Pricing & Economics
How CRE debt is priced in Canada, what the lender actually earns, and where Cameron Stephens likely sits on the risk/return curve.
Why pricing is hard
CRE debt is not bond pricing. There is no liquid secondary market, no daily mark, and each loan has unique structural features. Pricing is a negotiation between (a) the lender's required risk-adjusted return, (b) what the sponsor will pay before walking, (c) the price of the next-best lender, and (d) constraints from the lender's own funding cost and capital regime. AI/tech can improve the inputs to that negotiation (precedent transactions, market spreads, risk modelling) but does not replace it.
Anatomy of a quoted rate
A CRE loan rate is usually expressed as benchmark + spread:
Coupon = Benchmark rate + Credit spread + Structural spread
| Component | What it reflects | Typical range (Q2 2026) |
|---|---|---|
| Benchmark | Cost of money. GoC yield matching loan term for fixed; CORRA + spread or Prime for floating. CORRA replaced CDOR in 2024. | 3.0–4.0% on 3–5yr GoC |
| Credit spread | Lender's risk premium for this asset + sponsor + structure | 150–450 bps (term, lower-risk) → 450–800 bps (transitional) |
| Structural spread | Premium for non-standard features: high leverage, mezz, junior position, short term, complex collateral | 50–300 bps |
Loan-level rate is one number; the lender's economic return is a different number once fees, capitalisation, and prepayment are accounted for.
Indicative benchmarks (Q2 2026)
Directional only. The actual market moves weekly. Use to calibrate your ear, not to quote.
| Product | Senior all-in | Spread over benchmark | Who lends |
|---|---|---|---|
| CMHC-insured multi-family (term) | 4.0–4.8% | +50–100 bps over GoC | Banks, life cos, NHA-MBS issuers |
| Stabilised multi-family term (uninsured) | 5.5–6.5% | +200–300 bps over GoC | Banks, life cos, credit unions |
| Industrial term | 5.7–6.8% | +225–325 bps | Banks, life cos |
| Retail term (grocery-anchored) | 6.0–7.2% | +250–375 bps | Banks, life cos, debt funds |
| Office term | 7.5–9.5% | +450–650 bps | Few; mostly trophy assets |
| Multi-family construction (senior) | 7.0–8.5% | +350–500 bps | Banks (large sponsors only), debt funds, MICs, CS |
| Condo construction (senior) | 8.0–10.0% | +450–650 bps | Banks (premium sponsors), debt funds, MICs, CS |
| Bridge loan (stabilising asset) | 8.5–11.0% | +550–750 bps | Debt funds, MICs, CS |
| Mezzanine (construction) | 11.0–14.0% | +750–1000 bps | Mezz funds, debt funds, CS |
| Land loan | 10.0–13.0% | +650–900 bps | Private lenders, MICs |
| Pref equity | 12.0–18.0% (target) | n/a — equity | Pref funds, family offices |
Fee waterfall
Fees compound on top of coupon to produce the lender's all-in yield. The structure varies but the menu is consistent.
| Fee | When charged | Typical magnitude | Who keeps it |
|---|---|---|---|
| Engagement / good-faith | Term sheet signing | $5K–$50K | Lender (covers due diligence; refunded against commitment if closes) |
| Commitment fee | Commitment letter signing | 50–200 bps of loan amount | Lender (earned) |
| Lender fee / origination fee | Funding | 100–250 bps of loan amount | Lender |
| Broker fee | Funding | 50–150 bps of loan amount | Paid by sponsor to broker (often outside loan) |
| Standby fee | On undrawn balance (construction) | 25–100 bps per annum | Lender |
| Renewal / extension fee | Each extension exercised | 25–100 bps | Lender |
| Exit fee | Payout (bridge / construction) | 50–200 bps of payoff | Lender |
| Servicing / administration fee | Annual, on outstanding balance | 15–50 bps per annum | Lender (or external servicer) |
| Prepayment / make-whole | Early payout | Greater of 3 months' interest or yield maintenance | Lender |
| Modification fee | Any material amendment | 10–50 bps | Lender |
Worked example — $50M construction loan, 24 months
Indicative non-bank senior construction loan against a 200-unit GTA purpose-built rental, by a manager like Cameron Stephens.
| Line | Value | Notes |
|---|---|---|
| Loan amount (committed) | $50,000,000 | 75% LTC |
| Term | 24 months + 6mo ext | |
| Coupon | GoC 2yr + 425 bps = ~7.50% | Floating reset quarterly |
| Commitment fee (1.00%) | $500,000 | Paid at signing |
| Lender fee (1.50%) | $750,000 | Paid at funding |
| Standby fee (0.50% on undrawn, avg $25M) | $250,000 | Earned over draw period |
| Exit fee (1.00%) | $500,000 | Paid at payout |
| Avg outstanding (S-curve) | ~$30M | Drawn over construction |
| Interest earned (24mo avg) | ~$4,500,000 | 7.50% × $30M × 2yr |
| Gross revenue (24mo) | ~$6,500,000 | Interest + fees |
| Effective annualised yield on committed | ~7.5–8.5% | Function of how fast drawn |
| Effective annualised yield on average outstanding | ~10–12% | What the LP "sees" |
Operator The mental shortcut: a non-bank construction lender like CS targets 10–13% gross IRR on average outstanding on a senior construction loan, before management fees and losses. Net to LP after fees and losses is meaningfully lower — usually 7–10%.
Prepayment economics
Sponsors prepay when they refinance into cheaper debt (e.g. construction loan → CMHC takeout), when they sell, or when they're forced (covenant breach, lender demand).
- Term loans almost always have yield maintenance or make-whole — borrower owes the present value of remaining interest at the loan's contract rate, often less benchmark reinvestment. Protects lender's expected income.
- Construction loans typically have a minimum interest period (e.g. 12 months guaranteed interest) plus exit fee. Lender's downside if sponsor refis early is partly capped.
- Open windows appear in last quarter of term or at defined milestones (lease-up reached, etc.).
Modelling prepayment behaviour is one of the harder data problems — sponsor and asset type both shift probabilities. A common gap in fund-level reporting.
Fund-level economics
The deal yield rolls up into fund-level returns through a fee and waterfall layer. Approximate non-bank Canadian CRE debt fund economics:
| Gross loan IRR (asset level) | 10–13% |
|---|---|
| Less: management fee | −100–150 bps on AUM (typical for institutional mandate); −200 bps on retail |
| Less: realised losses (cycle-avg) | −25–100 bps depending on book risk |
| Less: cash drag / undeployed capital | −25–75 bps depending on deployment |
| Less: performance fee / carry above hurdle | 10–20% over 6–8% pref (varies) |
| Net to investor | ~7–10% in a normal-rate environment |
On the Equity Capital side the math is different — JVs with sponsors target equity-IRR 15–22% with chunkier promote structures. Will deepen in a follow-on doc when CS shifts focus there.
Where Cameron Stephens likely sits
Stitching the deal mix together against the curve:
CS lives in the middle of the stack on the debt side, plus a focused equity slot. The pricing battle is rarely with the Big Five banks — it's with the other non-bank lenders sitting at the same yield band, on dimensions of speed, certainty of close, structuring flexibility, and sponsor relationship.
When you hear an internal pricing debate framed as "the bank is offering 5.75%", check that comp is real. Banks frequently indicate aggressive pricing but don't deliver — long timelines, last-minute conditions, takeout requirements that don't fit. A 7.5% loan that funds in six weeks is a different product than a 5.75% loan that takes six months and may not happen. That gap is the entire reason non-bank lenders exist; don't let it get priced away.