Everyone enjoys a surprise now and then. That is, everyone except commercial real estate owners who just discovered their ability to use and develop their property has been severely limited without their consent. The neighbor claims it has the right to drive delivery trucks across the owner’s parking lot. Another neighbor asserts it has the …
The equity multiple is a commonly used performance metric in commercial real estate, and yet it’s not widely understood. In this article, we’ll take a look at the equity multiple as it’s used in commercial real estate, and we’ll also walk through several examples step-by-step. What Is the Equity Multiple? First, what exactly is the equity …
Equity waterfall models in commercial real estate projects are one of the most difficult concepts to understand in all of real estate finance. Cash flow from a development or investment project can be split in a countless number of ways, which is part of the reason why real estate waterfall models can be so confusing. …
The mortgage constant, also known as the loan constant, the debt constant, or the mortgage capitalization rate, is an important concept to understand in commercial real estate finance. Yet, it’s commonly misunderstood. In this article, we’ll take a closer look at the mortgage constant, discuss how it can be used, and then tie it all …
The debt yield is becoming an increasingly important ratio in commercial real estate lending. Traditionally, lenders have used the loan to value ratio and the debt service coverage ratio to underwrite a commercial real estate loan. Now, the debt yield is used by some lenders as an additional underwriting ratio. However, since it’s not widely used …
The Debt Service Coverage Ratio, often abbreviated as “DSCR”, is an important concept in real estate finance and commercial lending. It’s critical when underwriting commercial real estate and business loans as well as tenant financials, and it is a key part in determining the maximum loan amount. In this article, we’ll take a deep dive …
Pari Passu is a term that’s widely used in finance, law, and commercial real estate. It has important implications in a bankruptcy and plays a significant role in the CMBS market. In this article, we’ll discuss pari passu in commercial real estate and review some relevant examples. What is Pari Passu? Pari Passu is Latin …
When property is purchased, buyers often make several assumptions. Buyers assume they will be able to use the property. Buyers also assume they can enter and exit the property. But, the rights to enter and exit the property may be separate from the ownership of the property. Ingress is defined as the right to enter …
The Modified Internal Rate of Return, often just called the MIRR, is a powerful and frequently used investment performance indicator. Yet, it’s commonly misunderstood by many finance and commercial real estate professionals. In this post, we’ll take a deep dive into the concept of the MIRR. We’ll define the MIRR, look at the logic and intuition …
Title insurance is one of the key pieces of any commercial real estate transaction. Without it, buyers and sellers would most likely find the risks of buying and selling property to be too high. Title insurance has been around in one form or another in the United States since 1874. The stronger your understanding of …