Who are the major aerospace and defense tenants?

Prime contractors (Boeing, Lockheed Martin, Northrop Grumman, Raytheon Technologies, General Dynamics, L3Harris, BAE Systems) plus tier-1 suppliers and U.S. government via GSA leases.

Can SBA finance aerospace and defense industrial?

For owner-occupied small to mid-market aerospace suppliers using their own real estate, SBA 504 finances at 90 percent LTC subject to standard SBA size and use eligibility. Most institutional aerospace and defense is investor-owned and financed institutionally.

What is ITAR and how does it affect financing?

International Traffic in Arms Regulations (ITAR) controls access to defense articles and technical data. ITAR-controlled facilities have ownership and tenant change requirements that lenders verify.

Are GSA leases financeable?

Yes, with specialty GSA-lender programs. GSA leases have specific structures (typically 15 to 20 year initial terms with renewals) and lender appetite is concentrated among programs that understand the federal lease framework.

Maintenance, Repair, and Overhaul. Aerospace MRO facilities service commercial and military aircraft, requiring specialized hangars, tooling, and infrastructure.

What is the typical cap rate?

Stabilized aerospace and defense industrial typically trades at 5.50 to 7.00 percent cap rates depending on tenant credit, lease term, and facility specialization.

Is non-recourse standard?

Yes for institutional aerospace and defense industrial. Life co, CMBS, and most institutional debt fund executions are non-recourse with carve-outs.

Can ground-up aerospace facilities be financed?

Yes for build-to-suit projects with strong tenant credit and pre-leasing. Speculative aerospace facility construction is rare given the specialized infrastructure cost and narrower tenant pool.

Aerospace and Defense Industrial Financing

At a Glance

Aerospace and Defense Industrial Financing Snapshot

Typical loan size

$10M to $200M+

Maximum LTV

55 to 70 percent

Typical DSCR floor

1.30x to 1.45x

Term

5 to 25 years

Recourse

Non-recourse with carve-outs (institutional)

Tenant credit

Investment grade (prime contractors, GSA leases)

Lease term

10 to 25+ years typical

Lender count actively quoting

~15 to 25 specialty + life co

Capital Source Map

Where Aerospace and Defense Industrial Loans Come From

Aerospace and defense industrial financing leans heavily on life co and CMBS for stabilized credit-tenant properties. Specialty industrial lenders fund mid-market transactions. Government-leased properties (GSA leases) access additional dedicated lender programs. The asset class requires lender expertise in tenant credit analysis, lease structure, and security clearance considerations.

Capital Source	Rate Range (Apr 2026)	LTV / Down	Best Fit
Life insurance company	5.85 to 6.65% (10 to 15 yr fixed)	55 to 65 percent	Stabilized credit-tenant aerospace and defense $20M+
CMBS conduit	6.45 to 7.35%	60 to 70 percent	Stabilized credit-tenant aerospace and defense $10M+
GSA-specialty lender	6.25 to 7.25%	65 to 75 percent	Government-leased aerospace and defense properties
Specialty industrial bank	7.25 to 8.50%	60 to 70 percent	Mid-market aerospace and defense $10M to $30M
Bridge debt fund	SOFR + 425 to 600	65 to 75% LTC	Acquisition + value-add aerospace and defense

Pricing is indicative and reflects active CLS CRE quote pipeline as of April 2026. Actual pricing depends on property condition, sponsor profile, deal size, and market dynamics.

Deal Profile

Typical Aerospace and Defense Industrial Deal

Aerospace and defense industrial transactions span $10M for smaller MRO and R&D facilities to $200M+ for major aerospace manufacturing campuses. Per-square-foot pricing varies materially: standard aerospace warehouse and assembly at $150 to $300, MRO with specialized infrastructure at $250 to $500, R&D and clean room at $400 to $1,000+.

Sponsor profiles include institutional industrial owners with aerospace and defense allocations, GSA-leased property specialists, and family offices with sector concentration. Tenant credit (prime contractors, federal government leases via GSA) drives lender appetite.

Operating revenue is triple-net rent from aerospace, defense, or government tenants. Lease terms typically 10 to 25 years with CPI escalations. Long-WALT and tenant credit profile support tight pricing and broad lender appetite.

What Lenders Look For

Aerospace and Defense Industrial Underwriting Considerations

Aerospace and defense underwriting evaluates the property, the tenant, the lease structure, and the regulatory environment. Specialized infrastructure and security considerations distinguish the asset class.

Tenant credit: prime contractors typically investment grade
Lease structure: triple-net long-term with CPI escalations
Property type: warehouse, manufacturing, MRO, R&D, GSA-leased, security-clearance facilities
Regulatory: ITAR, security clearance, federal contracting requirements
Adaptive reuse: specialized facilities have limited reuse value
Sponsor experience: aerospace and defense lender appetite scales with sponsor expertise
Lease term remaining: WALT drives pricing; 10+ years preferred
Government lease structure: GSA leases have specific termination and renewal provisions

Pitfalls We See

Common Aerospace and Defense Industrial Financing Pitfalls

Aerospace and defense transactions have specific failure modes around tenant concentration, defense spending volatility, and specialized facility adaptive reuse.

Tenant concentration risk: single-tenant aerospace properties depend on tenant credit
Defense spending cycles: budget volatility affects program-specific facilities
Specialized facility adaptive reuse: clean rooms, secure spaces, and specialty manufacturing have limited reuse
Security clearance requirements: facility access restrictions affect property management
ITAR compliance: International Traffic in Arms Regulations affect ownership and tenant changes
Government lease termination: GSA leases can include unilateral termination provisions
Insurance: defense and aerospace insurance requirements
Capital expenditure: specialized infrastructure refresh

From the CLS CRE Pipeline

A Real Aerospace and Defense Industrial Deal

On an $86M acquisition of a 480,000 square foot aerospace MRO facility leased to a prime contractor on a 14-year remaining triple-net lease at a Sun Belt aerospace cluster, the institutional sponsor financed through life co at 5.95 percent fixed 15-year, 60 percent LTV ($51.6M), with full yield maintenance. Long WALT and investment-grade tenant credit supported the relationship-tier life co pricing.

All deal references anonymize borrower and lender identities and use city-level geography only.

Aerospace and defense industrial is one of the more specialized institutional industrial sub-types in the country. Long-WALT credit-tenant leases support tight pricing, but the specialized facility profiles and regulatory considerations narrow the active lender bench.
Trevor Damyan, Commercial Lending Solutions