Hi everyone, and welcome back to my blog. I would like to apologize for my recent absence; I've been really sick lately.
Week 4 was eventful in that I started working on loan reviews, which was entirely new for me. Loan reviews, from what I gather, are meant to give potential lenders an idea of how a certain property performs during a given year; based on this information, lenders can decide whether or not they will give a loan to the owners or operators of the property. For example, I was working on a loan review for a business park, and as I looked through the income statement, budget statement, and rent roll for the property at hand, I had to format the information in front of me into a simple, concise description of net operating income and what lenders can expect in terms of returns on a loan.
Loan reviews, it seems, are where all of the tiny pieces that I had to research on various databases, like the Maricopa County Assessor's Office, and CoStar, came together. Every aspect of the property, from the net rentable square footage to the end dates of the leases of the tenants, matters, and it's best reflected in what expenses, reimbursed or not, and what income the property generates. This information is best summarized by the debt coverage ratio, or the DCR, which is calculated by taking the net operating income and dividing it by how much debt is paid back in a year. It basically represents how many times over the income of the property can cover the debt, and the higher that the ratio is, the better. Perhaps my calculations are wrong, but for the current loan review that I'm working on, the DCR is 19.14, which means that the income of the property can cover the debt 19 times over. Of course, I've normally seen DCRs between 1 and 2, which gives me sufficient reason to doubt the DCR I calculated. It's a work in progress, I suppose.
As far as I know, I'm nearing a relatively okay understanding of all of the services that Churchill provides, and it will soon be time for me to create and finish a loan package for one of their active deals. I am not yet sure what the deal will be, but now that I have a decent comprehension of all of the terms mentioned and the sources of that information, I will be able to track economic development of the area of interest.
Thanks for reading, and I'll see you next week.
Week 4 was eventful in that I started working on loan reviews, which was entirely new for me. Loan reviews, from what I gather, are meant to give potential lenders an idea of how a certain property performs during a given year; based on this information, lenders can decide whether or not they will give a loan to the owners or operators of the property. For example, I was working on a loan review for a business park, and as I looked through the income statement, budget statement, and rent roll for the property at hand, I had to format the information in front of me into a simple, concise description of net operating income and what lenders can expect in terms of returns on a loan.
Loan reviews, it seems, are where all of the tiny pieces that I had to research on various databases, like the Maricopa County Assessor's Office, and CoStar, came together. Every aspect of the property, from the net rentable square footage to the end dates of the leases of the tenants, matters, and it's best reflected in what expenses, reimbursed or not, and what income the property generates. This information is best summarized by the debt coverage ratio, or the DCR, which is calculated by taking the net operating income and dividing it by how much debt is paid back in a year. It basically represents how many times over the income of the property can cover the debt, and the higher that the ratio is, the better. Perhaps my calculations are wrong, but for the current loan review that I'm working on, the DCR is 19.14, which means that the income of the property can cover the debt 19 times over. Of course, I've normally seen DCRs between 1 and 2, which gives me sufficient reason to doubt the DCR I calculated. It's a work in progress, I suppose.
As far as I know, I'm nearing a relatively okay understanding of all of the services that Churchill provides, and it will soon be time for me to create and finish a loan package for one of their active deals. I am not yet sure what the deal will be, but now that I have a decent comprehension of all of the terms mentioned and the sources of that information, I will be able to track economic development of the area of interest.
Thanks for reading, and I'll see you next week.
Hey Tanmyaa! it's great to see that you're starting something new and expanding your research by delving into loan reviews. Did you fine any troubles making this transition? If so, how did you handle them?
ReplyDeleteHey Tanmyaa! It's unfortunate to hear you getting sick; I hope you're feeling better now. Correct me if I'm wrong, but it seems to me that lenders look at a loan review to assess the likelihood of them receiving the money they lent to the owners of the property?
ReplyDeleteWouldn't all loans be binding, so the lenders can guarantee that they'll receive their loan one way or another instead of having to look at a loan review?
Thanks again!
I hope you're feeling better! Will you be working on a team with Churchill employees to create the loan package, or are you able to do it by yourself? Have a great spring break!
ReplyDelete