CMBS rating agencies require remaining ground lease term to exceed loan maturity by a defined cushion (often 10 to 30+ years), an enforceable recognition / non-disturbance agreement , the leasehold-mortgagee protection package, and FMV reset visibility before loan maturity. Loans missing any element are typically excluded from CMBS or punitively priced.
What CMBS rating agencies look at on leasehold collateral
Each CMBS rating agency publishes criteria for rating treatment of leasehold-secured loans. Common requirements: remaining ground lease term well in excess of loan amortization (typically 10 to 30+ years of cushion beyond loan maturity), an enforceable fee-owner recognition / non-disturbance agreement, the leasehold-mortgagee protection package, and clear visibility into any rent resets occurring during or near loan maturity.
Loans on shorter residual ground lease terms are typically excluded from CMBS conduit pools or treated punitively in sizing. Single-asset / single-borrower (SASB) and large-loan CMBS deals can absorb leasehold risk more efficiently because each loan is rated individually, but rating agencies still apply leasehold criteria.
Modern ground leases (99-year initial terms, CPI-capped escalation, standardized leasehold-mortgagee protections) are well-known to rating agencies and price tighter than bespoke legacy ground leases. Legacy Manhattan ground leases with 25-year FMV resets often require special structural treatment in CMBS, partial leasehold pools, defeasance triggers around reset dates, or exclusion from conduit pools.
Sponsor takeaway: confirm the leasehold-mortgagee protections and the residual term cushion before signing the LOI on any CMBS-bound leasehold financing. Discovery at the rating-agency stage is too late, by then the sizing concessions or exclusion are unavoidable. Counsel-led ground-lease review at LOI is the standard discipline.
Sources
- Net Lease REIT Sector Data and Industry Reports · Nareit · 2026-Q1