January 30, 2025
The 2025 commercial real estate conference season kicked off in high gear earlier this month for those of us in the mortgage banking industry. In a short span of weeks, the cross-country journey took us from CREFC in Miami to…
MARKET BLOG
January 23, 2025
This week, as we celebrate Dr. King’s legacy alongside the inauguration of a new presidential administration, it’s a natural moment for reflection. From national headlines to challenges such as geopolitical tensions, wildfires, and other strife, we find ourselves at a…
January 16, 2025
Slatt Capital aims to offer a clear overview of the interest rate ranges quoted for various types of commercial real estate properties and lenders. This data is derived from financing quotes from all Slatt Capital offices within the past 60…
Slatt Capital was very pleased to attend CREF Miami 2025, where the spotlight is on an increasingly competitive lending landscape. With banks and insurance companies aggressively growing portfolios, opportunities are clearly emerging in mid-construction financing, floating-rate debt, and office assets…
WHITE PAPERS
January 13, 2025
Analyzing expense reimbursements is essential for managing the financial success of retail, industrial, and office properties. These reimbursements significantly impact operations and planning because they influence budget allocation and tenant satisfaction, which makes it essential to have a clear understanding…
April 11, 2024
Commercial real estate bridge loans serve as a valuable financing option for investors by bridging the gap between immediate capital needs and long-term financing solutions. These types of loans are typically utilized in commercial real estate transactions where quick access…
March 21, 2024
When it comes to investing in commercial real estate, understanding the value of a property goes much further than simply comparing property costs in the area. Instead, investors must carefully consider the cost of a property in contrast to the…
KEY TERMINOLOGY
Amortization
The process of gradually reducing or paying off a debt or loan through scheduled, periodic payments over a specified period of time. It involves the systematic repayment of both the principal amount borrowed and the accrued interest charges.
It’s important to note that the specific terms and conditions of an amortizing loan, including interest rates, payment frequency, and any prepayment penalties, are outlined in the loan agreement. Borrowers should review these terms carefully and consult with lenders or financial professionals to fully understand the implications of the amortization process.
CAP Rate
The capitalization rate, commonly referred to as the CAP rate, is a key metric used to assess the potential return on investment for an income-producing property. It provides a measure of the property’s net operating income (NOI) relative to its purchase price or value.
The CAP rate is expressed as a percentage and is calculated by dividing the property’s net operating income by its current market value or purchase price.
The formula for calculating the CAP rate is as follows:
CAP Rate = Net Operating Income / Property Value
Net Operating Income (NOI)
Net Operating Income (NOI) is a key measure that shows the income a property generates after subtracting operating expenses but before financing costs and taxes. It helps determine a property’s profitability and cash flow potential. Lenders use NOI to assess a property’s loan eligibility. A higher NOI means a more financially stable property, increasing the chances of favorable financing terms. Investors and lenders rely on NOI to make informed decisions in commercial real estate and mortgage lending.
Treasury Rate
The Treasury Rate is the interest rate on U.S. government bonds. It acts as a benchmark for commercial real estate loans. Mortgage lenders use the Treasury Rate as a reference point to set interest rates. When the Treasury Rate goes up, it means borrowing costs increase, and borrowers may face higher rates for commercial real estate loans.