Commercial loan w/ Fannie/Freddie

[Ryan Fortier]

I'm looking into a Fannie/Freddie commercial mortgage for a new purchase and have been speaking with an agency lender and a commercial mortgage broker. I received different information from both regarding required ownership percentage for anyone who will be on the mortgage. One said anyone who will be signing on the mortgage(and using their net worth) has to have a minimum of 20% ownership and one said only 5% ownership is the minimum.  Does anyone know the answer? Thanks!

[Conor Freeman]

@Ryan Fortier Correct, not every investor has to be a key principal.

If I'm understanding correctly, you have a SPE (special purpose entity, typically an LLC) as the borrower that is 95% owned by your TIC and 5% owned your partner's TIC? Then your partner is not a KP. I guess I'm just confused why you'd each have a TIC of your own - who are your tenants in common? Not each other, correct?

Also, to your last point, there is no minimum that an investor has to put down on a deal. I generally separate Key Principals and non-key principal in to GP (general partners) and LP (limited partners). Hypothetically, you as a GP can put down say 10% of the equity required and raise the final 90% of the equity from call it 10 friends and family LPs. You as majority owner in the borrowing entity (SPE) would be the key principal, and the LPs, who brought in the majority of the down payment would not be key principals as long as their ownership in the borrowing entity is <20%. That would mean that you as the sole KP would sign the carve out guarantes and need to meet net worth and liquidity requirements. That's a long way of saying its not contingent on how much capital one brings in, rather how the borrowing entity is structured.