Portfolio and blanket loans: several properties, one note

A blanket loan answers a specific problem: you own several small buildings, each with its own loan, maturity and annual review, and you want one loan instead. It is also the clean way to buy a group of buildings from one seller, or to pull equity from paid-down properties without selling them.

The tool is simple. The contract is not. Everything that matters is in four clauses: cross-collateralization, cross-default, the allocated loan amounts and the release provisions.

How the pool is underwritten

The lender adds up the pool. Coverage is total NOI over total debt service, and LTV is the total loan over total value. The upside is that a strong building can carry a weak one. The downside is the same sentence read the other way: if one property loses its anchor tenant, the whole loan can fall out of compliance.

Worked example (illustration). Three buildings, refinanced together. The lender’s policy: 70% LTV and 1.25x pooled coverage at 6.75% on a 25-year amortization.

Property	Value	NOI	Coverage on a value-based share of the final loan
A: 8-unit building	$1,200,000	$70,000	about 1.09x
B: mixed-use corner building	$1,800,000	$120,000	about 1.25x
C: 20-unit building	$3,000,000	$210,000	about 1.31x
Pool	$6,000,000	$400,000	1.25x pooled

LTV allows 70% of $6,000,000, or $4,200,000. Coverage allows $400,000 ÷ 1.25 = $320,000 of debt service, which at a debt constant of about 0.0829 supports $3,859,600. The loan is about $3.86 million, set by coverage. At the LTV figure of $4.2 million, pooled coverage would be only about 1.15x.

Run each property through the DSCR calculator on its own too. If one building fails badly alone, that is the one the lender will focus on, and the one that will be hardest to release later.

Allocated loan amounts and release prices

Each property gets an allocated loan amount, its share of the total. To sell or refinance one property out of the pool, you pay its release price, which is usually the allocated amount times a premium. The premium protects the lender from you selling the best buildings first and leaving it with the worst.

Continuing the illustration. Suppose the loan of $3,860,000 is allocated by value, so Building C carries 50%, or $1,930,000, and the note sets release prices at 115% of the allocated amount. To sell C you pay $2,219,500. The extra $289,500 pays down the loan on A and B. After the release, the lender retests the remaining pool. If A and B together do not meet the coverage and LTV tests, the note can require an additional paydown on top of the release price.

Questions to settle at the term sheet:

Clause	What to ask for	Why
Release price	The lowest premium the lender will accept, written per property	Every point is cash out of your sale
Post-release tests	Tests on the remaining pool that you can model today	Avoids a surprise paydown at sale
Substitution	The right to swap in a replacement property	Keeps the loan in place through a 1031 exchange
Release order	No forced order, or an order you control	Prevents being locked into selling the weak asset first
Partial release fee	A flat fee per release, not a percentage	Small, but it adds up across many sales

If you expect to sell buildings one by one through a 1031 exchange, the substitution right can matter more than the rate.

Prepayment

There are two layers. The whole-loan prepayment clause (a step-down on most bank loans, yield maintenance on some non-bank portfolio loans) governs a full payoff. The release price governs a partial one. On many blanket loans the release premium is the more expensive of the two, because you pay it every time you sell a building.

Costs and timeline

Every property needs its own title work, valuation and often its own environmental report. On a pool of small buildings, those third-party costs can exceed the origination fee. Properties in different states add local counsel and recording rules. The closing date is set by the slowest property: one missing survey or open lien holds up the whole loan.

What lenders check

• Each property’s income separately and pooled, with the weakest asset’s rent roll read closely.
• Your schedule of real estate owned with debt, NOI and maturity per property.
• Title on every property, including any existing liens that must be paid off at closing.
• The concentration of the pool. A pool that is mostly one building is really a single-asset loan with extras.
• Sponsor liquidity and the guarantee. Bank blanket loans are usually recourse.

Common deal killers

• One property drags pooled coverage below the floor. Drop it from the pool and finance it separately.
• A release clause too tight to execute your plan. Read it before you sign, not when you have a buyer.
• Title problems on one property that delay every other property’s closing.
• Mixed property types the lender does not want together, such as apartments pooled with a vacant retail building.

When separate loans are the better answer

If each building qualifies on its own for a non-recourse agency loan at a good rate, separate Fannie Mae small loans can beat a recourse blanket loan, even with more paperwork. If you plan to sell buildings over the next few years, separate loans avoid release premiums entirely. If the goal is to pull equity from one paid-off building, a single cash-out refinance on that building is simpler. Non-bank DSCR loans also come in portfolio form for rental pools, and are worth pricing when bank documentation is the obstacle.