Commercial Property Financing

Commercial mortgage financing in Ontario is underwritten on the asset and its cash flow, not on the borrower's beacon score. The lender starts with net operating income, applies a capitalization rate to establish value, and then sizes the loan to a debt service coverage ratio — typically 1.20x to 1.35x depending on asset class. That means a building with weak or unverified rent rolls will not support a large loan regardless of how strong the sponsor is, and a well-tenanted building can support a large loan for a sponsor with a thin balance sheet.

Asset class drives everything downstream. Multi-residential of five units or more accesses the deepest and cheapest capital, including CMHC-insured programs at the lowest spreads in the market. Industrial and warehouse remain lender favourites on strong covenants. Office is being underwritten conservatively with lower loan-to-values and shorter terms. Mixed-use, hospitality, and special-purpose assets sit at the alternative and private end, priced on exit and sponsor experience. Construction and land are their own market again, funded in draws against cost-to-complete with a firm takeout.

Timelines are where commercial files go wrong. An institutional or insured facility is a 60-to-120-day process once the appraisal, environmental, building condition report, and full rent roll are ordered. A private or bridge facility can close in two to four weeks but costs more and expects a defined exit — stabilization, lease-up, or a term takeout. Most of the files we rescue are covenant breaches or maturity defaults where the borrower ran out of runway waiting on an institutional approval that was never going to arrive in time.