Commercial Real Estate Credit · Underwriting
Independent Commercial Real Estate Loan Underwriting
A third-party underwriting of a commercial real estate loan, built from the rent roll up. Every ratio is recalculated, every assumption is labelled as reported, modelled or assumed, and every data gap is listed.
Free reports cover the existing up-to-five-metro programme; regional credit coverage is set by agreed research scope.
Scope
What this work is for
Underwriting begins with the income. We reconcile historical operating statements with the rent roll and leases, separate one-time items from recurring income, and project NOI with vacancy, concessions, expenses, reserves and capital expenditure stated explicitly.
Ratios follow from that income, not the other way around. We then test whether the loan can be repaid or refinanced at maturity under rate and value assumptions that are written down rather than implied.
Inputs & analysis
What we examine
Distinguishing reported figures, modelled estimates and assumptions throughout.
| Area | What we test |
|---|---|
| Historical and projected NOI | Trailing operating statements, budgets and the borrower pro forma, reconciled line by line. |
| Leases and rent roll | Expiries, rollover, rent versus market, concessions, tenant concentration and credit. |
| Vacancy and concessions | Physical and economic vacancy, free rent and tenant-improvement burn-off. |
| Expenses and capex | Taxes, insurance, utilities, management, reserves and deferred maintenance. |
| Debt terms | Amount, rate, amortisation, term, reserves and maturity. |
| Collateral and market evidence | Supply, demand, comparable rents and capitalisation-rate evidence with dates. |
| Valuation reference | Supplied appraisal or value conclusion, with its date and basis identified. |
| DCF and refinancing | Hold-period cash flows and maturity-date debt capacity. |
Process
How an engagement runs
- 01
Reconcile income
Statements, rent roll and leases tied out; differences flagged.
- 02
Underwrite NOI
Market vacancy, credit loss, expenses and reserves applied.
- 03
Calculate ratios
DSCR, debt yield, LTV and LTC on consistent periods and dates.
- 04
Test maturity
Refinance capacity at stated exit rate and cap rate.
- 05
Stress
Base, downside and severe downside.
- 06
Document
Assumptions, sources and data gaps in one register.
Ratio definitions
The formulas, stated plainly
- DSCR
- NOI ÷ annual debt service
- Debt yield
- NOI ÷ loan amount
- LTV
- Loan amount ÷ relevant property value
- LTC
- Loan amount ÷ total project cost
Each ratio uses consistent periods, currency and valuation dates. Reported values, modelled estimates and assumptions are labelled separately.
Worked example
A small underwriting, start to finish
Illustrative only. Hypothetical figures, not client data or a market forecast.
A stabilised property with underwritten NOI of $1,240,000 and a reference value of $23,000,000 (implied cap rate 5.39%). Proposed loan $14,000,000 at 6.00% fixed, 30-year amortisation: annual debt service $1,007,245. Against an original total cost of $21,500,000, LTC is 65.1%.
| Case | NOI | Value | DSCR | Debt yield | LTV |
|---|---|---|---|---|---|
| Base | $1,240,000 | $23,000,000 | 1.23x | 8.86% | 60.9% |
| Downside | $1,116,000 | $18,943,173 | 1.11x | 7.97% | 73.9% |
| Severe downside | $992,000 | $15,521,088 | 0.98x | 7.09% | 90.2% |
Work product
What you receive
- Underwriting memorandum with NOI build and ratio summary
- Scenario table: base, downside and severe downside
- Maturity and refinancing analysis
- Market and collateral evidence appendix
- Assumptions register distinguishing reported, modelled and assumed figures
Scope boundary. Models do not independently verify supplied inputs, and recovery or value scenarios are analytical estimates, not guarantees. Legal, title, environmental, engineering and loan-document review require qualified specialists where outside the agreed engagement. Wert-Berater does not lend, originate, service or special-service loans, issue ratings, or provide regulated investment advice or legal opinions.
Scope the credit question before you commit to it.
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