What is CRE (Commercial Real Estate)?
Real property used for business purposes, including office, retail, industrial, multifamily (5+ units), and hospitality properties.
CRE (Commercial Real Estate) in commercial lending practice
CRE lending involves specialized underwriting focused on property-level cash flow (NOI), occupancy and lease structure, market conditions, and sponsor strength. Standard CRE underwriting includes rent roll analysis, T-12 normalization, DSCR stress testing, debt yield calculation, and an LTV analysis against current appraisal. Bank regulators monitor aggregate CRE exposure under the FDIC/OCC interagency 100/300 capital concentration thresholds.
Related terms
Related concepts in commercial underwriting
NOI (Net Operating Income)
Total property revenue minus operating expenses, excluding debt service, capital expenditures, depreciation, and income taxes.
Read definitionCap Rate (Capitalization Rate)
The ratio of a property's net operating income (NOI) to its current market value or purchase price, expressed as a percentage.
Read definitionDSCR (Debt Service Coverage Ratio)
The ratio of net operating income (or available cash flow) to total annual debt service, including principal and interest payments.
Read definitionLTV (Loan-to-Value Ratio)
The ratio of the loan amount to the appraised value of the collateral property.
Read definitionRent Roll
A detailed schedule of all tenants in an income-producing property, listing tenant names, unit numbers, lease start and end dates, monthly rent amounts, security deposits, and any concessions.
Read definitionT-12 (Trailing Twelve Months Operating Statement)
A financial statement showing a property's actual income and expenses over the most recent twelve-month period.
Read definitionDebt Yield
The ratio of a property's net operating income to the total loan amount, expressed as a percentage.
Read definitionConcentration Risk
The risk arising from excessive exposure to a single borrower, industry, geography, or loan type within a lending portfolio.
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