Commercial Real Estate
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Participants examine stress measures on net operating income, break-even analysis, the importance of existing versus stabilized NOI, and the use of the debt service constant for term debt support.
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Certificate
1 credit or $295
Cost
1.5 - 2 Hrs.
duration
1 hr.
Prep Time
1
Quiz
Overview
Participants review three common measures of stress on net operating income that an income producing property must successfully withstand in order to service the property's interest-bearing debt from property cash flow. They examine break-even estimates using both "stabilized" and existing NOI values and draw various conclusions about the use and limitations of break-even analysis. In addition, Participants examine the importance of existing net operating income - in contrast to stabilized net operating income - in properly servicing interest-bearing debt. Further, they review the use and application of the debt service constant in computing annual debt service as well as identifying the maximum amount of term debt that can be supported by an income producing property's cash flow.
Who Should Take This Course
This Course is ideal for participants currently in or aspiring to enter the following job functions:
- Credit Management
- Commercial Credit Administration
- Commercial Real Estate Administration
- Commercial Loan Administration
- CRE Lending
- Corporate Lending
- Loan Review
- Special Assets
- Internal Audit
- Construction Lending
- Non-Profit and Municipality Lending
- Health Care Provider Lending
- Private Banking
- Specialized Lending
- Credit Analysis
Prerequisites
Familiarity with the operating statement for an income producing property, appraisal reports, and the central role net operating income (NOI) plays in commercial real estate risk assessment.
Objectives
By the end of the webinar, participants will be able to:
- Identify the three common approaches to estimating market value and state the limitations of using stabilized value assumptions in estimating market value of an income producing property via application of the income capitalization approach to value.
- Identify the likely impact on net operating income from three common measures of stress that an income producing property must successfully withstand in order to service the property's interest-bearing debt from property cash flow.
- Apply break-even methodology and identify the uses and limitations of break-even analysis when applied to a property's cash flow in a "stabilized" environment.
- Identify the critical factors that drive and determine a property's NOI in establishing the most accurate estimates of rental rates, vacancy rates, and operating expenses.
- Determine whether property cash flow meets a lender's DSC underwriting standard, given a lender's stated LTV maximum, by applying and assessing both "stabilized" and existing estimates for rental rates, vacancy rates, and operating expenses.
- Understand and apply the debt service constant in computing annual debt service and identify maximum term financing given a specific NOI set aside to honor a lender's DSC minimum.
Materials(access provided with registration)
- Credit Refresher on A Simple Stress Test
- 1200 Columbia Pike Appraisal Report Excerpts
- Exercise for the Webinar
- Webinar Presentation Slides
- Webinar Poll Questions
- Webinar Poll Solutions
- Exercise Solutions
