KNOWLEDGE CENTER

MARKET BLOG
June 20, 2024

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 90…

May 30, 2024

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 90…

May 23, 2024

Retail dealmakers and industry experts came together this week at the Las Vegas Convention Center for ICSC Las Vegas 2024. Slatt Capital team members were among the 20,000+ attendees digesting insights from dozens of insightful panels spread across the 3-day event. The…

WHITE PAPERS
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…

March 14, 2024

Insurance is one of the most important and complicated pieces of the loan origination and servicing processes. Whether you are a borrower with a commercial property or whether you work in the commercial mortgage industry, chances are you have heard…

March 12, 2024

It is a basic requirement of our business that we very often are tasked with helping our Sponsor clients compare various loan options. One of the most important aspects of a given loan structure, and one that can frustrate even…

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.