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Industrial loans like other commercial investment type loans are based 100% on cash flow. The cash flow for an industrial building is the base rent.
The format for Net Operating Income is the same as any other commercial investment; starting off with Rental Income.
Base Rental Income
- Less - Vacancy and or Collection loss
- Plus - Expense Reimbursement
- Plus - Other Income
- Equals - Effective Gross Income
- Minus - Operating Expenses
- Equals - Net Operating Income
OPERATING EXPENSES CAN CONSIST OF THE FOLLOWING EXPENDITURES.
Real Estate Taxes
Property Insurance
Utilities
Repairs and Maintenance
Management Fees
Payroll and Benefits
Advertising and Marketing
Professional Fees
General and Administrative
Other Expenses
Includes Loans would consist of loans for Warehouse (Single-or Multi-Tenant), Manufacturing, Research and Development, Flex Space, Light Industrial, Heavy Industrial, Other Industrial
Underwriting Criteria
Maximum Loan To Value 75% to 80%
Maximum Amortization – 25 years
Minimum DCR - 1.25x
Minimum Vacancy Reserve – the greater of actual or market vacancy; typically 7% to 10%.
Minimum Tenant Improvement and Leasing Commission Cost (TI/LC) - the greater of actual, or $0.25 to $0.35 per square foot
Minimum Replacement Reserves - the greater of actual or $0.10 to $0.20 per square foot.
Cap Rate – use market-driven capitalization rate; typically 9% to 11 %.
For a No-Obligation Professional Loan Analysis for Industrial Loans please fill in the form.
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