Commercial Real Estate Finance

Built to Suit in Commercial Real Estate

Built to Suit in Commercial Real Estate

In a built to suit lease, a developer builds a property specifically for the use of one tenant. Generally, a tenant will locate a developer who is willing to purchase or ground lease land (or already owns land), and is willing to engage in a built-to-suit transaction.

Blend and Extend Amendments in Commercial Real Estate

Blend and Extend Amendments in Commercial Real Estate

In commercial leasing, a blend and extend amendment is allows a tenant to extend their lease and negotiate a new rate, merging, or “blending” the new and old rents. During periods of particularly high vacancy, commercial landlords will often offer agree to a blend and extend amendment that lowers a tenant’s rent, in order to keep their property occupied for an extended period of time.

Real Estate Debt Funds in Commercial Real Estate

Real Estate Debt Funds in Commercial Real Estate

For commercial real estate borrowers, debt funds often offer loans that banks can’t-- or won’t offer, including commercial construction loans, bridge loans/lease-up financing, and certain property rehabilitation and redevelopment loans. According to the Mortgage Bankers Association (MBA), debt funds originated nearly $70 in billion commercial real estate loans in 2018, around 10% of all CRE loans originated in that year.

Dark Shell in Commercial Real Estate

Dark Shell in Commercial Real Estate

A dark shell refers to a commercial property that is leased to a tenant without interior improvements, such as heating, lighting, interior walls, plumbing, or air conditioning. A dark shell is also sometimes referred to as a cold dark shell, a cold shell, a grey shell, or a base shell.

Adaptive Reuse in Commercial Real Estate

Adaptive Reuse in Commercial Real Estate

In commercial real estate, adaptive reuse occurs when an older building is adapted for a different use than it was originally designed for. Adaptive reuse can have a variety of advantages for commercial real estate investors and developers. Primarily, this comes in the form of significant savings; demolition and new building construction can be extremely expensive, and adaptive reuse can lead to substantially lower construction costs.

Intercreditor Agreement in Commercial Real Estate

Intercreditor Agreement in Commercial Real Estate

In commercial real estate, an intercreditor agreement is an agreement between two lenders that stipulates the rights and responsibilities of each party. Intercreditor agreements are most commonly used when mezzanine debt is layered on top of a senior commercial real estate loan. Typically, the agreement creates a variety of safeguards that protect that senior lender’s interest in the property should the borrower default on their loan.

Infill Development in Commercial Real Estate

Infill Development in Commercial Real Estate

In commercial real estate, infill is defined as the development of unused land in urban areas. This commonly takes the form of developing an empty lot of land between two buildings, but can also involve the demolition of older or underused properties. Supporters of infill development believe that it makes efficient use of existing land and reduces burdens on municipal services, due to the fact the area is already being served by water, power, and communications infrastructure.

Recapture Clause in Commercial Real Estate

Recapture Clause in Commercial Real Estate

In commercial leasing, a recapture clause permits a landlord to terminate a lease early, and may also allow them to demand all or part of the remaining lease payments immediately. Recapture clauses can be triggered by a variety of events, but are are most often activated when a tenant closes their business and attempts to sublease the property.

Capital Stack in Commercial Real Estate

Capital Stack in Commercial Real Estate

In commercial real estate finance, the capital stack is the legal organization of all the layers of debt that are used to purchase, build, or renovate a piece of real estate. The position of a piece of debt in a property’s capital stack determines what the order that lender will repaid in the case of a borrower default or bankruptcy.

Submarket in Commercial Real Estate

Submarket in Commercial Real Estate

In commercial real estate, a submarket is a smaller part of a larger market. While a market may be a city or MSA, such as New York City, or the Dallas-Fort Worth-Arlington MSA, a submarket is likely to be a neighborhood or Suburb, such as Williamsburg, Brooklyn or downtown Dallas.

UBP: Unpaid Principal Balance in Commercial Real Estate

UBP: Unpaid Principal Balance in Commercial Real Estate

In commercial real estate finance, unpaid principal balance, or UPB, is the amount of a loan’s principal balance that has not yet been paid back to a lender. To calculate the UPB, a borrower cannot simply subtract their current mortgage payments from the initial loan amount; since they have also been paying interest, they will have to add this into their calculations.

DSCR: Debt Service Coverage Ratio In Commercial Property Loans

DSCR: Debt Service Coverage Ratio In Commercial Property Loans

Debt service coverage ratio or DSCR, is a comparison between net operating income and debt service on an annual basis and is generally one of the most important considerations when a commercial mortgage broker, lender or bank is underwriting a loan.

MSA: Metropolitan Statistical Area in Commercial Real Estate

MSA: Metropolitan Statistical Area in Commercial Real Estate

Metropolitan Statistical Areas, or MSAs, are U.S. government designations for specific urban areas. MSAs are defined by the U.S. Office of Management and Budget (OMB). Currently, there are 383 Metropolitan Statistical Areas in the United States and 7 in Puerto Rico. An MSA generally groups several cities and counties that are closely interconnected, which makes it significantly easier for government agencies and businesses to compile statistics about a specific area

Due Diligence in Commercial Real Estate

Due Diligence in Commercial Real Estate

Due Diligence refers to the practice of investigating or auditing a prospective investment in order to confirm facts. The audit includes analyzing different aspects of the investment like reviewing financial records, going over all legal documentation, etc. Due diligence is effectively the care any reasonable party should take before entering into any legal agreement or financial transaction

Conduit Loan in Commercial Real Estate

Conduit Loan in Commercial Real Estate

A conduit loan, also known as a CMBS loan, is a commercial real estate loan which is secured by a mortgage on a commercial property. These loans are structured by conduit lenders, commercial or investment banks.

CMBS: Commercial Mortgage Backed Securities in Commercial Real Estate

CMBS: Commercial Mortgage Backed Securities in Commercial Real Estate

A Commercial Mortgage Backed Security (CMBS) loan is a fixed income security backed by a commercial mortgage. These loans are for commercial property such as malls, apartments, office buildings and factories.

Holdbacks in Relation to Commercial Property Loans

Holdbacks in Relation to Commercial Property Loans

A holdback is a clause in the commercial property loan that seeks to put aside a certain portion of the loan until an objective has been accomplished. Holdbacks account for any issue that has not been resolved before closing the contract and can be solved soon after. The holdback is held in the lender’s escrow account.

CapEx: Capital Expenditure in Commercial Real Estate

CapEx: Capital Expenditure in Commercial Real Estate

Capital expenditure or "CapEx" are the funds used to acquire, upgrade or repair the property . It also includes the acquisition of equipment for said property. An expenditure is considered a CapEx if it is a new purchase or extends the life of the property. For example, fixing the roof, installing a furnace or painting the building.

CFR: Code of Federal Regulations in Commercial Real Estate

CFR: Code of Federal Regulations in Commercial Real Estate

CFR stands for Code of Federal Regulations. The CFR is the codification of the general and
permanent rules and regulations published in the Federal Register by the executive departments and agencies of the federal government of the United States.

NOFA: Notice of Funding Availability in Commercial Real Estate

NOFA: Notice of Funding Availability in Commercial Real Estate

NOFA or Notice of Funding Availability is a statement issued by the GRRHP  (under the USDA) in the Federal Register. The statement will contain information on the amount of funding to develop homes available for each area along with the period for which the funds will be available for.