CRE loan pricing is set by index plus spread : a benchmark (matching Treasury for fixed-rate, SOFR for floating-rate) plus a credit spread reflecting lender appetite, asset risk, leverage, sponsor profile, and capital-markets conditions. The note rate is the index plus the spread; the all-in rate adds servicing and amortized fees.
What does the lender consider when setting spread?
Asset class (industrial tightest; office and hospitality wider), leverage (lower LTV gets tighter pricing), debt yield (higher debt yield gets tighter pricing), sponsor history, market depth, and structural protections (recourse, reserves, completion guarantees). Capital markets conditions, bond spreads, lender warehouse capacity, agency volume cap status, set the floor.
Why do similar deals price differently?
Two stabilized industrial deals can quote 30 basis points apart because one is priced by a life company funded with long-dated insurance liabilities and the other by a CMBS desk warehousing for a securitization that has not yet been sold. Lender mark-to-market changes daily.
Sources
- Daily Treasury Par Yield Curve Rates · U.S. Department of the Treasury · daily
- Treasury Constant Maturity Series (DGS5, DGS10) · Federal Reserve Bank of St. Louis (FRED) · weekly
- Secured Overnight Financing Rate (SOFR) · Federal Reserve Bank of New York · daily