Commercial Real Estate Fundamentals Flashcards

Commercial Real Estate Fundamentals Flashcards Light Industrial- less customization- Usually warehouse faciliites in industrial parks- desgined for businesses to have customers on site for trasnactions Residential Property TypeSingle Family; Multifamily (4+) Loan to Valuie (LTV)What the loan amount will be, expressed as a % of the total asset value.LTV can be from loan amount relative to purchase price, apppraised vale, or some other calculated asset value Property Typesresidential ad non-residential Serviced LandAccess to the power grid, water, sewer, etc.Unserviced LandNo access to the power grid, water, and sewer systems 'Bare Land'Does typically not have a tenant or generate cash flow Non-ResidentialRetail; Office; Industrial; Special Use; Land Retail PropertyA type of commercial property from which goods are sold What happens if heavy industrial tenant goes out of business 1) unlikely to find a new tenant that requires the same specifications2) many costly modifications required Low RiseLower; defined by a certain number of units or doors.Separates themselves from Duplex or Fourplex (typically 4-6 units) Net Operating Income (NOI)Gross rental income less OpEx; used to compare profitability of rental properties.Similiar to EBITDA but asset class specific Capitalization Rate (Cap Rate)Conceptually, it is a measure of an investment property's expected return, based on income it generates relative to the market value.It can be thought of as a stock's dividend yield.Net Operating Income / Market Value of the Property Economics of Multifamily PropertiesPros1) residential is less levered to economic cycles - more recession proof2) Government-backed residential mortgage insurance allows for higher LTV or lower interest ratesCons1) Leases typically only allow 12 months, converting month-to-month arrangements after the initial term2) Turnover is high3) Lack of pricing power; due to tenant protections stopping landlords from rasiing retns more than a maximum % a year 'Special Use' PropertiesSpecial use properties are properties that are there to benefit the public, such as schools, hospitals, hotels, student housing, golf course, and police stations.requires high levels of customization; risk for a lender that finances a special use property is that it is hard to get a new tenant into the facility without modificationsbars, restuarants, bars, night clubs

Anchor TenantThe large and generally well-known retailers who draw the majority of customers to a shopping centerthis can help the surrounding retailors as well Industrial Property TypesHeavy Industrial vs. Light Industrial Office Property Characteristics- low customization- includes specialty site- tends to be clustered Amortization PeriodThe number of months or years over which the principal repaytments of a loan are spread; the total length of time it will take to pay off the mortgage Own (Hold) vs. Rent (Sell)1) Location2) Proximity to Customers3) Proximity to Workforce4) Market Rents vs. Property Prices5) Facility Size6) Customization TermThe length of time that the interest rate is agreed to Heavy Industrial- large standalone sites- significatn customization- heavy manufacturing features- usually single tenant High RiseLarge towers with many floors; amenities Condominiumsresidents have sole ownership of the living space but joint ownership of the land and common areas. monthly maintenance feeFinanced as separate entities Corporate GuaranteesWhen a franchiser can provide support and gauarantee for a tenant 'Special Use' Properties Characteristics - linked to economic cycles (systematic risk)- lower loan to value (LTVs) and shorter amortizations