Commercial Real Estate Lending: Cash Flow Analysis & Cap Rates
Banks continue to deal with commercial real estate (CRE) loans as a major portion of their loan portfolios.
Also, many borrowers still have large holdings of income-producing or rental real estate. Whether directly financing these assets or including the income stream(s) in your overall credit analysis, it is important to understand key analytical concepts utilized in evaluating CRE cash flow.
This program covers the key variables and concepts for determining CRE cash flow and transaction-level stress-testing. We’ll learn that CRE cash flow involves more than earnings before interest, taxes, depreciation and amortization (EBITDA) for a debt service coverage (DSC), and that we should be using the updated cash flow to help update the underlying collateral as part of ongoing loan monitoring. Making the connection between updated cash flow and an updated value estimate involves a capitalization (cap) rate.
If you are also interested in our CRE Lending: Property Types, Lease Structures and Other Non-Financial Risks webinar on June 27th, 2017; CLICK HERE for discounted package pricing.
- Cash flow or net operating income (NOI) concepts
- Understanding key variables: vacancy, management fees and replacement reserves
- The missing link: Using NOI along with a cap rate to estimate current property value
- Moving from NOI to cash flow available for debt service (CFADS) and DSC
- Stress-testing of debt service coverage (DSC) and loan-to-value (LTV) at transaction level
- How to use a sample worksheet to explore the major issues, including stress-testing, demonstrated with a case example
Commercial lenders, credit analysts and small business lenders, consumer lenders, mortgage bankers and private bankers; loan review specialists, special assets officers, lending managers and credit officers.
Richard Hamm has been training bankers for 25 years, designing and delivering courses specializing in commercial lending and credit, including portfolio and risk management, commercial real estate (CRE) and appraisals, plus selling and negotiating skills, and director training.
Richard is based in Huntsville, AL and has owned/operated Advantage Consulting & Training for 11 years, after a 22-year banking career including senior positions in lending and credit, plus president through formation and acquisition of a community bank. He has BS and MBA degrees from the University of Alabama.
Institute of Certified Bankers: Visit http://www.icbmembers.org/login.aspx for instructions regarding self-reporting. Estimated credits: 2.5 CE Credits
- Live Webinar which includes 5 Day On-Demand - $265
- Six Month On-Demand – $295
- Live plus Six Month On-Demand – $365
- CD-ROM (Includes Six Month On-Demand) – $345
- Premier (Includes all options) – $395
- Additional Locations – $75
Online: Click here.
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