Lease Property

A single-tenant net lease property produces $200,000 of net operating income and is valued at $3,076,923 (a 6.50% cap rate). Assume a lender quotes 6.75% interest with 25-year amortization (an annual loan constant of 8.291%) and tests three limits:

The lowest result governs, so the loan is about $1,930,000: 62.7% of value, with annual debt service of about $160,000 and a 10.4% debt yield. A lower interest rate, longer amortization or an interest-only period would raise the coverage-based limit; a lower appraisal would reduce the LTV limit. Rates, constants and requirements here are illustrative, not a quote.

Property Types We Finance

• Net lease (NNN): single-tenant retail, quick-service restaurants, automotive, banks and pharmacies, leased to investment grade, unrated and franchise tenants.
• Multifamily: garden, mid-rise, townhome, co-op and condominium, mixed-use, student, active adult, affordable and workforce housing, and build-to-rent.
• Industrial: flex and R&D, manufacturing, bulk distribution and cold storage, plus sale-leasebacks for selected single-tenant users.
• Healthcare: medical office, urgent care, ambulatory surgery, dialysis and dental clinics, assisted living and skilled nursing, plus sale-leasebacks and build-to-suit financing for selected tenants.
• Hospitality: full-service, limited-service and extended-stay hotels (flagged or independent), conversions, micro-resorts, campgrounds and short-term rental investments.
• Special use: auto dealerships and service, car washes, gas stations and convenience stores, day care, restaurants and single-family rental portfolios.

Investment Grade Capital, the lender-matching service of Investment Grade LLC, works with a broad network of banks, life insurance companies, CMBS and agency lenders, debt funds and private lenders, and matches each request to lenders active in that property type and loan size, so borrowers can compare terms side by side.

Maturing Loans: Refinance, Restructure or Sell

Loans made when rates were low have been maturing into a higher rate environment. The Mortgage Bankers Association estimated that $957 billion of commercial and multifamily mortgages, 20% of the $4.8 trillion outstanding, would mature in 2025. When a loan matures, an owner can refinance (possibly adding equity if the property no longer supports the old loan amount), negotiate an extension or modification with the current lender, or sell. The right choice depends on the property’s cash flow, value and the owner’s plans; see refinance or sell before your loan matures.

• Lower or fixed payments: a new loan with a lower rate or longer amortization can reduce debt service; moving from floating to fixed removes rate volatility.
• Cash-out refinancing: releases equity from properties that have gained value, within the lender’s LTV and DSCR limits.
• Restructuring: interest-only periods or covenant changes can give an owner time to improve operations, at the lender’s discretion.

Rates: 2025 in Review and Current Benchmarks

The Federal Reserve cut its target range three times in late 2025, to 3.50% to 3.75% by December, but long-term rates fell less: the 10-year Treasury yield, the benchmark for most fixed-rate commercial mortgages, traded between 3.97% and 4.79% during 2025. As of October 1, 2026, the 10-year Treasury yield is 5.24%. Commercial mortgage rates are typically quoted as a spread over a Treasury or swap rate, so check current quotes before relying on any rate.

What to Send for a Quote

• Property address, type and size, and the requested loan amount and purpose (purchase, refinance or cash-out).
• Trailing 12-month operating statement and current rent roll, or the lease for a single-tenant property.
• Purchase contract or current loan details, including maturity, rate and any prepayment terms.
• Sponsor resume or schedule of real estate owned, and a personal financial statement.

Frequently Asked Questions