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CRE Lending: Cash Flow Analysis & Cap Rates

This program covers the key variables and concepts for determining CRE cash flow and transaction-level stress-testing.

OnDemand
Recorded Monday,
May 2nd, 2022
Presented by Richard Hamm
2h total length
$279.00 or 1 Token

Includes: 30 Days OnDemand Playback, Presenter Materials and Handouts

  • Lending
  • Commercial Lender
  • Consumer Lender/Retail Banker
  • Credit Analyst
  • Loan Closer
  • Loan Operations Manager/Specialist
  • Mortgage Lender
  • Private Banker
  • Senior Management
  • Small Business Lender

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Banks continue to deal with commercial real estate (CRE) loans as a major portion of their loan portfolios. Also, many borrowers still have large holdings of income-producing or rental real estate. Whether directly financing these assets or including the income stream(s) in your overall credit analysis, it is important to understand key analytical concepts utilized in evaluating CRE cash flow.

This program covers the key variables and concepts for determining CRE cash flow and transaction-level stress-testing. We'll learn that CRE cash flow involves more than earnings before interest, taxes, depreciation and amortization (EBITDA) for a debt service coverage (DSC), and that we should be using the updated cash flow to help update the underlying collateral value as part of ongoing loan monitoring. Making the connection between updated cash flow and an updated value estimate involves a capitalization (cap) rate.

What You'll Learn

  • Cash flow or net operating income (NOI) concepts
  • Understanding key variables: vacancy, management fees and replacement reserves
  • The missing link: Using NOI along with a cap rate to estimate current property value
  • Moving from NOI to cash flow available for debt service (CFADS) and DSC
  • Stress-testing of debt service coverage (DSC) and loan-to-value (LTV) at transaction level
  • How to use a sample worksheet to explore the major issues, including stress-testing, demonstrated with a case example

Who Should Attend

Commercial lenders, credit analysts and small business lenders, consumer lenders, mortgage bankers and private bankers; loan review specialists, special assets officers, lending managers and credit officers.

"Richard does a nice job with these events.  I enjoy attending and always seem to pick up something new despite a 30+ year career in the banking industry." John Covington, President/Sr. Lender, First National Bank, Mattoon

Richard Hamm

Instructor Bio

Richard Hamm has been training bankers for 28 years, designing and delivering courses specializing in commercial lending and credit, including portfolio and risk management, commercial real estate (CRE) and appraisals, plus selling and negotiating skills, and director training. He also conducts eight senior lender forums on a periodic basis in multiple states and one series at the national level.

He is based in Huntsville, AL and has owned/operated Advantage Consulting & Training for 14 years, after a 22-year banking career including senior positions in lending and credit, plus president of a community bank through formation and acquisition of an existing bank. He has BS and MBA degrees from the University of Alabama.

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