CRE Debt Glossary: Commercial Real Estate Loan Terms

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1031 debt replacement · Loan structure: The IRS Section 1031 requirement that the replacement property carry equal-or-greater debt than the relinquished property, or that the sponsor contribute additional cash equity to cover the shortfall.
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A common 1031 misconception is that only equal-or-greater value is required at replacement. Reality: equal-or-greater value AND equal-or-greater debt. A debt shortfall not covered by additional cash equity creates mortgage boot, taxable as gain.
On every 1031 exchange. Debt sizing on the replacement property must coordinate with the relinquished-property debt, the available cash to bridge any shortfall, and the 45-day identification / 180-day close window. Not tax advice, coordinate with QI and tax counsel.
§1031 like-kind exchange · Loan structure: Internal Revenue Code §1031 allows deferral of capital-gains tax on the sale of real property held for investment if proceeds are reinvested in like-kind replacement property within 45 days to identify and 180 days to close.
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Sell a property and roll the entire sale price, including debt payoff, into a new property of equal or greater value. The unrecognized gain rides forward and is only taxed on the eventual cash-out sale, or escapes entirely on step-up at death.
Start the 1031 calendar before the relinquished property closes. Lender bake-off should produce a commitment inside the 180-day window, not just a term sheet, or the deferred gain becomes immediately taxable.

A

A/B note structure · Loan structure: A single mortgage split internally into a senior A-note and a subordinate B-note, with separate cash-flow and loss waterfalls.
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Common in CMBS and large-loan financings. The mortgage is split into a senior A-note, which typically goes into the securitization, and a subordinate B-note held outside the trust. The B-note holder is not the B-piece buyer. The B-piece buyer buys the most subordinate bonds. The B-note holder usually directs the workout until a control-shift event. Control then moves to the A-note. B-note investors get hit first on losses but earn higher yield.
Acceleration · Workout & default: The lender's right, after an uncured event of default, to declare the entire loan balance immediately due and payable.
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Acceleration is the formal kickoff of foreclosure or note sale. Most lenders accelerate only after extended workout discussions fail.
Once the lender has accelerated, the deal is in formal workout. Negotiating leverage shifts dramatically.
Active adult housing · Agency programs: Age-restricted (55+) market-rate apartments without licensed care services. Underwrites and prices like multifamily, with no operator-quality premium and full agency program access.
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Active adult is multifamily with an age restriction. No care services, no operator quality premium. Conflating active adult with IL/AL leads to wrong financing decisions on both sides.
When financing an age-restricted property without licensed care services. Active adult goes through the standard agency multifamily channels at multifamily pricing, IL/AL/MC/SNF do not.
Adaptive reuse (CRE) · Loan structure: Conversion of a commercial building (typically office, hotel, or industrial) to a different primary use, most commonly residential, through major renovation, change of use entitlement, and reconfiguration of building systems.
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Two-stage financing: pre-development bridge funding acquisition + soft costs, then a construction loan sized off as-converted residential value with a stack of tax abatements (NYC 467-m, DC, Chicago) and historic tax credits where eligible. Lender bench: debt funds, regional banks, HFAs.
Feasibility, floor-plate depth, plumbing-stack count, elevator counts, window operability, gates lender appetite. A third-party feasibility study at pre-development is the binding diligence document. Marginal feasibility profiles drive pricing wider and advance rate lower.
ADR (average daily rate) · Hospitality: Average daily rate, total rooms revenue divided by occupied room nights. The price half of the RevPAR equation.
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ADR captures pricing power. A hotel raising ADR while holding occupancy is gaining pricing power; one raising occupancy by lowering ADR is filling rooms cheaply. Operating margin tells which strategy is working.
On every hotel underwrite alongside occupancy. Brand standards and competitive set drive ADR sustainability. Resort and luxury hotels carry higher ADR variance with seasonality and group-booking timing.
Agency lender · Lender types: A lender approved to originate Fannie Mae DUS, Freddie Mac Optigo, or HUD/FHA multifamily loans.
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Agency lenders underwrite, close, and service loans on the agency's behalf within defined credit parameters. Borrowers get agency execution; the lender holds the relationship.
Agency lender pick matters, different lenders have different appetites for affordable, MAH, green, and small-balance product. Process and pricing differ even at the same agency.
Agency tier (Tier 2/3/4) · Agency programs: Tier 2 is generally 80% LTV and 1.25x DSCR, Tier 3 generally 65% and 1.35x, Tier 4 generally 55% and 1.55x, grid varies by asset and market.
When it matters
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Always ask the DUS lender to quote the deal at multiple tiers at term-sheet stage. The optimal answer depends on whether higher proceeds at Tier 2 or tighter rate at Tier 3 produces the better all-in result.
Agency volume cap · Agency programs: The annual dollar limit FHFA sets on each of Fannie Mae's and Freddie Mac's multifamily loan purchases. For 2026 the cap is $88 billion per Enterprise. At least 50% of purchases must be mission-driven. Workforce housing loans that preserve affordability are excluded from the cap. Other mission-driven loans, including most targeted affordable business, count toward the cap. Small-balance is not a 2026 cap category.
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The agencies can only originate so much multifamily volume per year. As they approach the cap in Q3 and Q4, they prioritize mission-eligible business; standard executions can experience wider pricing.
Time conventional agency placements to Q1 or Q2 when possible. Mission-eligible deals (MAH, TAH, Green Rewards) are not subject to the same Q4 dynamics.
All-in cost of capital · Pricing & spreads: The true annual cost of the loan, including coupon, fees, rate-cap cost, and origination amortized over the expected hold.
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A 'cheap rate' that comes with 1% origination, a 50 bps exit fee, and a $300k rate cap is not actually cheap. All-in cost flattens those into one number you can compare.
Always run all-in cost over the actual expected hold, not the loan term. A 5-year loan refinanced at year 2 wears its origination 2.5x as fast.
All-in rate · Pricing & spreads: The total interest rate the borrower pays, benchmark plus spread, before any fees.
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Term sheets often quote 'spread' and 'index' separately. The all-in rate is the sum, and is what your debt service is actually calculated on.
Compare deals on all-in rate first, then layer in fees, IO period, and prepayment to get to a true cost of capital.
Allocated loan amount (ALA) · Loan structure: The portion of a portfolio loan attributed to a single property in the pool. Used to calculate release prices and substitution mechanics.
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ALAs are typically set at origination based on each property's value or NOI share. The schedule lives in the loan docs as an exhibit.
Tight ALAs can make individual releases impossible without bringing fresh capital, sometimes a deliberate lender strategy.
ALTA/NSPS survey · Process & docs: A boundary and improvement survey conforming to American Land Title Association standards, required for issuance of an extended-coverage lender's title policy.
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Identifies easements, encroachments, access, parking, and any conditions that would otherwise be standard exceptions on the title policy.
Survey delays are a common closing bottleneck. Order early; the surveyor's calendar isn't your closing date.
Amortization · Loan structure: The schedule on which loan principal is paid down over time. A 30-year amortization spreads principal payments over 30 years even if the loan term itself is only 5 or 10 years.
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Most commercial loans amortize on a longer schedule than the loan term, leaving a balloon balance due at maturity. The schedule controls how much principal walks off the balance during your hold.
A 30-year schedule on a 10-year loan retires roughly 18% of the balance over the term. A 25-year schedule retires more, and meaningfully changes refi proceeds.
Anchor tenant · Retail: The largest tenant in a shopping center, typically a grocery, big-box, or department store, that drives traffic for the smaller in-line tenants.
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Anchors usually pay below-market rent on long leases (often with tenant-funded improvements). They are paid in traffic generation; the in-line tenants pay full freight.
Loss of an anchor can trigger co-tenancy clauses across the in-line tenants, a domino-effect downside that lenders model carefully.
Appraisal · Process & docs: An independent third-party valuation of the property, ordered by the lender (or the lender's counsel) at the borrower's expense.
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MAI-designated appraisers use income, sales-comparison, and cost approaches and reconcile to a final value. The appraised value drives the LTV test and often the maximum loan amount.
A low appraisal can size the loan down. Pushing back on appraised value (with comps, with leasing data, with cap-rate evidence) is part of every closing.
As-converted NOI · Underwriting & metrics: Projected stabilized NOI of an adaptive-reuse property after completion of conversion and lease-up, used by construction lenders to size the as-converted appraisal that drives advance-rate.
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Conversion construction loans size off as-converted residential value at completion (typically 60% to 70% LTV), not as-is office basis. As-completed appraisal is the binding test; the completion-and-stabilization risk drives the advance-rate haircut against ground-up construction (which typically gets 65% to 75%).
On every conversion underwriting model. As-is and as-converted come in two appraisal values, sponsor must coordinate conversion-feasibility study, third-party appraisal, and construction-cost estimate to avoid a lender re-cut at term sheet.
Assignment of leases and rents · Loan structure: A loan document that transfers, conditionally, the borrower's rights to collect rents under existing and future leases to the lender.
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Inactive in the ordinary course; activates on default. Lets the lender start collecting rents directly without first foreclosing.
Receivership orders typically reference the assignment of rents. State law varies on how readily it can be enforced. Texas and California are different worlds here.
Assumable loan with seller second · Loan structure: An acquisition financing structure that combines assumption of an existing below-market senior loan (HUD, agency, certain life-co) with a seller-carryback second to fill the gap between the assumed balance and the purchase price.
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Delivers below-market blended cost when the existing senior coupon is materially below current market rate. Senior assumption requires lender consent, an assumption fee (typically 1.0% to 2.0%), and underwriting of the new borrower. The seller's note is junior. It must be subordinate to the senior loan, and the senior lender has to consent to that junior lien. The senior lien does not subordinate to the seller.
When the existing senior was originated 2-4+ years before current market rates and remains assumable. HUD 232 LEAN and HUD 223(f) loans are fully assumable; many agency loans conditionally assumable; bank loans rarely. The math wins when senior coupon is materially below current market.
Assumption fee · Process & docs: A fee charged by the lender when a CRE loan is assumed by a new borrower at sale. Typically 1% of loan balance plus lender legal ($25K-$75K) on agency multifamily; variable on bank perm and CMBS.
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Assumption is most valuable when the existing loan rate is materially below current market. The assumption fee is typically a fraction of the cost of new origination, plus the sponsor preserves the favorable existing rate as a deal benefit.
Sponsors selling a property with an attractive existing loan should price the loan-assumption value into the asking price and structure the LOI to commit the buyer to a path on assumption or refinance.

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B-piece buyer · Workout & default: An investor that buys the most subordinate bond classes of a CMBS deal at issuance, typically with the right to direct the special servicer for as long as their position has value.
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B-piece buyers pre-screen each loan in a CMBS pool and have the power to kick loans out before issuance. Their influence shapes the pool more than any single originator.
Knowing the B-piece buyer for the deal you're in is part of preparing for any CMBS workout, they often direct the special servicer in your case.
Bad-boy carve-out · Loan structure: Specific borrower acts that convert an otherwise non-recourse CRE loan to full or partial personal recourse against the guarantor. Standard list covers fraud, willful misconduct, intentional waste, criminal acts, and misappropriation.
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Non-recourse means the lender's only remedy is the property, except for the bad-boy list. Some carve-outs create liability only for the loss the act causes. Others, typically a voluntary bankruptcy, spring the guaranty to the full loan balance. The guaranty states which is which.
The standard list is non-negotiable in substance. The expanded list, voluntary bankruptcy, environmental, financial-covenant breach, is where sponsors lose meaningful protection if the term sheet is signed without negotiation.
Bad-boy carve-outs · Loan structure: A defined list of bad acts (fraud, voluntary bankruptcy, unauthorized transfer, environmental contamination, misappropriation of rents) that pierce non-recourse and create personal liability.
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A springing-recourse carve-out, commonly voluntary bankruptcy, makes the guarantor liable for the full loan. Other carve-outs create liability only for the loss that act causes. The list is usually negotiated; the standard ones are non-negotiable.
Sponsors caught off guard by carve-out triggers (e.g. a ground lease default, a mechanic's lien left unbonded) can find themselves personally on a $40M note.
Balloon payment · Loan structure: The lump-sum principal balance due at the end of a commercial loan term that did not fully amortize. Almost all commercial mortgages have one.
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Refinancing or selling before maturity is the norm. The balloon is just the unpaid balance handed back to the lender if the borrower walks away at the end.
Sponsors who think of the maturity date as 'when the loan is paid off' miss that the balloon assumes a refinance is available, at whatever rates exist on that date.
Base rent · Retail: The minimum guaranteed rent under a commercial lease, before any percentage-rent overage or expense recoveries.
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Base rent is the contractual minimum. Total rent often includes CAM, taxes, insurance, and (on some leases) percentage rent.
Lenders underwrite to base rent first. Anything above base is upside; anything below contract is a problem.
Basis points (bps) · Pricing & spreads: One basis point is 1/100th of one percent. 100 bps equals 1.00%. The unit lenders, brokers, and traders use to talk about rates, spreads, and fees.
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Every term sheet you read is denominated in bps. A 25 bps swing on a $25M loan is roughly $62,500 of annual interest, so the unit is small but the dollars are not.
Behind-the-meter (BTM) generation · Construction & development: On-site power generation (natural gas turbines, fuel cells, renewable plus storage) that supplies the data center directly without depending fully on the utility interconnect. Strategies range from emergency-only standby diesel to baseload natural gas at 50% to 100% of facility load.
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BTM avoids the multi-year utility interconnect queue and lets a hyperscale tenant come online faster. Worked example: a 60 MW BTM natural gas plant feeding a 50 MW IT-load data center typically costs $80M to $120M ($1.3M to $2.0M per MW installed), requires a firm gas-supply contract for 5+ MMBtu/MW of capacity, and triggers Title V air permitting in most jurisdictions. The trade-off is a 24- to 36-month time-to-market savings versus waiting for full utility interconnect.
BTM is increasingly a financing strategy in supply-constrained markets where the utility queue cannot deliver capacity in the project timeline. Some debt funds will lend on speculative powered-shell projects specifically because the BTM strategy carries strategic value to a hyperscale tenant.
BESS project finance · Construction & development: Project-finance debt structure for utility-scale battery energy storage system (BESS) projects, typically a project SPE holds the battery system, offtake / ancillary-services contracts, and project-level debt; underlying CRE land is held under long-term ground lease.
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On utility-scale BESS development. Underlying CRE land typically on long-term ground lease; senior CRE lender on landowner's fee must consent to the BESS lease and execute a non-disturbance agreement. Separate from underlying CRE debt structurally; coordinate via intercreditor.
Best-efforts rate lock · Pricing & spreads: A rate-lock structure where the lender uses commercially reasonable efforts to lock the quoted rate but does not bind itself if market conditions move materially. Standard on agency and bank perm before commitment.
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Different from a true rate lock. Best-efforts means the lender tries to hold the rate but can reprice if Treasuries move beyond a defined band. The borrower bears the rate risk.
On a long closing (45+ days) in a volatile rate environment, best-efforts is meaningfully different from a hard early rate lock. Quantify the difference and weight it against rate-lock fees before choosing.
Bonus depreciation · Underwriting & metrics: Internal Revenue Code §168(k) allows immediate expensing of qualifying short-life property identified in a cost-segregation study. For qualified property acquired after January 19, 2025, the additional first-year deduction is 100% and does not phase down. Property acquired on or before January 19, 2025, and placed in service in 2026, remains at the prior 20% rate.
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Combined with cost segregation, bonus depreciation lets sponsors take a large first-year deduction against the property's depreciable basis. For qualified property acquired after January 19, 2025, the deduction is 100%. Property still on the prior phase-down is the case to test.
The lower the bonus percentage, the smaller the year-one investor distribution boost. Underwrite IRR sensitivity to the current bonus rate.
Branch profits tax · Loan structure: A 30% federal tax (or treaty-reduced rate) on a foreign corporation's effectively connected earnings and profits not reinvested in U.S. business assets. Designed to equalize the tax burden between foreign-corp branches and U.S.-corp subsidiaries.
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When a foreign corporation owns U.S. CRE directly through a branch, repatriated earnings are subject to BPT in addition to regular U.S. corporate tax. The combined rate can exceed 50%.
Foreign-corp investors typically avoid direct ownership of U.S. CRE because of the BPT layer. REIT-blocker or U.S.-LLC pass-through structures are the standard alternatives.
Break-even yield · Underwriting & metrics: The highest capitalization rate at which a sale or refinance still repays the loan. If market cap rates rise above that level, proceeds fall short. It is a refinance-risk ceiling. It is not the cap rate at which in-place NOI covers debt service. Coverage is a DSCR test.
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Break-even yield is the math-driven version of the worst-case cap rate. If your loan requires 8.5% to break even and the market is trading at 6.5%, you have 200 bps of cushion.
On bridge and value-add loans, lenders run the break-even yield against an assumed exit cap. Sponsors should run the same math before signing.
Breakeven occupancy · Underwriting & metrics: The occupancy level at which property NOI equals annual debt service, i.e. DSCR = 1.0x.
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A property with 92% physical occupancy and a breakeven of 78% has 14 points of cushion before debt service is at risk. Lenders and rating agencies look at the cushion as a key risk metric.
On lease-up deals (bridge, construction take-out), the trigger to refinance is often hitting a defined occupancy that delivers a defined breakeven cushion.
Bridge extension option · Loan structure: A contractual right for the borrower to extend the bridge maturity by a defined period (typically 6 to 12 months) by paying an extension fee and meeting a performance test.
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Standard structure is two 6-month extensions at 25 to 50 bps fees, exercisable on 30 to 60 days notice, subject to no event of default plus a defined DSCR / occupancy performance test. Each extension also typically requires a fresh rate cap.
Performance gates should test the asset as it exists at the extension date, not against original underwriting. A DSCR test of 1.20x against projected stabilized NOI is a gate designed to fail. Negotiate to actual-not-projected language at term sheet.
Bridge interest reserve · Loan structure: A funded reserve held by a bridge lender to cover the gap between in-place property NOI and required debt service while the asset stabilizes.
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Sized as projected coupon (rate-cap strike + spread) times lease-up months times funded loan, less in-place NOI. Held in a lender-controlled account, drawn monthly to bridge the shortfall. Tighter rate-cap strike → smaller reserve; wider strike → larger reserve.
Most-negotiated reserve mechanic on a value-add bridge. Sponsors should fight to release unused reserve back to borrower once stabilized DSCR is achieved for 3+ consecutive months. Standard lender drafts trap the cash; sponsor-friendly drafts release it on a defined cure.
Bridge lender · Lender types: Any originator focused on short-term floating-rate transitional commercial debt, debt funds, mortgage REITs, money-center banks, regional banks, life-co alternative platforms.
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The 'bridge market' is not a lender type; it is an asset class served by many lender types. Debt funds dominate by share but compete with bank and life-co bridge platforms.
Different bridge lenders price the same deal very differently. Sponsor relationships, asset class focus, and cost of capital all drive variance.
Bridge loan · Loan structure: Short-term debt (typically 12 to 36 months, floating-rate) used to finance a property in transition, value-add, lease-up, or a time-sensitive acquisition.
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Replaced at stabilization by permanent financing or a sale. Bridge loans carry interest reserves, future-funding facilities for capex, and the SOFR rate cap requirement.
Bridge is the right tool when permanent debt won't size, yet. Wrong tool if the business plan can't deliver stabilization inside the loan term plus extensions.
Build-to-rent (BTR) · Construction & development: Purpose-built rental community real estate, single tax parcel, single owner, professional on-site management, full amenity package (pool, gym, clubhouse). Configurations include horizontal (detached/duplex), vertical (townhomes/midrise), or mixed.
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Agency eligibility can affect the financing options for a build-to-rent community. Confirm eligibility and compare actual proposals for the property.
When developing or acquiring a BTR community. Agency eligibility (single parcel, single owner, professional management, community amenity) opens the meaningful pricing arbitrage vs. SFR portfolio execution.
Build-to-suit (BTS) · Industrial: A new construction project built specifically for a single, identified end-user tenant under a long-term lease signed before construction starts.
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Common in industrial. The BTS structure removes lease-up risk, the tenant signs on closing, which makes BTS construction loans price tightly.
BTS deals require credit underwriting of the tenant, not just the asset. Tenant default during construction is the dominant risk.
Bulk distribution · Industrial: Industrial buildings designed for high-volume warehousing and distribution, large floor plates (typically 200,000+ SF), high clear heights, full dock-door coverage.
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The institutional industrial product. Bulk distribution near major freight corridors and ports trades at the tightest cap rates in commercial real estate.
Bulk distribution leases run long (often 7 to 10+ years) with credit tenants. Lenders compete hard for these deals.

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California AB 2011 · Process & docs: California AB 2011 (Affordable Housing and High Road Jobs Act of 2022), provides by-right approval for office, retail, and parking conversions to residential in commercial corridors statewide, subject to labor and affordability requirements.
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By-right entitlement (no zoning variance, no public hearing, no discretionary review) materially reduces entitlement-timeline risk, which expands lender appetite for California office-to-residential conversions. Most active in LA and SF but applies statewide where commercial-corridor criteria are met.
On any California office, retail, or parking conversion to residential. The by-right pathway shortens the financing-readiness timeline by 6 to 12 months vs. discretionary entitlement. Bank and debt-fund construction available; agency multifamily perm at stabilization.
California FAIR Plan (commercial) · Underwriting & metrics: California's state-mandated residual property insurance pool covering commercial assets the admitted market declines. Named-peril only (fire, lightning, smoke, internal explosion); per-location commercial limits capped well below most CRE replacement values.
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Lenders accept FAIR Plan as a base layer only, a difference-in-conditions (DIC) policy from a specialty market is required on top to broaden coverage to all-risk and to extend limits to full replacement cost. Mortgagee clause attaches to both policies.
On every California CRE asset in or near a wildland-urban interface (WUI) zone where the admitted market has declined coverage. Counsel review of both forms is prudent before closing.
CAM (common area maintenance) · Retail: The shared cost of maintaining common areas in a multi-tenant property, landscaping, parking, snow removal, security, lighting, recovered from tenants pro rata.
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On NNN leases, CAM is a tenant cost passed through 100%. On modified gross or capped leases, the landlord absorbs CAM above the cap.
CAM reconciliation disputes are constant. Underwriting CAM recoveries, not gross CAM, gives a cleaner read on net economics.
Cap rate (capitalization rate) · Underwriting & metrics: Net Operating Income divided by purchase price (or current value), expressed as a percentage. A $1M NOI on a $20M property is a 5.0% cap rate.
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A capitalization rate relates net operating income to value. The dollar effect of a change depends on both the income and the starting capitalization rate.
Cap rate is the single most-quoted CRE metric, and the most easily abused. Whose NOI? Whose comps? In whose market?
Capital stack · Loan structure: The full set of debt and equity tranches funding a deal, ordered from most senior (first to be paid) to most subordinate (last to be paid).
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Assess the entire financing plan, including the senior loan, any additional permitted debt and the sponsor contribution. Each source changes the project’s obligations and repayment needs.
Cash management agreement · Loan structure: The agreement among borrower, lender, property manager, and depository bank that governs how property cash flows through the lockbox and waterfall.
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Defines the order in which cash pays debt service, taxes, insurance, reserves, operating expenses, and (last) borrower distributions. The waterfall is non-negotiable once a trigger event is in effect.
When DSCR drops below the cash-trap threshold, distributions stop. The cash-management agreement is the document governing whose pocket the cash flow lands in.
Cash trap (cash sweep) · Loan structure: A loan covenant that automatically captures and holds excess cash flow in a lender-controlled account if a defined DSCR or debt-yield threshold is breached. Cash is held until the metric recovers for a specified number of consecutive quarters.
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When the property underperforms a defined trigger, the lender stops distributions to the sponsor and traps the excess in a reserve account. The cash is still the borrower's, but it can't leave until performance recovers.
Negotiating the trigger threshold (1.10x DSCR vs. 1.20x), the cure mechanic (one quarter vs. four consecutive), and how trapped cash is released has direct equity-distribution consequences.
Cash-on-cash yield · Underwriting & metrics: Annual pre-tax cash distribution to equity divided by total cash equity invested. The leveraged equity-side yield metric most sponsors track at the deal level.
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If you invested $5M of equity and the deal distributes $400,000 in year one, your cash-on-cash is 8.0%. Different from IRR (which includes time value and exit) and from cap rate (which is unlevered).
Refinance optimization decisions hinge on cash-on-cash. Pulling equity at refi raises CoC on the remaining basis but may compress DSCR, track both before and after the refinance.
Cash-out refinance · Loan structure: A CRE refinance where new loan proceeds exceed the existing loan balance plus closing costs, returning the difference to the sponsor as cash. Subject to lender LTV, DSCR, and seasoning tests.
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Cash-out is the structural alternative to a sale. Pull equity out at the refi, keep the asset, and continue the hold. Tax-efficient compared to a taxable sale.
Most lenders require 12 to 24 months of seasoning before allowing meaningful cash-out. Agency programs cap cash-out at LTV thresholds (typically 75% for refinance) and impose minimum DSCR/debt-yield gates.
Certainty of close · Process & docs: The lender's track record of actually funding the loan it quoted, on the terms it quoted, by the date it committed to. The non-price dimension of a competitive bake-off.
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Two lenders quoting the same all-in rate are not equivalent. The lender that has closed five deals just like yours in the last 12 months is not the same as the lender that hasn't.
On time-sensitive closings (1031 deadlines, hard PSA dates, maturity walls), certainty of close can be worth 25 bps of spread. Weight it explicitly when picking a winner from the bake-off.
CFIUS real estate jurisdiction · Process & docs: Treasury's Committee on Foreign Investment in the United States has jurisdiction over foreign acquisitions of U.S. real estate located in proximity to specified military, intelligence, or critical-infrastructure sites.
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If the property sits near a covered installation (airport, port, base), CFIUS may require a mandatory or voluntary filing. CFIUS can block, condition, or unwind the transaction.
Pre-LOI: check the property address against the FIRRMA covered-real-estate list. Some lenders condition closing on a CFIUS no-action letter for foreign-controlled buyers near sensitive sites.
Chicago LaSalle Street Reactivation · Loan structure: City of Chicago / Department of Planning and Development initiative providing TIF participation, gap financing, and city-funded support for office-to-residential conversions on LaSalle Street and adjacent downtown blocks.
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Used in combination with Illinois Housing Development Authority (IHDA) participation on the affordable set-aside. The city's gap-financing layer materially improves the economics on heavier-conversion buildings that wouldn't pencil on a pure-private capital stack.
On LaSalle Street and adjacent downtown Chicago office buildings being converted to residential. Application coordinates with TIF eligibility, affordability set-aside, and senior construction lender close. City program staff are the routing point.
CHIPS Act incentive · Loan structure: U.S. Department of Commerce / NIST-administered funding for qualifying semiconductor manufacturing, R&D, and supply-chain projects under the CHIPS and Science Act, awarded via Notice of Funding Opportunities (NOFO).
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Awards are typically large (hundreds of millions to several billion per project) following extensive application and merit review. Sponsor-side timing: NOFO response, merit review, and award negotiation typically 9 to 18 months. Award funding flows to construction milestones; combines with IRA Section 45X / 48C credits and state incentives.
On semiconductor manufacturing and supply-chain reshoring projects. Stack with IRA tax credits, state job-creation grants, and senior CRE construction debt. Application strategy requires specialized federal-grants counsel coordinated with project-finance counsel.
Clawback (CRE JV) · Loan structure: A JV provision requiring the GP to return previously distributed promote dollars if the LPs' final returns fall below the agreed preferred return or hurdle thresholds. Most common in American (deal-by-deal) waterfalls.
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Without clawback, an early-good, late-bad portfolio could overpay GP promote based on the early winners. Clawback is the institutional check that trues up the lifetime split.
Clawback is one of the most negotiated LP-protection terms. GP-friendly variations cap clawback at after-tax distributions; LP-friendly variations require gross repayment with interest.
Clear height · Industrial: The vertical height inside an industrial building from finished floor to the lowest overhead obstruction (typically the bottom of joists).
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Modern bulk distribution buildings target 36' clear; 32' is functional; 28' is older-generation. Clear height drives racking density, automation feasibility, and rent.
Clear height under 30' significantly limits the tenant pool. Lenders price for the rentable, leasable use case, not the gross square footage.
Closing · Process & docs: The day funds wire, deeds record, and the loan funds. Marks the legal transfer of ownership and the start of debt service.
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The closing checklist is dozens of items long, final lien releases, organizational documents, opinion letters, insurance certificates, payoff letters, settlement statement.
Closing delays are usually death by a thousand cuts: one missing estoppel, one survey revision, one wire instruction. Pre-close runs catch most of them.
Closing checklist · Process & docs: The lender-issued list of documents, reports, and conditions the borrower must satisfy before the loan funds. Typically 60 to 120 line items spanning third-party reports, entity diligence, title, insurance, and reserve setup.
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The checklist is the path from commitment to wire. Each line is owned by one party (borrower, lender's counsel, title, third party) and tracked through closing.
On a 45-day closing, every business day matters. A weekly checklist call run by the placement firm is the standard mechanism for keeping the deal on schedule and surfacing slippage before it becomes a delay.
CMBS (commercial mortgage-backed securities) · Lender types: Commercial mortgages pooled together and sold to investors as fixed-income bonds. The borrower's day-to-day relationship is with a master servicer, not the original lender.
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Strong execution for non-recourse fixed-rate debt on retail, office, industrial, and hospitality. Standardized documents, defeasance prepayment, special-servicer involvement at workout.
CMBS clears at scale, usually $5M to $200M+, when other lenders can't match leverage or non-recourse. The trade-off is rigid documents and rigid servicing.
Co-tenancy clause · Retail: A lease provision allowing an in-line tenant to reduce rent or terminate the lease if a defined anchor or percentage of co-tenants leaves the center.
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Co-tenancy is the contractual response to anchor loss. Typical remedies escalate from rent reductions to alternative rent (% of sales) to termination.
Anchor losses often cascade through the in-line rent roll via co-tenancy. Lenders read co-tenancy clauses carefully on every retail deal.
Cold shell · Industrial: A data center building delivered with the structural shell only, without utility power, substation, or mechanical infrastructure. The lowest level of pre-completion delivery in the data center development hierarchy.
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Cold shell is the early-stage delivery state where the building exists but the systems do not. Worked example: a 200,000 SF cold-shell delivery on a 50 MW planned facility might be complete within 12 to 18 months of groundbreaking at a cost of roughly $2M to $3M per planned MW, but the building has no operational value until the substation energizes and the powered-shell milestone is reached.
Most data center construction loans contemplate a powered-shell or fitted milestone rather than a cold-shell milestone, the cold-shell state has limited value to a hyperscale tenant. Lenders rarely fund speculative cold-shell projects.
Cold storage · Industrial: Industrial buildings equipped with refrigerated and frozen storage capacity, typically operating between -20°F and 40°F across multiple temperature zones.
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A specialty industrial subtype. Construction cost runs 2 to 4x conventional warehouse; demand has been driven by online grocery and pharmaceutical logistics.
Cold storage requires specialty lenders. Conventional industrial lenders often won't underwrite the refrigeration systems or the higher operating costs.
Comfort letter · Hospitality: A letter from a hotel franchisor to the lender allowing the lender, on borrower default, to cure under the franchise agreement and continue operating under the brand.
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Without a comfort letter, the franchise terminates on default and the lender takes title to a hotel without a flag, a meaningful value impairment.
Almost every hotel financing requires a comfort letter. Negotiating it adds time at closing.
Commitment letter · Process & docs: A binding agreement from the lender to make the loan on defined terms, subject to closing conditions and final documentation.
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Sits between term sheet and closing. Once issued, the lender is on the hook subject to the closing conditions; the borrower is on the hook for any contracted rate-lock costs.
Some lenders rate-lock at commitment. The commitment letter is when a quote becomes a contract.
Comp set (competitive set) · Hospitality: The defined group of competing hotels used to benchmark a property's RevPAR, ADR, and occupancy performance. Tracked through industry benchmarking reports.
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Comp set selection is part art, part contract: the set is defined when the hotel signs up with STR and rarely changes. Comp set composition affects what 'winning' looks like.
Lenders look at RevPAR Index (subject RevPAR / comp set RevPAR). An index above 100 means winning share; below 100 means losing share.
Completion guaranty · Construction & development: A non-recourse-exception guaranty under which the guarantor agrees to fund cost overruns to deliver a construction project per plans. Burns off at substantial completion against the lien-free completion certificate.
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Even on a non-recourse construction loan, the completion guaranty puts the guarantor on the hook to finish the project. If costs overrun and contingency is exhausted, the guarantor funds the overrun.
Burn-off mechanics matter more than the existence of the guaranty. Tighten the substantial-completion definition; require the burn-off to occur automatically upon meeting the trigger.
Conduit (conduit CMBS) · Lender types: The traditional multi-borrower CMBS execution, in which 30 to 60 loans from various sponsors are pooled into a single bond issuance.
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Most $5 to $50M CMBS loans go into conduit deals. Pricing is somewhat standardized; the originator's individual rate sheet matters less than the broader market.
CMBS execution depends on the lender, the proposed securitization and market conditions. Confirm the funding and rate-setting terms for the actual loan.
Construction loan · Construction & development: A floating-rate loan funding ground-up development or major rehabilitation, drawn down over the construction period and repaid at stabilization or refinance.
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Carries a completion guaranty, cost-overrun guaranty, and interest reserve. Sized at LTC (typically 55 to 65%) constrained by the stabilized-LTV take-out test.
Construction is the highest-risk lending in CRE. Recourse, draw mechanics, and lender flexibility through construction matter as much as headline pricing.
Construction-to-permanent loan · Construction & development: A facility that converts from construction debt into long-term permanent debt at stabilization, eliminating the cost and rate-environment risk of a separate refinance.
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Common in HUD 221(d)(4), some life-co and bank platforms. The borrower locks the perm rate at construction close, valuable in a rising-rate environment, expensive in a falling one.
C2P removes refinancing risk at the cost of paying for the perm rate today. Modeling the breakeven against forward rates is the deciding analysis.
Contingency reserve · Construction & development: A line item in a construction loan budget reserved to absorb cost overruns. Typically 5% to 10% of hard costs depending on project complexity, GC track record, and site conditions.
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Contingency is the first absorber of change orders. Once it's exhausted, the sponsor has to fund overruns with new equity (the balancing test). Burning contingency faster than the build is a leading indicator of a budget problem.
Sponsor sizing of contingency is project-specific: 5% for ground-up multifamily with experienced GCs; 10%+ for adaptive reuse and complex sites. Lender minimums are typically 5% of hard costs.
Continuation vehicle (CV) · Lender types: A new fund structure that acquires one or more assets from an existing private fund, allowing the GP to continue managing the assets past the original fund's end-of-life. Existing LPs choose to roll into the CV or take a cash exit.
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CVs are the dominant GP-led secondary structure. Pricing is set by the bid of the secondary buyer; the GP often rolls 100% of crystallized promote into the CV alongside new equity from secondary investors.
CVs typically need fund-level financing, either a NAV facility or a CV-specific subscription line. Bridge financing covers the gap between CV launch and full secondary investor pay-in.
Continuing-care retirement community (CCRC) · Agency programs: A mixed-acuity senior-housing campus combining IL, AL, MC, and SNF on a single campus, typically with entrance-fee pricing models and a continuum-of-care guarantee.
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CCRCs let residents age in place across acuity levels under one campus contract. Financing combines tax-exempt bond financing, initial entrance-fee receipts, and residual loan facilities, materially different mechanics than single-acuity senior housing.
When financing or refinancing a CCRC. The lender options is a small group of bond underwriters and tax-exempt-finance specialty lenders. Actuarial review of resident contract obligations is the sponsor-side gating step.
Contract for deed (CRE) · Loan structure: An installment-sale contract on commercial real estate: the buyer takes possession and pays installments over a defined term while the seller retains legal title until completion.
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State-law variance is material, some states (Minnesota, Iowa, Wisconsin, Texas) have well-developed buyer-protection statutes; others treat the contract as functionally a mortgage requiring full judicial foreclosure on default. Senior lender consent typically required where seller has existing debt.
Use cases that work: free-and-clear properties without senior debt, small-balance commercial deals, quasi-distressed sales. Most large commercial transactions don't use contract-for-deed because of senior-consent and state-law variability. Counsel-led process; not legal or tax advice.
Controlling class · Workout & default: In CMBS, the most-subordinate bond class still bearing economic loss. Controlling-class certificateholders direct workout decisions through the special servicer.
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When losses on the loan eat through the bottom of the bond stack, control shifts up the stack. Sponsors who know who controls the bond can negotiate accordingly.
Controlling-class identities and investment positions drive workout outcomes. The same loan looks different to a hold-to-maturity investor than to a short-position trader.
Conversion feasibility floor-plate · Underwriting & metrics: The depth from window line to building core that drives whether an office building can be converted to residential at reasonable cost, sub-40-foot depths are strong-conversion candidates; over 60 feet usually drives the deal to demolish-and-rebuild.
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Residential apartments require exterior windows. Floor plates with depth greater than 35 to 40 feet from window to core require interior light wells, atria, or unit configurations that don't reach the core. Sub-40-foot depths are strong; 40 to 60 feet are moderate; 60+ feet are typically uneconomic.
Pre-acquisition feasibility study should map floor-plate depth, plumbing-stack count and locations, elevator counts, window operability, and HVAC zoning. Marginal feasibility profiles drive lender pricing wider, advance rate lower, and may require additional sponsor recourse.
Conversion incentive stack · Loan structure: The combined federal, state, city, and historic incentive layers used to finance an adaptive-reuse conversion, typically tax abatement (NYC 467-m, DC, Chicago) + federal historic tax credits + senior construction debt + sponsor and tax-credit equity.
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Each layer has its own application, certification, and timing window, NPS Part 1/2/3 for historic credits, city tax-abatement application before construction permit, tax-credit equity LOI before construction close, senior debt closing aligned with construction start.
On every multi-incentive conversion. Sequencing the closings to avoid timing gaps is the project-management discipline that determines whether the abatement and credit dollars actually land in the capital stack, or land six months late.
Cost segregation study · Underwriting & metrics: An engineering-based study that re-classifies portions of building basis into shorter-lived asset categories (5-, 7-, and 15-year) to accelerate depreciation deductions in the early ownership years.
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On a typical multifamily acquisition, 20% to 30% of the depreciable basis can be reclassified into shorter-lived categories. The accelerated deduction reduces taxable income early in the hold, increasing after-tax cash-on-cash returns.
Cost-seg accelerates depreciation but does not change loan sizing, DSCR is calculated from NOI, which excludes depreciation. The benefit is investor-distribution timing, not bank underwriting.
Cost-overrun guaranty · Construction & development: A construction-loan guaranty in which the principals personally fund any costs above the approved budget.
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Often paired with a completion guaranty. The cost-overrun piece is what bites in a contractor-default or commodity-spike scenario.
Construction lenders look at the guarantor's liquidity, not just net worth. Tied-up illiquid net worth doesn't satisfy a cost-overrun call.
CRE CLO (commercial real estate collateralized loan obligation) · Lender types: A securitization of floating-rate transitional commercial loans (mostly bridge), funded primarily by debt-fund originators.
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The bridge market's CMBS analog. Originators warehouse loans on a balance sheet, then securitize into a CRE CLO when the pool is large enough.
When CRE CLO bond spreads widen, bridge spreads widen the next week. Watching the CLO market is watching the bridge market.
CRE rehab budget · Construction & development: The line-item budget for the renovation / repositioning capex on a value-add CRE deal, hard costs, soft costs, and a contingency reserve, sized against either a GC bid or a sponsor-controlled GC's in-house budget.
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Hard costs (interior unit renovation, common area, exterior, life safety, MEP), soft costs (architect, permits, third-party reports, lender legal), and 5% to 10% contingency on cosmetic value-add or 10% to 15% on heavier repositioning. Funded into a lender-controlled rehab reserve drawn against completed work via inspection.
The LTC test caps total bridge proceeds at 70% to 80% of as-is purchase plus rehab budget. Bidding the rehab budget too tight strands capital; budgeting it too loose pushes the deal over LTC. Third-party PCA + GC bid + sponsor track record on comparable rehabs is the evidence stack lenders demand.
Credit committee · Process & docs: The internal lender body that approves a CRE loan request after the deal team has underwritten it. The decision-making layer between term sheet (indicative) and commitment letter (binding).
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Credit committee is where deals die or get repriced. Most major lenders convene credit committee weekly. Strong sponsor packaging shortens the time to committee and reduces last-minute conditions.
Track scheduled credit committee dates against the deal calendar. A deal that misses committee by one day loses a week. Submit packages early enough to make the calendar.
Credit memo · Process & docs: The lender's internal write-up of the loan, borrower, property, market, structure, risks, mitigants, used to obtain credit committee approval.
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Borrowers rarely see the credit memo, but it controls whether the loan happens. Originators write it; credit officers grade it.
Originators who push back on borrower-supplied data are catching what the credit memo will eventually flag. Better to fix it at term sheet than at committee.
Credit spread · Pricing & spreads: The portion of the loan spread that reflects credit risk, separate from the lender's funding cost and target margin.
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When the corporate bond market widens, lenders price wider too, even on the same building, with the same DSCR. That movement is the credit spread component.
In a market sell-off, every quote on your desk gets wider in the same week. The deal didn't change; the credit spread did.
Credit union (commercial) · Lender types: Member-owned non-profit financial cooperatives that originate commercial real estate loans for member borrowers, typically capped at 12.25% of assets in CRE.
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Active on small-balance loans (often $1M to $10M) with a relationship orientation. Pricing competitive with regional banks; concentration limits often the binding constraint.
Credit unions can compete hard on multifamily and owner-user product when their CRE bucket has room. Watch the bucket.
Credit-tenant lease (CTL) · Loan structure: A perm financing structure where the lender underwrites primarily on the credit of a single investment-grade tenant under a long-term triple-net lease. Common in data centers leased to hyperscale tenants and in net-lease industrial.
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CTL is the cheapest cost of capital available for a single-tenant investment-grade data center but caps proceeds at lease-driven sizing (typically 50% to 60% LTV). Sponsors maximizing leverage route to CMBS or higher-leverage debt-fund perm.
Critical IT load · Industrial: The portion of total IT load that requires UPS-backed and generator-backed power to maintain operations through utility disruptions. Distinct from non-critical load (lighting, office, ancillary systems).
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Critical IT load drives the sizing of the UPS, the generator backup, the battery system, and the redundant electrical paths. Worked example: a facility marketed as 50 MW typically means 50 MW critical IT load. Under N+1 redundancy, that requires roughly 4 generator strings of 14 MW each (3 needed plus 1 spare). Under 2N redundancy, it requires two fully duplicated 50 MW paths, which roughly doubles electrical infrastructure capex per MW.
Lender underwriting and tenant lease pricing both reference critical IT load, not gross facility consumption. The redundancy posture (N+1 vs. 2N) materially affects construction cost per MW critical and is a tenant-driven specification.
Cross-collateralization · Loan structure: A loan structure in which two or more properties secure a single loan or pool of loans, so a default on one triggers remedies against all.
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Common in portfolio loans and bank credit facilities. The lender's collateral expands; the borrower's release flexibility shrinks.
Selling one asset out of a cross-collateralized pool requires a release price and (often) coverage tests on the remaining pool. Plan releases at origination.
Cross-default · Loan structure: A provision that triggers default on one loan when the borrower or its affiliate defaults on another.
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A garden-variety bank credit facility may cross-default to every other loan from that bank to the same borrower. CMBS and life-co loans almost never cross-default to outside paper.
Banks use cross-default to enforce relationship discipline. A single asset's stumble can take down the entire portfolio's financing if cross-default is wired in.
Cure period · Workout & default: The defined period after a default during which the borrower (or, under an ICA, the mezz lender) can cure the default and avoid acceleration.
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Monetary defaults often have a 5- or 10-day cure; covenant defaults often have 30 days. Cure periods that lapse without action are deeply expensive.
Mezz lenders' cure rights under the ICA are time-limited. Senior and mezz both run the same clock, but only one can cure first.

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Dark store · Underwriting & metrics: A net-lease tenant that vacates the property during the lease term while continuing to pay rent. Replacement-tenant economics may be far below the in-place rent, creating re-tenanting risk for the lender.
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Dark-store risk is the inverse of tenant default: the rent keeps coming in, but the building is empty. Lenders model the cost to re-tenant, TI/LC, downtime, rent reset, into LTV and stress DSCR. Drug-store and large-format big-box categories trade wider on dark-store concerns.
Most acutely on single-tenant net-lease and CTL financings where the lease is the entire credit story. Multi-tenant and shopping-center properties have natural diversification that reduces dark-store risk per asset.
Davis-Bacon prevailing wage · Construction & development: The federal prevailing wage law that attaches to construction projects funded with federal money, most commonly HUD-insured construction loans (Section 221(d)(4)) and projects with LIHTC, HOME, or CDBG funding. Adds 10% to 25% to hard costs in open-shop markets.
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Davis-Bacon requires construction workers to be paid the prevailing local wage for their trade, plus weekly certified payrolls submitted to the DOL. In union markets, the cost premium is small; in open-shop markets, it can be 15% to 25%.
Include the prevailing-wage premium in the underwritten cost basis at term-sheet stage on any HUD-insured deal or any deal with federal soft money. Pro formas that don't adjust for prevailing wage are 10% to 25% under-budgeted on labor.
Debt fund · Lender types: A private credit fund that originates floating-rate commercial mortgages, primarily bridge and transitional product.
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Funded by institutional LPs (pensions, endowments, sovereigns) and (often) levered through warehouses and CRE CLOs. Quick decisions, flexible structure, higher pricing than banks.
Debt funds dominate bridge in markets where banks have pulled back. Fund-life dynamics, capital deployment pressure, vintage discipline, drive pricing as much as deal quality.
Debt yield · Underwriting & metrics: NOI divided by loan amount, expressed as a percentage. It does not use the interest rate, amortization, or appraised value.
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Debt yield strips out the variables that affect LTV (cap rate sentiment) and DSCR (rate environment). It asks the simplest question: how much pure operating cash flow does the property produce per dollar of loan?
Critical on hotels (typical 11% to 13% floor on stabilized; 13%+ on transitional), CMBS deals broadly, and any operating-real-estate underwrite. Often the binding constraint on hotel sizing.
Deed in lieu of foreclosure · Workout & default: A consensual transfer of the property from borrower to lender in satisfaction of the debt, avoiding the cost and time of foreclosure.
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Common when the property is meaningfully underwater and the borrower accepts that there will be no equity recovery. Requires lender consent and (usually) sponsor cooperation on transition.
DIL avoids the foreclosure record and (in some states) accelerates the lender's takeover. Tax consequences for the borrower can be significant.
Default · Workout & default: A failure by the borrower to perform under the loan documents, most commonly missing a payment (monetary default), but also covenant violations and other technical defaults.
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Loans cure most defaults inside the cure period. Defaults that aren't cured trigger acceleration, foreclosure rights, and (on CMBS) transfer to special servicing.
Even a technical default can trigger lockbox activation, fee acceleration, and reputational harm with the lender. Treat the cure period as a hard deadline.
Defeasance · Loan structure: A prepayment mechanism used almost exclusively in CMBS. The borrower replaces the property as collateral with a portfolio of Treasury securities sized to make all remaining loan payments.
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Mechanically complex (requires a defeasance consultant, accountant, attorney, and a successor borrower). Cost depends on the spread between the loan coupon and current Treasury yields.
Defeasance can run 10%+ of the loan balance early in a CMBS fixed-rate term. Time the sale around the open-prepay window if possible.
Defeasance cost · Loan structure: The cost to substitute U.S. Treasury securities for the property as collateral on a CMBS loan, allowing the borrower to release the lien and prepay or sell. Driven by the spread between loan rate and current Treasury yields.
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On a CMBS loan, you don't just pay a fee, you buy a Treasury portfolio that replicates the loan's remaining cash flows and pledge it to the trust. The cost can be 0% to 20%+ of loan balance depending on rate environment and remaining term.
Defeasance is path-dependent and time-sensitive. A defeasance estimate good Tuesday can be 200 bps different on Friday. Run the calculation close to the actual prepay date.
Delaware Statutory Trust (DST) · Loan structure: A statutory trust structure that holds title to real estate and issues fractional beneficial interests, qualifying as like-kind property for 1031 exchanges per IRS Revenue Ruling 2004-86.
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DSTs let 1031 sponsors place exchange equity into a fractional interest in a larger institutional asset. The DST sponsor places debt at the entity level; the 1031 investor's share of that debt counts toward the investor's debt-replacement requirement.
When a 1031 investor needs a passive replacement option without underwriting and managing a single property. DST debt is typically 50% to 60% LTV, 7 to 10 yr fixed, non-recourse to the investor. Coordinate with QI and securities counsel before identifying any specific DST.
Depreciation recapture · Loan structure: On the sale of depreciable real property, the portion of gain attributable to prior depreciation is taxed at a maximum 25% federal rate (unrecaptured §1250 gain) rather than the lower long-term capital-gains rate.
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Aggressive cost segregation increases recapture exposure at sale because more basis was depreciated. A cash-out refinance does not trigger recapture; only a sale does.
When deciding between a 1031 exchange and a taxable sale, model the recapture component separately. Recapture deferral via §1031 is often more valuable than the capital-gains deferral.
Difference-in-conditions (DIC) policy · Underwriting & metrics: A specialty-market policy that broadens narrowly written underlying coverage (such as a FAIR Plan named-peril policy) to all-risk and extends limits to full replacement cost, including business interruption, ordinance / law, and other coverages the underlying form excludes.
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Standard pairing with a residual-market base policy. Loss settlement on a covered claim is split between the two policies per the policy language; counsel review of both forms is prudent before closing on a residual-market-fronted asset.
On every California FAIR Plan, NY NYPIUA, and similar residual-market base placement. Mortgagee clause attaches to both the base policy and the DIC layer, frequent closing-checklist failure point.
Discount margin · Pricing & spreads: The spread over the floating-rate index that prices a floating-rate bond or loan to par.
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On a CRE CLO bond, the discount margin is the trader's number for spread. It is the bond-market analog to loan spread.
Bridge spreads track CRE CLO discount margins closely. When CLO bonds widen, bridge quotes widen the next week.
Discounted payoff (DPO) · Workout & default: A consensual loan resolution in which the lender accepts less than the full outstanding balance in exchange for a payoff and release.
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The lender takes a known loss now to avoid an unknown loss through a long workout. Borrowers typically need fresh capital to fund the DPO.
DPO is back on the menu in 2024 to 2025 as the maturity wall hits. Negotiation hinges on credible foreclosure cost vs. DPO size.
Distribution waterfall · Loan structure: The contractual ordering of cash distributions in a CRE joint venture. Typical layers: return of LP capital, LP preferred return, GP catch-up (sometimes), and tiered promote splits above each IRR hurdle.
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The waterfall is the rulebook for who gets paid first, second, third, and so on. Each tier has a hurdle (a return threshold) that must be cleared before the next tier begins paying.
American (deal-by-deal) waterfalls pay promote on each asset; European (whole-fund) waterfalls require all LP capital to be returned across the fund first. The choice affects the sponsor's mid-life cash flow materially.
Dock doors · Industrial: The truck-height loading bays on an industrial building. Ratio of dock doors to square footage drives leasability for distribution use.
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A modern bulk distribution building has roughly 1 dock door per 5,000 to 10,000 SF. Last-mile delivery centers can need much higher ratios.
Insufficient dock doors limits the deal to small-tenant uses. Adding dock doors during retrofit is expensive and not always feasible.
DOE Loan Programs Office (LPO) · Lender types: U.S. Department of Energy office that administers loan and loan-guarantee programs for qualifying advanced-manufacturing and innovative-energy projects, including the Advanced Technology Vehicles Manufacturing (ATVM) program and the Title XVII Innovative Energy Loan Guarantee program.
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Sponsor-side process is multi-stage (pre-application engagement, formal application, conditional commitment, financial close) and resource-intensive. Used for EV battery manufacturing, advanced energy projects, and qualifying innovative-technology facilities. Layers with senior CRE construction debt on the real-estate-improvement portion.
On large EV battery, advanced manufacturing, and innovative-energy projects where DOE LPO eligibility is plausible. Engage project-finance counsel before initial DOE LPO engagement, not after: application strategy and intercreditor structuring with senior CRE debt require specialized counsel. Not program-eligibility advice.
DSCR (debt service coverage ratio) · Underwriting & metrics: Net Operating Income divided by annual debt service. A 1.25x DSCR means NOI is 1.25x the loan payment.
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Most stabilized lenders require 1.20x to 1.30x; hospitality and other volatile cash-flow assets require 1.40x or more. DSCR is one of three standard sizing tests, alongside loan-to-value and debt yield. The lowest of the three sets proceeds.
When rates rise, DSCR-constrained loans size down, even if LTV would support more. The constant goes up, the NOI doesn't.
Due diligence · Process & docs: The buyer's investigation period under a purchase contract, title, survey, environmental, leases, financials, zoning, and physical inspection.
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Typically 30 to 60 days for institutional deals; longer for complex assets. The buyer's earnest-money deposit goes hard at the end of DD unless extended.
Lender diligence runs in parallel with buyer DD. Coordinating the two, and the seller's response time, is the broker's job.
DUS (Delegated Underwriting and Servicing) · Agency programs: Fannie Mae's primary multifamily lending program, in which approved DUS lenders underwrite, close, and service loans on Fannie's behalf within defined credit parameters.
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Known for speed and execution certainty. DUS lenders take a piece of the loss on each loan, which aligns interests and tightens credit discipline.
DUS lenders compete on more than rate, process, certainty, supplemental capacity, and asset-class expertise all matter.

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Economic occupancy · Underwriting & metrics: Total rent actually collected divided by total potential gross rent if the property were fully leased at market. Captures concessions, free rent, and bad debt that physical occupancy misses.
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A 95% physically occupied building giving 2 months free can have 88% economic occupancy. The lender's NOI is built off the economic number.
Lease-up assumptions in any pro forma should be expressed in economic terms. Anything else over-promises.
Effectively connected income (ECI) · Loan structure: Income that a foreign person derives from the conduct of a U.S. trade or business. ECI is taxed on a net basis at graduated U.S. rates and reported on Form 1040-NR (individuals) or Form 1120-F (corporations).
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Active U.S. real-estate operations (developing, managing, leasing) typically produce ECI. Passive rental income can be elected to be treated as ECI under IRC §871(d) or §882(d) to obtain net-income treatment.
Without the §871(d) / §882(d) election, gross rental income is taxed at 30% with no deductions allowed. The election is usually beneficial and is made on the original return.
Environmental indemnity · Loan structure: A separate contract in which the borrower and key principals agree to indemnify the lender for any environmental contamination claims, regardless of fault.
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Survives loan payoff. Even after the loan is gone, the indemnity stays in effect, historic contamination from a prior owner can still come back to the borrower.
An environmental indemnity is one of the few documents whose liability genuinely outlives the deal. Phase I diligence is the front-line defense.
Estoppel certificate · Loan structure: A signed statement from a tenant confirming the key business terms of their lease, rent, term, options, defaults, for the benefit of a buyer or lender.
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Required at closing on almost every loan or sale. Catches mismatches between the rent roll and what the tenant believes the deal actually is.
Tenants who refuse to sign, or who sign with material exceptions, can blow up a closing. Estoppel collection is a routine but high-stakes diligence task.
Excess flood insurance · Underwriting & metrics: Private flood coverage stacked above NFIP base limits to reach full replacement cost on commercial property. Markets include London syndicates and specialty domestic and international carriers.
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NFIP commercial limits cap at $500K per building / $500K contents, well below most CRE replacement values. Excess flood typically $50M to $250M of coverage from specialty markets, has hardened materially in 2023 to 2026 per FEMA Risk Rating 2.0 cycle data.
Exclusivity period · Process & docs: A binding paragraph in a CRE loan term sheet or LOI requiring the borrower to stop shopping the deal to other lenders for a defined window, typically 30 to 60 days.
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Once you sign and pay the deposit, you have given that lender a window to underwrite the deal without competition. Walking away during the window forfeits the deposit and may trigger expense reimbursement.
A long exclusivity period (60+ days) on a soft deal is bad for the borrower because rates and the lender's appetite can both move during the window. Negotiate to 30 days where possible.
Exit cap rate · Pricing & spreads: The cap rate assumed at sale or refinance, used to convert a future-period NOI into a future-period value.
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Exit cap is a forecasting assumption, not an observation. Most underwriters add 25 to 75 bps to the going-in cap to be conservative, then test sensitivity.
Bridge lenders and value-add LPs sweat the exit cap because it drives the refinance test, and the equity multiple.
Exit fee · Pricing & spreads: A fee due to the lender at loan payoff, expressed as a percentage of the original loan amount or remaining balance.
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Common on bridge and debt fund loans (typically 0.5% to 1.0%). Some lenders waive the exit fee if the borrower brings the take-out loan to them.
Expense deposit · Process & docs: A non-refundable deposit paid by the borrower at term-sheet signing to fund lender-side third-party costs, legal, appraisal, environmental, engineering, incurred during underwriting.
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Different from the good-faith or rate-lock deposit. The expense deposit reimburses real out-of-pocket costs the lender's counsel and consultants are about to incur, whether or not the deal closes.
Expense deposits range from $25,000 on small bank loans to $250,000+ on large CMBS deals. Cap the legal and consultant spend in the term sheet so the deposit doesn't become an open checkbook.

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Fair-market-value (FMV) rent reset · Loan structure: A ground-lease rent reset tied to fair market land value as appraised at defined dates (often every 25 years on legacy 99-year ground leases). The hardest reset structure to finance: a single reset can multiply rent 3x to 10x on a long-dated lease where land value has appreciated materially.
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Lender treatment: leasehold mortgagees typically require either a maturity buffer well before the next FMV reset, an FMV cap or formula negotiated into the underlying lease, or a sizing reserve funded over the lease term to absorb the reset shock.
On every legacy bespoke ground lease (especially Manhattan and other major-city legacy ground leases). Modern ground leases avoid near-term FMV resets entirely, materially improving financeability.
Fannie Mae · Agency programs: Federal National Mortgage Association, a government-sponsored enterprise that is one of the largest sources of multifamily debt in the United States. Operates through approved DUS lenders.
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Fannie's multifamily program provides fixed- and floating-rate non-recourse debt on conventional, affordable, MAH, and seniors product. Standardized but flexible execution.
Fannie volume is governed by FHFA caps reset annually. For 2026 the cap is $88 billion. At least half of purchases must be mission-driven. Workforce housing loans that preserve affordability are excluded from the cap. Other mission-driven loans, including targeted affordable housing, count toward the cap. Green Rewards is a pricing and proceeds execution, not a cap exclusion.
Fee mortgage · Loan structure: A mortgage encumbering the underlying fee interest, distinct from a leasehold mortgage. On a ground-leased asset, the fee mortgagee's primary collateral is the ground-rent stream (effectively a credit-tenant lease against the operator) plus residual fee value.
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Fee mortgages and leasehold mortgages can coexist on the same property. The fee mortgage is subject to the leasehold-mortgagee protection package, fee-mortgagee foreclosure replaces the fee owner with a new fee owner but does not impair leasehold-mortgagee collateral.
On modern ground lease portfolios where the fee owner is an NYSE-traded ground-lease REIT and the operator is the financeable leasehold party. Inter-creditor confirmation typical at closing of either loan.
Fee simple · Loan structure: Outright ownership of the land and improvements, with no superior land lease.
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The default form of property ownership. Lenders generally prefer fee deals over leaseholds, fewer parties, simpler collateral, no third-party termination risk.
On any acquisition, identifying fee versus leasehold is the first underwriting question. The two trade at different cap rates and finance differently.
FEMA Risk Rating 2.0 · Underwriting & metrics: In plain English
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Many commercial properties in flood zones have phased into materially higher premiums under Risk Rating 2.0; legacy grandfathered properties may continue to step up for several years before reaching the full risk-rated premium. Lender escrow and DSCR sizing must model the forward premium curve.
On every NFIP-covered CRE renewal and acquisition. Lender sizing and operating-budget modeling needs to plan for annual premium increases through the full glide path.
FF&E reserve · Hospitality: An escrow funded out of hotel cash flow for furniture, fixtures, and equipment replacement, typically 4 to 5% of room revenue.
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Required by both the franchisor (under the franchise agreement) and the lender (under the loan documents). Funded monthly; spent on rolling capex.
Underfunding FF&E reserves leads to deferred maintenance, brand-standard violations, and PIP escalation. Lenders watch reserve balances as a leading indicator.
FHA 221(d)(4) · Construction & development: HUD's construction-to-permanent program for new construction or substantial rehab of multifamily. Non-recourse construction-to-permanent debt. Interest-only during construction, then up to 40 years of amortization. The rate is locked at initial endorsement. Principals still deliver the completion assurance and operating-deficit guaranty HUD requires.
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The longest, highest-leverage construction loan available to U.S. multifamily developers. Process is long (often 12 to 18 months) and document-heavy, but the take-out risk is gone before the first shovel.
When a developer values rate certainty and amortization more than speed, 221(d)(4) is unmatched. Speed-sensitive deals stay on bank construction.
FHA 223(a)(7) · Agency programs: HUD streamlined refinance program for existing FHA-insured multifamily loans. Reduces the rate, extends the term, or both.
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Faster and cheaper than a full 223(f) refinance. Eligible only for borrowers already inside the HUD ecosystem.
When a HUD borrower wants to capture lower rates, 223(a)(7) is the lowest-friction path. Often closes inside 60 days.
Financing memorandum · Process & docs: The packaged sponsor-side document that summarizes the property, sponsor, business plan, capital request, and credit story for prospective CRE lenders. Sometimes called a debt OM or financing OM.
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The financing memo is the lender-facing version of the deal story. Where the equity OM sells return, the debt memo proves credit, operating data, sponsor track record, and exit plan that supports the requested loan.
A strong memo accelerates the bake-off and reduces back-and-forth diligence requests. A thin memo invites lender skepticism and weak quotes.
FIRPTA · Loan structure: The Foreign Investment in Real Property Tax Act of 1980 imposes U.S. tax on a foreign person's gain from disposition of a U.S. real property interest (USRPI). The buyer must withhold 15% of gross sale proceeds at closing.
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Foreign sellers of U.S. real estate are taxed on gain at U.S. rates. The 15% withholding is a prepayment that gets credited or refunded against the actual tax liability filed via Form 1040-NR or 1120-F.
Lenders, title companies, and 1031 intermediaries need FIRPTA documentation in escrow. Foreign-investor LPs typically use REIT-blocker or domestically-controlled REIT structures to mitigate FIRPTA exposure.
First mortgage · Loan structure: The most senior secured debt on a property, with a first-position lien on the real estate.
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Almost all institutional CRE debt is first-mortgage debt. Subordinate debt (mezz, B-notes) sits behind the first.
First-mortgage holders control foreclosure and workouts. Everyone behind them is along for the ride unless the ICA gives them rights.
Fixed-rate loan · Pricing & spreads: A loan whose interest rate is set at closing and does not change for the life of the loan term.
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Most permanent CRE debt, life-co, CMBS, agency, is fixed-rate. The borrower trades flexibility for certainty of debt service.
Fixed-rate locks you out of falling rates without a prepayment penalty (yield maintenance or defeasance), so the prepay structure matters as much as the coupon.
Flag affiliation · Hospitality: A hotel's affiliation with a national brand through a franchise agreement. Drives both reservation revenue (loyalty program contribution typically 30% to 50% of bookings) and lender confidence.
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The flag is the brand on the door, and the loyalty system that drives nightly bookings. Top-tier flag-affiliated hotels finance tighter than independent or weak-flag hotels.
On every hotel underwrite. Construction lenders almost always require an executed franchise agreement and brand approval letter pre-closing. Flag changes during the loan term trigger PIP and re-underwriting.
Floating-rate loan · Pricing & spreads: A loan whose interest rate resets periodically (usually monthly) at a benchmark plus a fixed spread.
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Bridge loans, construction loans, and many bank loans are floating-rate. Debt service moves with the index, typically SOFR, between scheduled resets.
Floating exposes you to rate risk; the rate cap and the lender's reserve mechanics are how that risk gets bounded.
Forbearance · Workout & default: An agreement by the lender to refrain from enforcing default remedies for a defined period in exchange for borrower commitments.
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Forbearance is short-term breathing room, typically 60 to 180 days, while a sale, refinance, or modification is being arranged. Almost always paired with deposit, reserve, or reporting commitments.
Forbearance buys time but doesn't change the fundamental loan terms. Without a credible exit plan, it just delays the workout.
Force-placed insurance (CRE) · Workout & default: Lender-only single-interest property coverage placed by the lender when borrower-procured coverage lapses. Premiums commonly run 2x to 4x normal market and are added to the loan balance under loan-document covenants.
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Lapsed insurance is an event of default on every senior CRE loan. Force placement activates lockbox / cash-trap, default interest, and (in CMBS) potential transfer to special servicing. Remediation: bind borrower-procured coverage matching the loan-document insurance schedule and request lender removal of force-placed coverage.
Most often on properties experiencing operational distress where borrower lets the policy lapse. Counsel-led remediation prudent given default interest and special-servicing fees may continue accruing.
Foreclosure · Workout & default: The legal process by which a secured lender takes title to (or sells) the collateral after default.
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Judicial foreclosure (court-supervised) is slow but final; non-judicial foreclosure (under a deed of trust) is faster but more limited. State law varies dramatically.
Foreclosure timelines drive workout outcomes. In long-foreclosure states, lenders are more likely to negotiate; in fast-foreclosure states, less so.
Forward commitment · Construction & development: An agreement by a permanent lender (often agency) to fund a defined loan amount at a defined rate at a future date, typically the stabilization of a construction project.
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Used in LIHTC and some agency multifamily executions. The borrower pays a forward commitment fee and (sometimes) rate-lock cost to fix the take-out before stabilization.
Forward commitments derisk the take-out for the construction lender. Agency forwards have specific rules around when they can be issued and on what product.
Forward-starting swap · Pricing & spreads: An interest-rate swap that begins exchanging payments on a future date, typically aligned with a known refi closing date or open prepay window. Locks the fixed rate today for the future loan.
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Sponsor with a loan maturing in 9 months can lock today's swap rate for the new loan via a forward-starting swap. Eliminates the rate risk between today and the start date.
Useful for known refi dates or open prepay windows. Cost is the forward premium (typically 25 to 50 bps over spot in steep-curve environments). Risk: if the underlying loan doesn't close on the start date, unwind cost can be substantial.
Franchise agreement · Hospitality: The contract between a hotel owner and a brand franchisor governing brand use, royalty fees, marketing fees, and brand standards.
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20-year terms are standard. Royalties typically run 5 to 6% of room revenue plus 3 to 5% marketing/program fees. Comfort letters with the lender protect the brand at default.
Franchise agreement renewal is a critical event for any branded hotel. PIP, term, and economic terms all reset.
Freddie Mac · Agency programs: Federal Home Loan Mortgage Corporation, a government-sponsored enterprise and the second of the two major multifamily agencies. The Optigo program competes head-to-head with Fannie DUS.
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Freddie's K-Series securitization, former Small Balance Loan program (applications ended April 30, 2026; new loans are Conventional Small, generally $2 million to $10 million), and Targeted Affordable Housing executions cover the multifamily landscape.
Fannie Mae and Freddie Mac programs have different requirements and proposals. Compare applicable options for the property.
Fund finance borrowing base · Lender types: The pool of LP commitments (subscription line) or eligible portfolio assets (NAV facility) against which a fund-finance lender will advance. Each LP receives an advance-rate haircut based on credit quality.
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Top-tier institutional LPs (state pensions, sovereigns) get 90%-95% advance rates; smaller HNW LPs get 50%-70%. The weighted average drives the size of the facility.
Adding one large institutional LP can materially increase the fund's subscription-line capacity. Conversely, an LP-default event reduces the borrowing base and can trigger a borrowing-base deficiency call.

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Going-in cap rate · Pricing & spreads: The cap rate implied by the purchase price and current (in-place) NOI at closing.
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If you pay $25M for a property with $1.25M of in-place NOI, the going-in cap is 5.0%. It tells you what you bought before any business plan is executed.
Lenders compare your going-in cap to the exit cap they'd assume at refi. A wide gap (going-in tighter than exit) means more refi risk.
Good faith deposit · Process & docs: Refundable funds the borrower posts with the lender at term-sheet acceptance, used to fund the appraisal, environmental, and other third-party reports.
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Usually $25,000 to $100,000 depending on deal size. The unused portion comes back at closing or refund.
Sponsors who sign multiple term sheets to comparison-shop end up funding multiple deposits. Pick a horse before you write the check.
Good-news draw · Loan structure: A future advance under a CRE bridge or transitional loan that releases additional proceeds when the asset hits a defined leasing, NOI, or DSCR milestone after closing.
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The lender commits to a maximum loan at closing but funds only the initial advance. Additional proceeds (the earn-out / good-news portion) release later when occupancy, in-place rent, or trailing-3 NOI hits the trigger. Used heavily on value-add multifamily, office repositioning, hotel PIP, and lease-up.
Sponsors should negotiate the trigger threshold, the testing frequency, the cure mechanic if a trigger is missed, and split releases vs. full release at term sheet; these directly affect IRR because earn-out cash compounds from the day it funds.
GP catch-up provision · Loan structure: A waterfall feature that, after LPs receive their preferred return, pays the GP 100% (or a high percentage) of cash flow until the GP has received its target promote share, then reverts to the agreed LP/GP split.
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Without a catch-up, the GP only earns promote on cash above the LP preferred return. With a catch-up, the GP receives an accelerated promote payout that brings the cumulative distribution split up to the agreed promote percentage.
A 100% catch-up materially increases GP economics on deals that just clear the LP preferred return. LPs push for no-catch-up or partial catch-up structures; sponsors push for full catch-up.
GP commitment / GP co-invest · Lender types: The capital the general partner commits to its own fund, typically 1% to 5% of total fund size. Some GPs finance their commitment with personal recourse loans secured by the GP's interest in the fund.
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LPs require GP commitment as alignment. Lenders to GP commitments underwrite both the GP's personal balance sheet and the fund's distribution capacity.
Green financing · Agency programs: Agency programs (Fannie Green Rewards, Freddie Green Up/Green Advantage) that offer rate discounts and additional proceeds for properties achieving defined energy or water savings.
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The borrower commits to a retrofit (LED, low-flow, HVAC, controls) that delivers a defined percentage savings. Agency rewards range from 15 to 40 bps off the rate plus higher proceeds.
On many deals the green rate discount more than pays for the retrofit cost over the loan term. Worth running on every agency execution.
Green Rewards (and Green Up) · Agency programs: In plain English
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Convert a defined retrofit scope into NOI uplift and tighter pricing. Sponsor commits to completing the retrofit within 12 months of closing.
Most stabilized multifamily properties qualify with a credible retrofit scope. The audit cost is partially reimbursed by the agency; the proceeds and pricing benefit typically more than offsets the structural complexity.
Grocery-anchored retail · Retail: A shopping center anchored by a grocery store, typically the most resilient and lendable retail subtype.
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Grocery anchors deliver weekly, recession-resistant traffic. Lenders price grocery-anchored centers tighter than any other retail subtype.
Grocer brand quality matters. Centers anchored by the dominant regional and national grocers get tighter pricing than those with weaker operators. The anchor's lease term to maturity is the binding underwriting question.
Ground lease · Loan structure: A long-term lease (typically 50 to 99 years) of the underlying land, with the tenant owning the improvements and financing them separately.
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Common in urban infill, hotels, and assets where the landowner won't sell. The leasehold mortgage finances the improvements, and the ground lease itself acts as a senior obligation.
Lenders heavily scrutinize ground-lease language, cure rights, reset terms, mortgageability, before financing the leasehold. Bad ground-lease terms can kill an otherwise good deal.
Ground lease escalation · Loan structure: The contractual rent step on a ground lease, fixed percentage (e.g., 2.0% to 2.5% annually or 10% every five years), CPI-indexed (sometimes with a floor and cap), or tied to a defined formula. Modern ground leases typically use CPI-capped escalation.
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Lender stress assumptions vary by structure: fixed escalations modeled directly; CPI escalations stressed to the cap on maturity DSCR and to the floor on operating-period coverage; FMV resets modeled separately as discrete shocks.
On every leasehold financing, escalation structure drives forward DSCR and refinance-risk underwriting.
Guaranty · Loan structure: A contractual obligation by a third party (typically the loan principal) to satisfy the borrower's obligations if the borrower fails to perform.
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Construction loans and bank loans almost always carry a guaranty. CMBS and life-co loans use limited recourse guaranties confined to bad-boy carve-outs and environmental.
The guaranty's net-worth and liquidity covenants are real. Falling below covenant levels can trigger default even when the property is performing.

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Hard cost · Construction & development: Physical construction expenditures on a CRE project, site work, structure, MEP, finishes, labor, materials, GC fee. Measured against the GC's AIA G703 schedule of values during draws.
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Hard costs are everything you can touch in the finished building. Soft costs are everything else, architecture, engineering, permits, legal, financing, taxes, insurance.
Hard costs typically run 70% to 80% of total project cost on multifamily; lower on hospitality and complex urban projects. Hard-cost contingency is the larger and more strictly controlled of the two contingency lines.
Historic Tax Credit (HTC) · Construction & development: A federal income-tax credit equal to 20% of qualified rehabilitation expenditures (QREs) on a certified historic structure. Administered by the National Park Service and IRS; credit is claimed ratably over five years.
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HTC equity bridges the gap between construction costs and the post-completion credit stream. Substantial rehabilitation requires QREs to exceed the greater of $5,000 or the building's adjusted basis.
HTC bridge lenders need NPS Part 2 approval before closing and Part 3 certification before final equity pay-in. State-level HTC programs (typically 20%-25%) often stack with the federal credit.
Horizontal multifamily · Construction & development: A BTR configuration of detached single-family or duplex/triplex units arranged as a community on a single tax parcel. The most clearly agency-eligible BTR style.
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Horizontal multifamily is the BTR product that institutional capital has gravitated to most aggressively. Single ownership, single parcel, professional management, all the agency multifamily eligibility checkboxes met with detached single-family product.
When developing or acquiring a single-family rental community. Confirm single-parcel structure and professional management at entitlement stage; subdividing eliminates agency eligibility.
Hotel management agreement (HMA) · Hospitality: The contract between a hotel owner and a third-party operator (often the brand itself) governing day-to-day operations and management fees.
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Common in full-service and luxury hotels. Often very long-term (20 to 30 years) and very difficult to terminate without significant fees, the contract value is part of the asset value.
On a sale or refinance, the HMA's mortgageability and assignability provisions can be a hidden constraint on price and proceeds.
HUD 223(f) · Agency programs: U.S. Department of Housing and Urban Development program for the refinance or acquisition of stabilized multifamily. Up to 35-year fully amortizing terms and the highest LTV available.
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Highest leverage in the multifamily debt market, up to 85% LTV on conventional, higher on affordable. 35-year fully amortizing fixed-rate non-recourse. 6 to 9 month closing.
When the borrower can wait, HUD 223(f) is unmatched on leverage and amortization. The trade-off is process. A 223(f) commonly takes longer than a conventional agency or bank refinance. A 221(d)(4) new-construction application takes longer than a 223(f).
HUD 232 / 232 LEAN · Agency programs: An FHA mortgage insurance program for residential care facilities, skilled nursing, assisted living, board and care, intermediate care. The LEAN processing track compresses approval timelines.
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When an operator owns a stabilized SNF or AL community and wants the longest amortization and tightest pricing available in the senior-housing perm market. Process is slower than agency or bank (6 to 12 months); bridge-to-LEAN is the typical workaround.
HVCRE (high-volatility CRE) · Construction & development: A regulatory classification for CRE construction loans that triggers a heightened 150% risk weight at the bank lender unless the loan qualifies for the HVCRE-ADC exemption (regulatory LTV, 15% contributed capital, life-of-loan retention).
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Loans that qualify for the exemption from HVCRE ADC treatment price tighter than loans classified as HVCRE ADC, because the bank's risk weight is 100% rather than 150%. To qualify, the borrower contributes at least 15% of as-completed value before the first advance, in cash, unencumbered readily marketable assets, paid development expenses, or contributed real property at its appraised value, and that capital stays in until the bank reclassifies the loan.

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Immersion cooling · Industrial: A cooling architecture where IT components are submerged in a dielectric fluid that absorbs heat directly. The most efficient cooling architecture available, supports the highest rack densities, and is increasingly common for AI training deployments.
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Immersion is the design point of choice for the most power-dense AI training workloads. Lenders are still developing comfort with the long-term operational track record of immersion cooling at scale, so the financing market typically prices a small premium for first-generation immersion deployments.
Imputed rent (owner-user) · Underwriting & metrics: The hypothetical market rent that an owner-user lender uses to compute a stand-alone DSCR for owner-occupied real estate. The test is a backstop against operating-business failure.
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Owner-user borrowers don't pay external rent, but lenders underwrite an imputed rent (market rent on the space) to compute a hypothetical DSCR independent of the operating business. The question: even if the operating business fails, would the real estate cash-flow on a market-rent basis at the loan's debt service?
On every SBA 504, SBA 7(a), and conventional bank owner-user underwrite. Imputed-rent DSCR is typically tested at 1.10x to 1.20x and is a credit gate even when the operating-company cash flow is strong.
In-line tenant · Retail: A smaller retail tenant in a shopping center occupying the linear store space between anchors.
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In-line tenants pay market rent (often $20 to $40+ PSF NNN) and bear the brunt of CAM charges. They benefit most from anchor traffic, and suffer most when anchors leave.
In-line rents drive most of the property's NOI on a center-by-center basis. Underwriting their durability matters more than the headline anchor.
Index Lock · Agency programs: Freddie Mac's Index Lock allows the sponsor to lock the underlying Treasury index early in the application process while the MBS spread remains market-determined until full rate lock. Useful in rising-rate environments.
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Locks the largest variable in the rate stack (the Treasury) early; the smaller variables (MBS spread, add-ons) lock at full rate lock later. Reduces exposure during the closing window.
Most useful when the sponsor's view is that Treasuries will move higher during the closing window. Cost is typically a small premium over standard rate lock.
Industrial outdoor storage (IOS) · Industrial: Commercial real estate consisting primarily of paved or stabilized yard with modest improvements (small office, security, lighting, fencing), used for truck terminals, container yards, equipment storage, vehicle storage, and materials staging.
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Prices as a scarce land asset, limited entitlements, defensible income, and a small specialty lender options. Typical 5 to 50+ acres, industrial-zoned with by-right outdoor-storage use. Tenant base: trucking, shipping, equipment rental, materials yards. Lease terms typically 3 to 5 yr triple-net.
Interconnect queue · Construction & development: The list of pending generator and large-load interconnection requests at an ISO or RTO. Queue position and cluster window timing affect when a new data center load can come online.
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Per FERC Order 2023, ISOs and RTOs have moved generator interconnect studies from a serial first-come-first-served process to a cluster study process intended to compress the queue. Worked example: a sponsor filing a new 100 MW load interconnect request in PJM (Northern Virginia) in early 2026 typically faces a feasibility study (4 to 8 months), a system impact study (6 to 12 months), and a facilities study (3 to 6 months), followed by 12 to 24 months of substation and network upgrade construction. Total energization timeline often runs 30 to 48 months.
Sites with grandfathered queue positions in supply-constrained markets carry nine-figure time-to-market value. New requests can face 24 to 48 month timelines from initial application to energization.
Intercreditor agreement · Loan structure: The contract between a senior lender and a mezzanine lender that governs cure rights, standstill periods, foreclosure rights, and what happens at workout.
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Often more important than the headline rate on either piece of capital. The ICA tells you who controls a workout, who can cure, and on what timeline.
Senior lenders increasingly insist on tight ICA terms (short cure periods, hard standstills), that pushes mezz pricing up and limits mezz flexibility at default.
Interest carry guaranty · Construction & development: A construction-loan guaranty obligating the principals to fund interest payments out of pocket if the project's reserve runs out before stabilization.
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Construction loans capitalize interest into the loan balance via an interest reserve. If the reserve burns through (delays, lease-up slip), the carry guaranty kicks in.
Lease-up that runs 6 months long can blow the interest reserve. The carry guaranty is the personal liability that follows.
Interest rate swap · Pricing & spreads: A derivative contract in which one party pays fixed and the other pays floating on a notional amount, used to hedge floating-rate loans.
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Instead of buying a rate cap, some borrowers swap to fixed. The swap costs nothing upfront but creates a mark-to-market liability if rates fall before payoff.
Breakage cost on a swap can rival defeasance cost on a fixed-rate CMBS loan. Treat the swap as part of your prepayment structure, not a side contract.
Interest-only (IO) · Loan structure: A loan structure with no principal amortization for a defined period. The full principal balance remains outstanding.
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Common in bridge loans and used selectively in permanent debt to maximize cash flow. A 5-year IO period on a 10-year loan means amortization only kicks in for the back half.
More IO means more cash flow today but less principal walked off by maturity, and a bigger balloon when the music stops.
IRA elective pay / transferability · Loan structure: IRS Section 6418 (transferability) and Section 6417 (elective pay), provisions enacted in the Inflation Reduction Act that allow certain energy and advanced-manufacturing tax credits to be transferred to unrelated taxpayers for cash, or claimed as direct payment by qualifying entities.
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Materially simplifies the energy / clean-tech equity stack, transferable credits (Section 45X production, Section 48E ITC on standalone storage, Section 48C investment) can be sold for $0.85 to $0.95 per dollar of credit at filing rather than requiring traditional tax-equity syndication structures.
On every BESS, solar, EV battery manufacturing, and IRA-eligible energy / manufacturing project. Transferability provides upfront capital and reduces sponsor-equity requirement. Specialized tax counsel essential for credit-eligibility, bonus-credit qualification, and transfer documentation.
IRA §6418 transferability · Construction & development: Inflation Reduction Act §6418 allows holders of certain energy-related tax credits (§45, §45Y, §48, §48E, §45U, §45V, §48C and others) to sell the credits to unrelated parties for cash. Transfers must be made by the unextended return due date.
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Unlike LIHTC, IRA energy credits can be sold once to a third party for cash. Pricing typically runs $0.92-$0.96 per credit, depending on credit type and bonus adders (prevailing wage, domestic content, energy-community).
For financing against a transferable tax credit, the lender reviews the purchase agreement, eligibility, transfer requirements and expected payment. Confirm the applicable tax documentation with the project’s tax advisers.
ISDA Master Agreement · Pricing & spreads: The standard framework agreement (developed by the International Swaps and Derivatives Association) governing the long-term relationship between a derivative counterparty and a sponsor. The Schedule customizes terms; Confirmations paper individual trades.
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Every cap or swap a sponsor executes is papered under an ISDA. First-time documentation takes 4 to 8 weeks; once in place, individual trades execute in days.
Active hedgers maintain pre-cleared ISDAs with two or three counterparties; first-time hedgers should start documentation at term-sheet stage on the loan, not at cap-RFP stage.

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Key principal · Loan structure: The natural person (or persons) named on a CRE loan as the guarantor of the bad-boy carve-outs and any other recourse obligations. Typically the sponsor or the senior sponsor entity's principal.
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On a non-recourse loan, the key principal is who the lender comes after if a bad-boy event occurs. KPs are net-worth and liquidity tested in lender underwriting.
Standard agency and life-co tests require KP net worth equal to the loan amount and liquidity equal to 9 to 12 months of debt service. Failing these tests forces a co-sponsor or a structural reshuffle before placement.
Know your customer (KYC) · Process & docs: The bank's identity-verification, ownership-disclosure, and AML screening of the borrower, principals, and beneficial owners.
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Required by all regulated lenders. The 25%+ beneficial-owner rule means every entity in the ownership chain has to be disclosed and screened.
KYC issues, sanctions hits, missing IDs, undisclosed PEP exposure, can stall closing for weeks. Start KYC at term sheet.
kW per rack · Industrial: The power density of a data center server rack, measured in kilowatts. A primary design variable that drives cooling architecture choice and IT-equipment-density per square foot.
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Rack densities have moved from a 2010s norm of 5 to 10 kW per rack to a 2025 design point of 30 to 100 kW per rack as AI training workloads have driven a step change in compute density. Worked example: a 50 MW IT-load facility designed at 10 kW per rack supports 5,000 racks across roughly 200,000 SF of white space. The same 50 MW designed at 50 kW per rack supports 1,000 racks across roughly 50,000 SF, a four-fold density increase that changes the building footprint, cooling architecture, and electrical distribution design.
Rack density determines cooling architecture, which determines capex per MW. Lenders treat the design rack density as a forward-looking obsolescence variable: a facility designed for 10 kW per rack air cooling is structurally less attractive to a 2026 AI-focused tenant than a facility designed for 50 kW per rack liquid cooling.

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Last-mile distribution · Industrial: Smaller industrial buildings located near major population centers, used for final-stage delivery from regional distribution centers to consumers.
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E-commerce demand has made last-mile one of the highest-growth industrial subtypes. Land cost is the binding constraint near urban centers.
Last-mile assets near major metros price tighter than bulk distribution further out. The location drives the cap rate as much as the building.
Lease-up bridge · Loan structure: A bridge loan sized and termed to fund a multifamily, office, or retail asset through lease-up to stabilization, with take-out into agency, HUD, life-co, or bank perm at occupancy / NOI thresholds.
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Multifamily lease-up bridges typically run 24 to 36 months with funded interest reserves and good-news draws on signed leases or NOI milestones. Office/retail lease-up bridges run 30 to 48 months with TI/LC reserves layered on top. Take-out competitive bake-off at stabilization.
Bridge term should equal expected stabilization plus 6 to 9 months for take-out execution. A 24-month lease-up sized on a 24-month bridge will require an extension. Cheap bridges that mature too soon become expensive bridges after extension fees and rate-cap renewal.
Leasehold estate · Loan structure: The tenant's possessory interest in real property under a long-term lease (typically 30 to 99 years for ground leases). Distinct from the fee owner's residual interest, the leasehold can be mortgaged, sold, or assigned subject to the underlying lease and any consent requirements.
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On a ground lease, the operator owns a leasehold estate in the land plus full ownership of the improvements built on the land. The fee owner owns the underlying land subject to the ground lease and the obligation to perform the landlord's covenants for the lease term.
On any long-term-leased CRE asset. Distinguishing the leasehold estate from the fee is the critical discipline, tax, financing, accounting, and bankruptcy treatment all differ from fee ownership.
Leasehold mortgage · Loan structure: A mortgage encumbering the borrower's leasehold estate (and improvements built on the leased land), not the underlying fee. Used on every ground-leased CRE financing, distinct from a fee mortgage, which encumbers the underlying land.
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On foreclosure, the leasehold mortgagee succeeds to the leasehold estate (becoming the new tenant under the ground lease) and continues to own the improvements. The underlying fee owner remains a separate party with separate rights, protected by the recognition / non-disturbance package.
Leasehold NOI · Underwriting & metrics: Property NOI net of contractual ground rent, the operative DSCR metric for leasehold financing. Distinct from property-level NOI, which is computed before deducting ground rent.
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Lender DSCR sizing keys off leasehold NOI, not property-level NOI. Sponsor-side underwriting must show both numbers because lenders, JV partners, and rating agencies rely on different cash-flow conventions in different contexts.
On every leasehold financing. Misstating leasehold NOI vs. property NOI in OM materials is a frequent lender / placement-firm pushback at the term-sheet stage.
Legal cap · Process & docs: A negotiated maximum dollar amount the borrower will reimburse for lender's counsel fees in a CRE loan transaction. Standard line in a term sheet that is almost always negotiable on a competitive deal.
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Without a cap, lender's counsel bills hourly and you pay all of it. A cap of $25,000 to $75,000 (depending on deal size and complexity) protects the borrower from runaway legal fees.
Lender legal cap is one of the easiest concessions to win on a competitive deal because it costs the lender nothing, only its outside counsel bears the risk of going over.
Lender bake-off · Process & docs: A structured, parallel solicitation of competitive term sheets from multiple lenders on the same CRE deal. The mechanism placement firms use to compress pricing and improve structural terms before the borrower picks one.
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Instead of approaching lenders sequentially, the bake-off sends a single packaged RFP to a curated list of qualified lenders and asks for indicative quotes by a defined deadline. Each lender knows others are quoting.
Run on the right list (5 to 10 fits, not the whole address book), the bake-off typically delivers 15 to 35 bps of spread compression and structural concessions on MAC, prepay, and IO that no single lender would have offered standalone.
Lender readiness · Process & docs: The condition of having all sponsor-side, property-side, and structural documentation organized and current to the standard a lender will demand at credit committee. Measured before the bake-off starts.
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A lender-ready deal moves to credit committee in 30 days; an unready deal takes 60. The difference is the sponsor's organization, not the lender's speed.
Diligence delays caused by missing or stale sponsor documents account for the majority of slippage between term sheet and closing. Score readiness before going to market, not after a quote has been signed.
Lender RFP · Process & docs: A standardized request for term sheet sent to multiple CRE lenders simultaneously, containing the deal summary, proceeds request, key terms requested, and a defined response deadline.
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The RFP is the package every quoting lender sees. Same deal data, same questions, same deadline. The response set is then comparable line-by-line.
A clean, complete RFP makes the bake-off work; an incomplete one produces incomparable quotes. Include rent roll, T-12, capex history, business plan, and the borrower's structural priorities (proceeds, IO, recourse).
Letter of intent (LOI) · Process & docs: An indicative, non-binding offer from a CRE lender outlining proposed pricing, sizing, and structure. Functionally interchangeable with a term sheet on most placements.
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The LOI is the lender saying we'd like to do this deal at these terms, subject to credit approval, third-party reports, and final docs. It is not a commitment.
Signing the LOI typically locks in an exclusivity period and an expense deposit. Read the binding paragraphs (deposit, exclusivity, expense reimbursement) carefully; they are real obligations even though the loan is not yet committed.
Lien waiver · Construction & development: A document signed by a construction contractor or subcontractor releasing mechanic's lien rights against the property in exchange for payment. Conditional waivers become effective on payment clearing; unconditional waivers acknowledge payment received.
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Lien waivers are how contractors give up their right to sue for unpaid work. Conditional means the waiver only takes effect when the check clears; unconditional means payment is already received.
Each construction draw is funded against conditional waivers; the next draw requires unconditional waivers for the prior period. Final waivers attach to substantial completion and trigger retainage release.
Life insurance company (life co) · Lender types: Insurance company portfolio lenders that hold long-dated fixed-rate commercial mortgages on their balance sheets to match long-dated policy liabilities.
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Life companies may consider long-term loans on stabilized properties. Compare leverage, coverage, prepayment and closing requirements in the actual proposal.
Life cos fund what they want when they want. They don't chase volume. Pricing-shopping life cos against each other is a niche skill.
LIHTC (Low-Income Housing Tax Credit) · Construction & development: The federal IRC §42 program providing a 10-year stream of tax credits to investors in qualifying affordable rental housing. The 9% credit and the 4% credit are the two main categories, allocated by state housing finance agencies.
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LIHTC equity is purchased by tax-credit syndicators on behalf of corporate investors who use the credits to offset federal income tax. The equity proceeds are paid in installments tied to construction completion and lease-up milestones.
Tax-credit equity rarely arrives at closing. A bridge loan covers the gap between construction draws and the equity pay-in schedule. The bridge sizes off the executed LP equity commitment, not the residual takeout.
Loan modification · Workout & default: A negotiated change to the loan documents, extension of maturity, rate adjustment, payment restructure, principal forbearance, to resolve or defer default.
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Mods range from short maturity extensions ('extend and pretend') to deep restructures with principal forbearance and partial paydowns. Common in CMBS via the special servicer.
Most workouts end in modification, not foreclosure. Lender economics, losses, hold cost, REO management, favor settling.
Loan-to-leasehold-value (LTLV) · Underwriting & metrics: The leasehold-financing analog of LTV, outstanding loan balance divided by leasehold value (post-ground-rent value), not combined-fee value. Caps typically 5 to 15 percentage points below comparable fee-simple LTV, with structure-quality adjustments.
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On a $5M property NOI / $1M ground rent / $4M leasehold NOI deal, LTLV is computed against the value derived from the $4M leasehold cash flow. A deal that would size at 65% fee-simple LTV may size at 50% to 60% LTLV depending on lease structure quality, residual term, and reset visibility.
On every leasehold financing. The sizing differential between LTLV and fee-simple LTV is the operative leasehold financing concept.
Lockbox · Loan structure: A cash-management arrangement in which all property income is deposited directly into a lender-controlled account.
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A 'soft' lockbox sweeps surplus to the borrower; a 'hard' lockbox holds everything until the lender releases waterfall items. A 'springing' lockbox activates only on a defined trigger (low DSCR, default).
Springing lockboxes are common on CMBS. Once they spring, getting them to un-spring takes weeks of tax/insurance/reserves cleanup, sometimes longer than the original trigger event.
LTC (loan-to-cost) · Underwriting & metrics: Total loan amount divided by total project cost (purchase plus capex, or all-in development cost). The standard leverage metric for construction and value-add bridge financing.
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On a $50M total cost project, a 65% LTC loan is $32.5M. Equity covers the remaining $17.5M.
Construction loans size on the lower of LTC and stabilized LTV. The binding test changes as cost escalates and rents move.
LTV (loan-to-value) · Underwriting & metrics: Loan amount divided by appraised property value. The standard leverage metric for stabilized permanent debt.
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60 to 75% LTV is the typical range for permanent debt. Agency multifamily can stretch to 75% to 80% on the right deal; CMBS office in 2025 often tops out at 55% to 60%.
LTV depends on the appraisal. A conservative appraisal can size your loan down before the lender ever applies their leverage cap.

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MAC clause (Material Adverse Change) · Process & docs: A lender's right to withdraw or restructure a commitment if a material adverse change occurs in the borrower, guarantor, or property between term sheet and closing. The single largest retrade lever in a CRE loan term sheet.
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Standard lender drafts read so broadly that almost any market move qualifies. Borrower-friendly drafts enumerate specific events, exclude general market conditions, and require notice plus a cure period.
If Treasuries spike or a major tenant news item lands between term sheet and closing, a wide MAC lets the lender walk or reprice. A tightened MAC is one of the most valuable structural concessions an advisor can win.
MAH / TAH (affordable agency executions) · Agency programs: MAH is Fannie Mae Multifamily Affordable Housing and TAH is Freddie Mac Targeted Affordable Housing. These loans generally count toward the FHFA volume cap. They are not excluded from it.
In plain English
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Affordability restrictions count toward the agencies' mission-driven business goals under FHFA scoring. The pricing benefit is the agencies' incentive for delivering affordable housing capital.
Many sponsors with mixed-income properties qualify for MAH/TAH but don't realize it. Properties with 20%+ LIHTC units, certain Section 8 contracts, or qualifying inclusionary zoning typically qualify.
ManCo financing · Lender types: A credit facility to a private-fund management company secured by the management fee stream and, sometimes, by the GP's promote receivables. Used to fund GP commitment, expansion, or working capital.
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ManCo loans size off projected management fee cash flow over the remaining fee period. Lenders are typically specialty private credit funds or family offices.
When a sponsor wants to scale platform expense (new strategy launch, anchor LP marketing) ahead of a new fund close, ManCo financing bridges the gap between platform spend and management-fee accrual.
MAP lender · Agency programs: A lender approved under HUD's Multifamily Accelerated Processing program to underwrite and submit FHA multifamily loans on HUD's behalf.
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MAP lenders have authority to do most of the underwriting that HUD would otherwise do internally. Necessary for any 223(f) or 221(d)(4) execution.
Picking a strong MAP lender is the single largest controllable factor in HUD execution timing.
Master lease with purchase option · Loan structure: A long-term commercial lease (typically 5 to 15 years) in which the operator funds operations and capex and holds a fixed-price purchase option exercisable at defined dates, the seller retains title and existing senior debt until exercise.
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Used on distressed assets where the senior won't permit transfer but will permit a long-term lease, on operator-driven repositioning, and where the operator wants to lock a future purchase price while creating value. Senior lender consent typically required for both the lease and the option.
Common in net-lease retail, hotel, and senior housing. Option-exercise financing must be lined up 6 to 12 months pre-exercise. Per ASC 842, a long-term lease with a below-market option may be classified as a finance lease on the operator's balance sheet, CPA review required.
Master servicer · Workout & default: The day-to-day administrator of a CMBS loan, collects payments, manages reserves, processes draws and consent requests.
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While the loan is performing, the borrower's CMBS counterparty is the master servicer. At default or trigger, the loan transfers to the special servicer.
Routine asks (lease consents, easement approvals, reserve releases) go through the master servicer. Setting tone with the master matters.
Maturity default · Workout & default: A default triggered by failing to repay the loan balance on the maturity date.
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The most common default in a maturity-wall environment. The loan is performing through maturity, then doesn't get refinanced or paid off in time.
Maturity default starts the lender's foreclosure clock. Extension negotiations or modifications need to happen before maturity, not after.
Medicaid mix (SNF) · Underwriting & metrics: The percentage of skilled-nursing facility revenue coming from state Medicaid reimbursement. Above 60% to 70% Medicaid mix materially constrains the lender pool.
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Medicaid reimbursement varies materially by state and is subject to state budget and rate-setting risk. Most banks and CMBS shops will not underwrite high-Medicaid SNFs because of this regulatory exposure. HUD 232 LEAN tolerates higher Medicaid mix.
On every SNF underwrite. The Medicaid mix and the state Medicaid rate-setting methodology are gating factors in lender selection.
Memory care · Agency programs: A specialized form of assisted living designed for residents with dementia diagnoses. Purpose-built secured units, higher staffing ratios (1:5 to 1:6), and shorter average length of stay (12 to 18 months).
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Memory care is the highest-acuity assisted living category. Higher cost basis (specialized building infrastructure), higher operating cost (staffing intensity), thinner operator bench. Pricing materially wider than IL or generic AL.
When financing or refinancing a memory care community. Construction lender options is thin; permanent take-out via FHA 232 or specialty agency. Operator track record on labor-cost discipline is the focal point.
Mezzanine debt · Loan structure: Subordinate debt secured by a pledge of the borrower's equity interests, sitting between the senior loan and common equity. Used to fill capital-stack gaps.
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Mezz is faster to foreclose than a mortgage (UCC sale of the equity interests), which is why it carries higher pricing, typically low- to high-teens depending on attachment and detachment points.
Mezz is often the difference between a deal that closes at 80% LTV and one that does not. Pricing the mezz, the senior, and the equity together is the only way to size the stack correctly.
Mezzanine loan · Loan structure: Subordinate debt secured by a pledge of the equity interests in the property-owning entity (rather than a mortgage on the real estate), sitting between senior debt and sponsor equity in the capital stack.
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Mezzanine fills the gap between maximum senior loan proceeds and the sponsor's equity. Mezz lenders price wider than senior because they take a junior position with no direct lien on the real estate.
Mezz adds proceeds at the cost of higher blended cost of capital and an intercreditor agreement that restricts senior lender remedies. Critical mechanic on cash-out refinances and value-add bridge.
Mini-perm loan · Loan structure: A short-to-medium-term loan (typically 3 to 7 years) that bridges between construction and long-term permanent financing.
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Used when the borrower wants more time to season the property before locking long-term debt, or when permanent debt isn't yet available at the desired terms.
Mini-perm fills a real gap, particularly on lease-up assets. Pricing typically sits between bridge and perm.
Modern ground lease · Loan structure: A standardized ground lease structure, popularized at scale by ground-lease REITs, that uses 99-year initial terms, CPI-capped escalation (often 3.0%), no near-term FMV resets, and standardized leasehold-mortgagee protections. Has materially expanded the financeable supply.
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Sponsor receives material cash proceeds at lease inception (the difference between fee owner's payment for the fee plus capitalized ground lease and the sponsor's basis), continues to operate and finance leasehold improvements, and has a predictable forward rent profile.
Modified gross lease · Retail: A lease in which the tenant pays base rent plus a defined subset of operating expenses, typically increases above a base year.
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Common in office and some retail. The tenant absorbs OpEx growth above base year; landlord absorbs the base.
Modified gross creates landlord exposure to OpEx volatility. Underwriting has to model expense growth against contractual recovery.
Money-center bank · Lender types: A large national or international bank that originates large CRE loans for both balance-sheet hold and CMBS distribution.
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The largest national and global banks. Originate $50M+ loans, run capital-markets desks, securitize what they don't keep.
Money-center banks compete with debt funds and life cos on large loans. They bring distribution capability but stricter credit boxes.
Mortgage boot · Loan structure: In a §1031 exchange, the taxable gain triggered when replacement-property debt is less than relinquished-property debt. The reduction in mortgage liability is treated as boot unless offset with additional cash equity.
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If the sponsor pays down debt as part of the exchange, the IRS treats the paydown as cash received, and taxes the deferred gain to that extent. Replacement debt should match or exceed the prior loan balance to keep the exchange fully tax-deferred.
Underwrite replacement-property debt sizing to match or exceed relinquished-property debt before signing the LOI on the replacement asset.
Mortgage constant · Pricing & spreads: Annual debt service divided by the loan amount, expressed as a percentage. Captures both interest and amortization in one number.
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On a 30-year amortizing 6% loan, the constant is roughly 7.2%. The constant is what you actually pay annually per dollar borrowed, useful for comparing IO vs. amortizing or different terms.
When the constant exceeds the cap rate, leverage is dilutive to cash-on-cash. That is the math behind 'negative leverage' deals.
Mortgage insurance premium (MIP) · Agency programs: The annual insurance premium HUD charges for FHA-insured multifamily loans, typically 25 to 60 bps depending on program and product.
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Comparing HUD pricing to non-HUD requires adding MIP to the headline coupon. Without that adjustment, HUD looks cheaper than it is.
Mortgage REIT (mREIT) · Lender types: A publicly traded or private REIT that originates and holds commercial mortgages, primarily floating-rate bridge.
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Funded with equity from public markets and leverage from warehouse lines and CRE CLOs. Pricing reflects the mREIT's cost of capital, when stock prices fall, lending capacity tightens.
mREITs are major bridge originators. Their quarterly earnings calls are a forward indicator of bridge pricing.
Mortgagee clause (CRE) · Underwriting & metrics: Standard ISO endorsement language that names the lender as mortgagee and additional insured under each property and liability policy. Survives borrower acts that would otherwise void coverage, the lender's primary protection.
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The mortgagee clause must be properly endorsed on the primary, every excess layer, and any specialty supplement. ISAOA / ATIMA (its successors and / or assigns as their interests may appear) is the standard form. Frequent closing-checklist failure point on multi-layer coastal towers.
On every CRE financing. Clause review at closing is non-negotiable; lender's counsel confirms each policy carries the proper endorsement before funding.
MW IT load · Industrial: The contracted megawatts of power available for the tenant's IT equipment, distinct from the total utility allocation that includes cooling and other overhead consumption.
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Hyperscale leases are typically denominated in MW IT load rather than square footage. Worked example: a 50 MW IT-load lease at PUE 1.20 requires roughly 60 MW of total utility allocation. At a hyperscale rent of $125,000 per MW per month, the lease generates $6.25M monthly or $75M annually before escalators. Pricing for build-to-suit hyperscale leases is set per MW IT load, not per square foot.
Every part of the financing math, sizing, leverage, debt yield, lease economics, is built off MW IT load. Two facilities with the same total utility allocation can have very different MW IT load capacity depending on PUE.

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Named-storm deductible · Underwriting & metrics: A property-policy deductible expressed as a percentage of insured value (typically 3% to 10% in coastal zones in 2026) that applies only to losses caused by a named tropical system. Replaces the flat-dollar all-other-perils deductible for named-storm events.
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On a $50M coastal asset a 5% named-storm deductible is $2.5M out-of-pocket per event. Lenders treat the deductible as a contingent borrower liability, typically requiring a funded deductible reserve or a sponsor liquidity covenant sized to absorb it.
On every coastal Florida, Texas, Louisiana, Carolina, and Gulf Coast CRE financing. The named-storm deductible can shift sizing by 25 to 75 bps via tighter debt-yield and DSCR floors. Wind deductible buy-down or parametric supplements may be considered.
NAV facility · Lender types: A credit facility secured by the underlying NAV of a private fund's portfolio assets, rather than by LP commitments. NAV facilities sit at the fund level and provide leverage for follow-on investments, distributions, or rescue capital.
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Where a subscription line is bridge financing repaid by the next capital call, a NAV facility is term financing repaid by portfolio cash flow or asset sales. NAV LTV is typically 10% to 25% of the fund's portfolio value.
NAV facilities are increasingly used for late-cycle GP-led continuation vehicles, fund recapitalizations, and unfunded LP-commitment shortfalls. They face heavier LP scrutiny than subscription lines.
Near-Stabilization execution · Agency programs: An agency multifamily execution that allows permanent placement on properties at 75-90% occupancy that have not yet hit standard DSCR thresholds but are projected to stabilize within 6-12 months. Conservative sizing; typically 25-50 bps wider pricing than fully stabilized.
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Locks the long-term agency execution at the early end of the lease-up window, eliminating rate exposure between completion and full stabilization. Trade-off: more conservative sizing and slightly wider pricing.
Useful when the sponsor's view is that rates will rise during stabilization. Some programs include a pricing step-down upon documented stabilization (rate reduction triggered by hitting defined occupancy and DSCR for a defined number of consecutive months).
Negative leverage · Pricing & spreads: When the loan constant exceeds the property's cap rate, so adding leverage reduces cash-on-cash return rather than improving it.
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In low-cap-rate, high-rate environments, a deal can pencil at 75% LTV but produce worse cash flow than the same deal bought all-cash. The math is simple, the bank earns more per dollar than the asset does.
Almost every value-add deal underwritten in 2023 to 2025 had to model negative leverage in year one and positive leverage at stabilization. The exit assumption carries the deal.
Net operating income (NOI) · Underwriting & metrics: Property revenue minus operating expenses, before debt service, capital expenditures, depreciation, and income taxes.
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The foundational cash-flow metric for almost all CRE underwriting. Cap rate, DSCR, and debt yield all start from NOI.
Disputes between buyer and seller (and between borrower and lender) start with what counts as NOI. Reserves, management fees, ground rent: every line item is negotiated.
New lease on foreclosure · Loan structure: A leasehold-mortgagee right to enter into a new lease with the fee owner on the same terms if the existing ground lease terminates for any reason (tenant bankruptcy rejection, uncured tenant default the leasehold mortgagee fails to cure). Critical bankruptcy / Section 365(h) protection.
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Pairs with the recognition / non-disturbance agreement and notice-and-cure rights to provide the leasehold mortgagee with a complete protection package. Typical exercisable within 30 to 90 days of the termination event.
On every leasehold financing where bankruptcy of the leasehold tenant or the fee owner is a real risk. Standard in modern ground leases; often missing in legacy bespoke ground leases that need amendment to be financeable.
New Markets Tax Credit (NMTC) · Construction & development: A federal credit equal to 39% of a qualified equity investment in a Community Development Entity (CDE), claimed over 7 years. CDFI Fund allocates NMTC to CDEs, which deploy capital into qualifying low-income community businesses (QALICBs).
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NMTC is structured as a leverage loan into the CDE. The investment fund is capitalized by a leverage lender and the tax-credit investor; the CDE then makes a loan to the QALICB project.
NMTC closings require CDE allocation in hand and a QALICB-eligible project (≥50% gross income from low-income community activity). Bridge lenders typically advance against the leverage loan only.
NNN (triple net) lease · Retail: A lease in which the tenant pays base rent plus the property's real estate taxes, insurance, and common area maintenance.
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Standard for industrial, single-tenant retail, and most multi-tenant retail in-line space. The landlord receives a true 'net' rent free of operating expense exposure.
NNN leases produce stable, predictable NOI, favored by life-co and CMBS lenders. Recovery mechanics need to be airtight or the 'net' isn't really net.
Non-recourse · Loan structure: A loan in which the lender's remedy in default is limited to the property itself, subject to standard 'bad-boy' carve-outs.
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The borrower (and principals personally) are not liable for the loan balance beyond the collateral. Carve-outs preserve recourse for fraud, environmental contamination, unauthorized transfers, and a defined list of bad acts.
Non-recourse is the default for institutional permanent debt (CMBS, life-co, agency). Some bank and bridge product is full or partial recourse, read the carve-outs carefully.
Non-recourse loan · Loan structure: A CRE loan where the lender's recovery in default is limited to the property and project cash flows; the borrower and guarantor have no personal liability beyond the bad-boy carve-out list and any specified guaranty obligations.
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True non-recourse is the institutional standard for CMBS, agency, and most life-co perm. Banks typically offer non-recourse only on a subset of permanent loans, with construction and bridge often partial- or full-recourse.
Non-recourse is the structural reason sponsors prefer CMBS or agency on a stabilized asset over a bank perm with partial recourse. Quantify the difference at the same all-in rate before choosing on price alone.
NYC 467-m office conversion abatement · Loan structure: New York Real Property Tax Law § 467-m, up to 35-year property tax abatement for qualifying office-to-residential conversions in Manhattan south of 96th Street, with affordability set-asides typically requiring 25% of units affordable at defined AMI bands.
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NYC HPD administers the program; the application is typically filed before the construction permit is issued. The abatement materially shifts post-completion NOI, which supports tighter perm take-out economics and pulls in a deeper construction lender options (debt funds, regional banks, NYC HDC).
On any Manhattan office conversion below 96th Street. Application sequencing must align with construction permit and financing close. Affordability set-aside reduces gross potential rent on the abated units, underwrite both the tax savings and the rent restriction.

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Occupancy · Underwriting & metrics: The percentage of a property's leasable area or units that is currently leased. Distinct from economic occupancy.
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Physical occupancy measures occupied space or units. Economic occupancy measures income performance relative to a defined potential-income measure. Concessions, collections and the denominator used affect the comparison.
Lenders underwrite to economic, not physical. Quoting only physical occupancy is a yellow flag.
Open prepayment period · Loan structure: The window at the end of a loan term, typically the last 3 to 6 months, when the loan can be prepaid without penalty.
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Almost every fixed-rate loan has an open period. Sales and refinances cluster in that window because there is no defeasance or YM cost.
If you're forecasting a sale, plan it inside the open window. Prepaying a month early to satisfy a buyer can cost millions in YM or defeasance.
Operating expense ratio · Underwriting & metrics: Total operating expenses divided by effective gross income, expressed as a percentage.
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Multifamily ratios cluster around 35 to 45%; office ratios are higher (often 40 to 55%) once recoveries are netted; industrial NNN ratios can be in the teens.
Outlier expense ratios are a flag. Underwriters chase the difference, usually it's a one-time item, sometimes it's a structural problem.
Optigo · Agency programs: Freddie Mac's primary multifamily lending program, similar in structure to Fannie's DUS, approved lenders underwrite and close within defined credit parameters.
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Optigo lender networks include Conventional, Targeted Affordable, and Seniors. The Small Balance Loan network stopped taking applications on April 30, 2026. New small loans are Conventional Small, generally $2 million to $10 million. Different lenders specialize in different niches.
Picking the right Optigo lender for the deal type can be worth 5 to 15 bps and a meaningfully smoother process.

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Parametric insurance · Underwriting & metrics: A policy that pays a fixed amount when a defined index trigger is breached (e.g., $5M payout if sustained winds exceed 130 mph at the property), regardless of property damage. Settles in days rather than the months typical of indemnity claims.
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Useful for working capital after a storm, payroll, demobilization, debris removal, business continuity. Not a substitute for indemnity coverage; a supplement that bridges the deductible gap and the indemnity-claim settlement window.
On coastal CRE where post-event liquidity matters, particularly hospitality and operating-intensive assets. CMBS / agency lenders may not credit parametric for sizing; debt funds and some life-co lenders are more flexible.
Partial recourse · Loan structure: A CRE loan structure where the guarantor's personal liability is capped at a percentage of the loan amount (typically 25% to 50%) rather than full or zero recourse. Common on bank perm and value-add bridge.
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Partial recourse is a middle-ground structure. The lender accepts some asset-level risk; the sponsor accepts limited personal exposure. The cap and the burn-off mechanics are both negotiable.
Negotiate the recourse percentage and the burn-off triggers (DSCR test for X consecutive quarters, debt-yield threshold) at the term sheet. A 25% recourse loan that burns to non-recourse at stabilization is structurally close to non-recourse for a competent operator.
Percentage rent · Retail: Additional rent calculated as a percentage of tenant sales above a defined breakpoint, layered on top of base rent.
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Common in mall and entertainment retail. Distinguishes successful tenants (whose sales push them past breakpoint) from struggling ones.
Percentage rent is upside that lenders generally don't underwrite. When it shows up in NOI, it's gravy, but plan for it to disappear if sales decline.
Permanent financing · Loan structure: Long-term fixed- or floating-rate debt on a stabilized property, typically 5, 7, or 10 years, often non-recourse, with extended amortization.
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CMBS, life-co, agency, and bank perm fall under this label. Perm assumes the property is operating, leased, paying market rents, and producing the underwritten NOI.
Perm pricing is a function of leverage, asset class, and benchmark rates. A property has to be ready for perm before the loan is even available.
Phase I environmental site assessment · Process & docs: A non-intrusive environmental review (records search, site visit, interviews) required by virtually every commercial lender as a condition of closing.
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If the Phase I identifies a 'recognized environmental condition' (REC), the lender will require a Phase II, borings, sampling, lab work, before closing.
A REC discovered late in closing can derail a deal or force a substantial reserve. Order Phase I early and read it carefully.
Phase II environmental site assessment · Process & docs: An intrusive environmental investigation (soil, groundwater, vapor sampling) triggered when a Phase I identifies a recognized environmental condition.
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Phase IIs cost real money ($25k to $100k+) and take weeks. Adverse findings can require remediation, escrow, or a no-further-action letter from the state.
A Phase II in process is a closing-on-hold. The clock starts when the Phase I delivers, not when the report is reviewed.
PIP (property improvement plan) · Hospitality: A brand-mandated capital expenditure program required to maintain or renew a hotel franchise license. Typical cost $5,000 to $25,000+ per key, with full-service and luxury PIPs running materially higher.
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Brands enforce PIPs to maintain consistent guest experience across the system. Skipping a PIP risks the franchise license. PIP scope is set by a brand inspector and documented in a PIP letter that lenders require pre-funding.
On every hotel acquisition or refinance. PIP reserve must be funded at closing or via earnout structure tied to PIP completion. Coordinate franchise renewal cycle with loan maturity to avoid mid-loan PIP triggers.
PIP bridge · Hospitality: A bridge loan funding a brand-mandated PIP (property improvement plan) on a hotel acquisition, brand conversion, or franchise renewal, typically $15K to $40K per key on the renovation scope.
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Lender funds a PIP reserve sized to the brand-approved scope plus 5% to 10% contingency, drawn against completed work. Owner-controlled vs. lender-controlled depends on sponsor strength; lender-controlled is standard. Brand consent at each major draw on franchise hotels.
Tenor 24 to 36 months; take-out at stabilized RevPAR via CMBS, bank perm, or debt-fund mini-perm. Interest reserve sized off the gap between in-place ADR/occupancy and post-PIP debt service. The brand approval process gates draw timing.
Portfolio interest exemption · Loan structure: An IRC exemption that allows foreign lenders to receive U.S.-source interest income free of the 30% withholding tax, provided the borrower is unrelated to the lender and the loan is in registered form.
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Foreign-bank and foreign-fund lenders typically structure CRE loans to qualify for the portfolio interest exemption. Without it, the foreign lender's after-tax yield drops by the withholding rate.
If the loan is to a related party (≥10% common ownership), the exemption does not apply and 30% withholding (or treaty rate) applies. Sponsor-affiliated foreign lenders need a different structure.
Power-constrained site · Construction & development: A data center, EV manufacturing, or other power-intensive site where utility transmission or generation capacity is the binding constraint on commercial operation, the site has demand for power that exceeds the utility's available capacity within an acceptable timeline.
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Lender financeability requires documented interconnection-queue position, utility commitment letter or executed interconnection agreement, executed PPA / wholesale power agreement, and a clear path to commercial operation date. FERC Order 2023 reformed queue management; BTM gas / battery options can bridge while utility power is secured.
On every data-center, hyperscaler, EV battery, and large-load reshoring site. Sites without firm power are typically equity-only until the utility commitment lands, power is the binding diligence test before any other underwriting matters.
Powered shell · Industrial: A data center building delivered with the structural shell, the substation and primary electrical infrastructure, and basic utility connections, but without the mechanical and electrical fit-out for a specific tenant load.
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A powered shell can be delivered in 6 to 12 months, where a fully fitted-out hyperscale facility takes 24 to 36. Worked example: a 50 MW powered shell typically costs $5M to $7M per MW (so $250M to $350M total) versus $10M to $15M per MW fitted ($500M to $750M total). The strategic value is speed-to-power for a hyperscale tenant who cannot wait through the full utility interconnect and construction cycle.
Prepayment lockout · Loan structure: An initial period (typically 1 to 2 years on CMBS) when the loan cannot be prepaid at all, even with a penalty.
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During lockout the loan cannot be prepaid or defeased. Defeasance is the exit after lockout ends, until the open prepayment window. The loan is effectively frozen.
Sponsors who buy with the intent to flip in 18 months and put CMBS on the deal at closing have a problem. Lockout is the worst kind of surprise.
Prepayment premium · Loan structure: The fee a borrower pays to retire a CRE loan before its scheduled maturity. Calculated under the prepayment formula in the loan documents, yield maintenance, defeasance, declining-percentage, or open-window.
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Prepay premium is the lender being made whole for losing the spread between contract rate and current market. On a low-rate loan in a higher-rate market, the premium can be small or zero; in a lower-rate market, it can be punishing.
Quantify prepay cost in the term-sheet evaluation, not just at refinance time. Two loans at the same rate with different prepay structures can differ by hundreds of basis points of break-cost.
Private credit · Lender types: Non-bank, non-securitized lending, debt funds, business development companies, mortgage REITs, and direct lenders that hold loans in private vehicles.
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Has grown from a niche corner to a major share of the CRE debt market. Less regulated than banks, more bespoke than CMBS, generally more expensive than both.
Private credit fills the gaps banks won't, and the gaps CMBS won't. The trade-off is pricing and (usually) shorter term and more sponsor-level diligence.
Pro forma · Process & docs: The forward-looking operating statement, projected income, expenses, NOI, debt service, and cash flow over the hold period.
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Lender pro formas are conservative; sponsor pro formas are aspirational. The reconciliation of the two is most of what underwriting actually does.
Stabilized-year pro forma drives the take-out test on bridge and construction loans. Aggressive pro formas that miss in year two cause stabilization triggers to slip.
Probable maximum loss (PML) · Underwriting & metrics: A seismic-engineering output (typically expressed as a percentage of replacement cost) describing the projected loss at a defined return period. Reported with both scenario expected loss (SEL) and scenario upper loss (SUL) figures per ASTM E2026 standards.
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20% SEL is an industry rule of thumb (not a regulation) for when earthquake coverage becomes a financing requirement. Above 20% to 25% SEL, lenders require coverage at limits sized to the PML or a sponsor seismic-retrofit plan with funded reserves.
On every California CRE acquisition and refinance, and on assets in other seismic zones (Pacific Northwest, Alaska, parts of the Mountain West, New Madrid corridor). Engage a seismic engineer before LOI on any non-trivial seismic-zone asset.
Proceeds test · Underwriting & metrics: The set of underwriting constraints a lender applies to determine maximum loan proceeds, typically the binding minimum across LTV, DSCR, and debt-yield tests. The lowest of the three controls.
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Sizing isn't one number; it's the result of running three constraints simultaneously and taking the smallest. On a low-cap-rate market, debt yield often binds; on a low-DSCR deal, DSCR binds.
Knowing which test binds tells the sponsor where to push at the term sheet. If DSCR binds, IO period or amortization schedule matter. If debt yield binds, NOI and pricing matter.
Promote (CRE GP carry) · Loan structure: The disproportionate share of project profits paid to the sponsor (GP) once limited partners have received their preferred return. Standard structures: 20% promote over an 8% preferred return, with one or two additional promote tiers above higher IRR hurdles.
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Promote is the sponsor's incentive payout for hitting return targets. The promote share of cash flow steps up at each IRR hurdle (the waterfall tiers).
Promote is the most-negotiated single line in the JV. LPs push down the promote percentage and push up the hurdle rates; sponsors push the other direction. A 5% promote difference materially changes the GP's share of upside.
Property condition assessment (PCA) · Process & docs: A third-party physical inspection of the property identifying immediate repairs, near-term replacements, and a 10 to 12 year cost forecast.
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Drives the immediate repair escrow (work to be completed within 6 to 12 months of closing) and the replacement reserve sizing. PCAs run $5k to $20k depending on asset.
A heavy immediate-repair list can hit closing economics, both as escrow and as deferred capex the buyer didn't price into the deal.
Public-land ground lease · Loan structure: Ground lease with a governmental or quasi-governmental landlord. National Park Service concession, Battery Park City Authority, public-university foundation, port authority, municipal parking authority. Distinct procurement, term, and leasehold-financing characteristics.
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Standard leasehold-mortgagee protections may require negotiation around sovereign-immunity, federal contracting requirements, and (in some cases) inability of the public landlord to grant certain protections. Lender bench narrows to specialty leasehold lenders with public-land experience.
On any RFP-procured public-land ground lease bid. Engage public-land-experienced counsel before responding. The financeability of any winning bid depends on the leasehold-mortgagee protection package the public landlord will accept.
PUE (Power Usage Effectiveness) · Industrial: The ratio of total facility power to IT-load power. A PUE of 1.20 means that for every 1.0 watt of compute power the facility consumes 0.20 watts on cooling, lighting, transformers, and other overhead.
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Lower PUE means more of the contracted utility allocation becomes revenue-generating IT load. Modern hyperscale designs in temperate climates target PUE of 1.10 to 1.25; legacy designs from the 2000s often run above 1.5. Worked example: a 60 MW utility allocation at PUE 1.20 supports 50 MW IT load (60 / 1.20). The same 60 MW allocation at PUE 1.50 only supports 40 MW IT load. At hyperscale rents of roughly $1.5M per MW per year, that 10 MW gap represents $15M of annual revenue and roughly $200M of stabilized value at a 7% cap rate.
PUE moves both the effective MW capacity and the tenant attractiveness for re-lease at the end of the initial term. Tenants increasingly write PUE caps into their leases. Lenders treat PUE as a forward-looking obsolescence variable when sizing perm and modeling exit cap rate.

Q

Qualified opportunity fund (QOF) · Loan structure: A vehicle organized to invest in qualified opportunity zone property under IRC §1400Z-2. Investors who roll capital gains into a QOF defer original gain recognition and, after a 10-year hold, eliminate tax on QOF appreciation.
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Sell stock or other appreciated property, roll the gain into a QOF within 180 days, and the original gain is deferred to 2026 (or sale of the QOF interest, whichever is earlier). After 10 years, the QOF appreciation is permanently tax-free.
QOF debt must satisfy substantial-improvement and 90% asset tests. Coordinate the construction-loan budget so the QOF is in compliance at every six-month testing date.

R

Rate buy-down · Pricing & spreads: An upfront fee paid to the lender at closing in exchange for a lower coupon over the loan term.
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Common on agency and life-co quotes. You pay points up front (e.g. 50 bps of loan amount) and the lender shaves the spread by some agreed amount.
Worth modeling against the actual hold period. The buy-down recoups slowly, so a short hold makes it a bad trade.
Rate cap · Pricing & spreads: An option contract under which the cap purchaser pays an upfront premium in exchange for the right to receive payments when a reference index (typically one-month SOFR) exceeds a defined strike rate.
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Caps are the standard hedging tool on floating-rate CRE bridge loans. They protect the borrower's covenant compliance and cash-flow exposure if SOFR spikes above the strike.
Cap pricing is driven by SOFR forward curve, implied volatility, term, strike, and notional. RFP three to five providers simultaneously to capture the 5% to 15% premium spread across providers.
Rate lock · Pricing & spreads: A binding agreement that fixes the loan coupon (usually index plus spread) ahead of closing, protecting the borrower from market moves before funding.
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Some lenders rate-lock at application, some at commitment, some only at closing. Earlier locks cost more, a non-refundable rate-lock deposit and sometimes spread itself.
If Treasuries are volatile, an early rate lock can save more than it costs. If they are calm, the lock fee is dead weight.
Rate-cap replacement reserve · Pricing & spreads: A funded escrow held by a floating-rate bridge lender during the initial rate-cap term to fund the cost of a replacement rate cap at extension or refinancing.
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Bridge lenders require the borrower to buy an interest-rate cap covering the loan term. When the loan term plus extensions exceeds the initial cap term, the lender requires a replacement-reserve escrow funded monthly during the initial cap period, sized to projected renewal cap cost.
Sponsor levers: pre-negotiate cap-counterparty selection (avoid lender-affiliated mark-up), confirm cap-premium financing into the loan, and negotiate the replacement-reserve trueing-up methodology. Cap collateral assignment is standard; preserve a borrower right to substitute counterparties on rating downgrade.
Receivership · Workout & default: A court-appointed third party (the receiver) takes operational and financial control of the property pending resolution of a default.
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The lender petitions the court for a receiver after default. The receiver collects rents, manages the property, and reports to the court, bypassing the borrower.
Receivership separates the property from the borrower's control before foreclosure completes. Common in states with long judicial foreclosure timelines.
Recognition / non-disturbance (ground lease) · Loan structure: A fee-owner agreement that on the leasehold mortgagee's foreclosure of the leasehold estate, the leasehold continues in effect on its existing terms and the fee owner cannot use the foreclosure as a cancellation event. The single most important leasehold-mortgage protection.
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Without recognition / non-disturbance from the fee owner, the leasehold mortgagee's collateral can be wiped out on a foreclosure. Recognition is a non-negotiable lender requirement and a baseline element of every modern ground lease.
On every leasehold-financing closing. Counsel-led review at LOI is the standard discipline; discovery at closing is too late.
Recourse · Loan structure: A loan in which the borrower (and often principals personally) is liable for the loan balance beyond the property collateral.
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Bank bridge and most construction debt comes with full or partial recourse. The personal guarantee can be dollar-capped, percentage-capped, or burn off as the asset stabilizes.
Recourse is a real cost, your personal balance sheet is collateral. Pricing should compensate; if it doesn't, push for non-recourse alternatives.
Refinancing gap · Loan structure: The difference between the existing loan balance at maturity and the new loan amount the property supports at current rates.
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Identify the gap early. Lining up gap capital takes longer than refinancing the senior, and equity calls have a way of going wrong at the last minute.
Regional bank · Lender types: A bank with deposits and lending concentrated in a defined geographic footprint, typically with $10B to $100B+ in assets.
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Regional banks dominate small- to mid-balance lending in their markets, generally $1M to $25M loans, often relationship-driven, almost always with recourse and balance-sheet hold.
After 2023, many regional banks dramatically pulled back on CRE concentration. Liquidity is uneven; relationships matter more than ever.
REIT blocker · Loan structure: A U.S. corporation that elects REIT status and sits between foreign investors and the underlying U.S. real property. Ordinary REIT dividends to a foreign investor are generally subject to 30% withholding or a treaty rate, and are not FIRPTA gain. Capital-gain dividends from the sale of U.S. real property, and liquidating distributions, can still be FIRPTA income unless an exception such as a domestically controlled REIT applies on a sale of the shares.
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Common rates: 15% (Canada, U.K., Germany), 0% on certain pension distributions.
REIT blockers add 75% gross-income and 95% gross-income test compliance requirements, plus distribution requirements that affect the fund's distribution waterfall. Cost-benefit analysis is per-investor.
Release price · Loan structure: The amount required to release one property from a cross-collateralized loan, typically a defined percentage (105% to 125%) of the allocated loan amount for that property.
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The premium over allocated debt is how the lender preserves coverage on the remaining pool. Tighter coverage tests increase the effective release price.
When you sell one asset out of a cross pool, the release price determines how much equity comes out, and whether the sale even pencils.
Rent roll · Underwriting & metrics: A schedule of every lease in a property, tenant, square footage, rent, lease term, options, deposits.
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The single most-scrutinized document in commercial diligence. The rent roll feeds the abstract, the WALT calculation, the rollover schedule, and (with the T-12) the underwritten NOI.
Errors on the rent roll, wrong rent, missed escalations, expired lease still listed as in-place, are the leading source of last-minute sizing changes at closing.
Rent roll abstract · Process & docs: A condensed lease summary, tenant, term, base rent, escalations, options, key restrictions, feeding the rent roll and underwriting.
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Lender's counsel and underwriter both abstract leases. Differences between abstracts are common and have to be resolved before closing.
Missed renewal options or co-tenancy clauses found in abstracting can collapse a deal's underwriting late in the process.
Replacement reserves · Underwriting & metrics: Lender-required monthly escrow deposits to fund future capital replacements (roof, HVAC, parking lot, exterior). Typically $200 to $400 per unit per year for multifamily; varies for commercial property by type and age.
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Replacement reserves protect the lender's collateral by making sure the building is reinvested in over time. The borrower funds them monthly; the lender holds and releases them against documented capital work.
Reserve amounts and release mechanics are negotiable. An over-funded reserve hurts cash flow distribution; an under-funded one starves the asset of capital and depresses long-term value.
Reserves · Loan structure: Lender-required escrows funded out of operating cash flow for taxes, insurance, replacements, TI/LCs, and other future expenses.
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Most loans require monthly funding of tax and insurance reserves. Replacement reserves (typically $200 to $300/unit annually for multifamily) and TI/LC reserves are common on commercial product.
Reserve requirements reduce distributable cash flow. They also reduce the borrower's tax and insurance risk, and the lender's loss exposure if a trigger event hits.
Residual ground lease term · Underwriting & metrics: The remaining term on a ground lease at the time of leasehold financing. Rating-agency criteria typically require residual term to exceed loan maturity by a defined cushion, often 10 to 30+ years depending on structure.
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Residual term is the binding constraint on long-dated leasehold financing. A leasehold currently financed at 65% LTLV with 50 years residual may, ten years later at 40 years residual, still finance reasonably; at 25 years residual it becomes constrained; at 15 years residual it is largely unfinanceable conventionally.
On any ground-leased asset held long-term. Residual term planning, extension negotiation, modern ground-lease restructuring, or coordinated refinance + extension, is the critical discipline.
Retainage · Construction & development: A portion of each construction draw (typically 10%, sometimes stepping to 5%) held back by the lender to make sure the GC and subs complete the project. Released in tranches at substantial completion and final completion.
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On a $40M hard-cost budget at 10% retainage, $4M is held back by substantial completion. It's working capital the GC and subs cannot deploy elsewhere, but it's the lender's mechanism for making sure the punch list gets closed.
Stepped retainage (10% on first 50% of work, then 5%) is a meaningful sponsor-friendly negotiation at the loan-document stage. Coordinate retainage between the loan documents and the GC contract.
Retrade · Process & docs: A lender-initiated change to the term sheet between commitment and closing, typically wider spread, lower proceeds, or tighter structure, triggered by market movement, third-party report findings, or MAC clause invocation.
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A retrade is the lender saying we still want to do the deal but on worse terms. The borrower's leverage at this point is limited because the deal is far down the path and other lenders may not move quickly enough to back-stop.
Reducing retrade risk starts at the term sheet (tight MAC, narrow third-party report contingencies, expense caps) and continues through diligence (no surprises in the appraisal, environmental, or engineering reports).
RevPAR · Hospitality: Revenue per available room, the single most important hotel operating metric. Computed as occupancy × ADR, or rooms revenue / available room nights.
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RevPAR captures both how full the hotel is and how much it charges. Two hotels with the same RevPAR can have very different occupancy / ADR mixes, and the mix matters for operating cost.
On every hotel underwrite. Lender NOI assumptions size off forecast RevPAR; stress sizing applies a RevPAR shock to test resilience. Brand-validated RevPAR forecasts trade tighter than sponsor-only forecasts.
RevPAR index · Hospitality: A hotel's RevPAR divided by its comp set's RevPAR, multiplied by 100. Above 100 = winning share; below 100 = losing share.
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Distinct from absolute RevPAR. A hotel can have high RevPAR but a low index (in a strong market) or low RevPAR but a high index (in a weak market). Both tell different stories.
Lenders increasingly underwrite RevPAR Index trend as much as absolute RevPAR. A declining index signals brand or operations issues that absolute numbers may mask.
Rollover risk · Underwriting & metrics: The risk that leases expiring during the loan term will not be renewed, or will be renewed at lower rates, leaving the property's NOI exposed.
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Office and retail underwriters build rollover schedules and stress-test re-leasing assumptions. Concentrated rollover (40%+ in a single year) is a red flag.
Lenders price for rollover risk through TI/LC reserves, lower leverage, and sometimes a partial cash trap until rollover is resolved.

S

Sale-leaseback (CRE) · Loan structure: A transaction where an operating business sells its real estate and leases it back long-term, typically on triple-net (NNN) terms. SLB opens 100% of real-estate equity and converts owned real estate to a lease liability.
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An SLB lets the operating business open its real-estate equity in one transaction and use that capital for operating investment, acquisitions, or debt paydown. Pricing is the cap rate the buyer accepts on the lease, which depends on tenant credit, lease term, and asset quality.
When the operating company values capital efficiency and balance-sheet flexibility above real-estate appreciation upside. ASC 842 lease accounting added the lease asset/liability to the balance sheet, but the economics are still rent vs. debt service. Not tax or legal advice, coordinate with accounting and counsel.
SARM (Structured ARM) · Agency programs: Fannie Mae's Structured ARM execution, a 7- or 10-year floating-rate multifamily loan priced over SOFR with embedded interest-rate caps included in the loan structure. Includes a defined conversion option to fixed-rate at any point.
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Combines floating-rate execution with built-in cap protection and the option to convert to fixed if rates fall. Cleaner than separate bridge plus cap on long-dated holds.
SARM works best for sponsors who want long-dated floating-rate optionality with the ability to convert to fixed if rates fall and lock in the gain.
SBA (Small Business Administration) lender · Lender types: Lenders making 7(a) and 504 loans, government-guaranteed financing for owner-user commercial real estate.
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504 loans pair a first mortgage from a bank with an SBA-guaranteed second mortgage at fixed rates and long amortization. 7(a) is a single SBA-guaranteed loan up to $5M.
Owner-user CRE (the borrower occupies 51%+ of the property) is SBA's lane. For investment properties, SBA does not apply.
SBA 504 · Lender types: An SBA owner-user real-estate financing program structured as 50% bank first mortgage + 40% CDC debenture (25-year fixed) + 10% sponsor equity. Project size typically $1M to $25M+; CDC debenture cap $5M to $5.5M.
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Best when the operating company wants long-fixed certainty on the real estate, deal size is $5M+, and the sponsor wants 90% combined leverage. Slower than 7(a) (90 to 120 days) and process-heavier, but the 25-year fixed CDC tranche is unmatched. Owner-user occupancy required: ≥51% existing, ≥60% new construction. Not tax or legal advice.
SBA 7(a) · Lender types: An SBA single-loan financing program for owner-user real estate, equipment, and working capital. Loan amount up to $5M, 75% to 85% SBA guarantee, prime + 2.25% to 2.75% variable, 25-yr amortization on real estate.
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SBA 7(a) is the single-loan, multi-purpose-of-proceeds alternative to SBA 504. It bundles real estate, equipment, and working capital into one loan with one set of docs. Faster to close than 504 (60 to 90 days with PLP) but variable-rate.
Best for sub-$5M deals or where the borrower needs working capital folded into the loan alongside real estate. Closes faster than 504 but does not offer the 25-year fixed CDC tranche. Personal guaranty required from owners holding 20%+ equity.
Scattered-site SFR · Lender types: A portfolio of separately-titled single-family homes (typically 50 to 5,000+ properties) under common ownership, financed via warehouse lines, securitization markets, or bank/debt-fund portfolio loans.
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Scattered-site SFR is portfolio real estate. Lender treatment is portfolio-financing, not single-asset CRE. Underwriting focuses on rent-roll quality, market diversification, and property management capability across the portfolio.
When financing an SFR portfolio of any size. Sub-securitization-scale portfolios (50 to 999 homes) use specialty bank or debt-fund portfolio loans; institutional-scale portfolios (1,000+) access securitization.
Scenario expected loss (SEL) · Underwriting & metrics: The expected-value loss from the defined seismic scenario, expressed as a percentage of replacement cost. Reported alongside scenario upper loss (SUL) on a qualified seismic engineer's report per ASTM E2026 standards.
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SEL above 20% typically triggers lender earthquake-coverage requirements; SEL above 25% typically triggers larger coverage limits, retrofit reserves, or both. SEL below 15% commonly waives coverage requirements entirely on most CMBS and life-co programs.
On every California CRE deal and other seismic-zone deals. SEL is the operative threshold a lender's insurance-schedule review will key off of.
Schedule of real estate owned (SREO) · Underwriting & metrics: A summary of all real estate owned by the loan principals, addresses, ownership share, acquisition cost, current value, debt outstanding, NOI.
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Required at application by virtually every lender. Lenders cross-check SREOs against credit reports and county records.
Missing or stale SREO entries (especially undisclosed defaults) are the fastest way to lose lender trust mid-process.
Section 365(h) (Bankruptcy Code) · Workout & default: A provision of the U.S. Bankruptcy Code allowing a tenant to retain its possessory rights under a lease (for the remaining term plus renewal options) if the debtor-landlord rejects the lease in bankruptcy. A cornerstone protection for ground-leased leasehold financing.
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Case law has clarified application: rejection is a breach but does not terminate the lease. Practical leasehold-mortgagee response: the loan documents and the underlying ground lease's protection package work together with Section 365(h) to preserve collateral.
On every leasehold financing where bankruptcy of the leasehold tenant or the fee owner is a real risk. Counsel-specific bankruptcy review prudent at LOI.
Select-service hotel · Hospitality: A hotel asset class with limited F&B, no banquet space, and a smaller staffing footprint. Operating margins higher (35% to 45%), construction cost lower, financing pool wider than full-service.
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Select-service is the workhorse of the hotel financing market. Typical examples are the large national select-service brands. Per AHLA pipeline data, select-service is the dominant new-construction hotel segment in 2026.
When choosing between hotel asset classes for acquisition or development. Select-service has wider lender pool, tighter pricing, and lower per-key construction cost vs. full-service.
Seller carry-back · Loan structure: A promissory note from buyer to seller for a portion of the CRE purchase price, secured by a junior mortgage on the property, typically junior to a senior CRE first mortgage.
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On any deal where buyer / seller can't bridge the equity gap and senior lender will permit a junior lien. State law on usury and foreclosure varies materially, always have state-specific counsel review before signing. Not legal or tax advice.
Settlement statement · Process & docs: The line-item statement of all funds flowing at closing, purchase price, loan proceeds, prorations, taxes, fees, escrows, holdbacks.
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Final version is signed at closing. Drafts circulate for days beforehand; small errors compound into big wire-disbursement issues.
Read the settlement statement line by line. The wire amount is right or it isn't.
SFR securitization · Lender types: A securitization market for stabilized single-family rental portfolios, typically 1,000+ homes, issued as single-borrower bond stacks with senior AAA tranche, mezzanine tranches, and B-piece.
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SFR securitization prices institutional SFR portfolios as bond stacks. Pricing competitive with single-asset CMBS for top issuers; lender pool dominated by a small bench of investment banks. Sub-1,000-home portfolios use specialty bank or debt-fund portfolio loans instead.
When refinancing or capitalizing a stabilized institutional SFR portfolio of meaningful scale. Securitization typically requires 1,000+ home portfolios to be efficient. Property management capability is the sponsor-quality test.
SFR warehouse line · Lender types: A revolving credit facility sized off acquired SFR collateral at 70% to 80% advance rates. Aggregators buy homes, place them on the warehouse, lease up, and roll the stabilized portfolio off the warehouse into securitization or longer-term portfolio debt.
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Warehouse lines are the build-up financing for SFR aggregators. Revolving structure lets the aggregator add homes as it acquires them, and term out the stabilized portfolio into permanent capital when the line is full or the portfolio is securitization-ready.
Side letter (LP equity) · Process & docs: A bilateral agreement between the GP and a single LP that modifies the standard JV or fund terms for that one investor, typically covering most-favored-nation rights, reporting cadence, fee waivers, and co-investment access.
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Anchor LPs negotiate side letters as the price of their large commitment. Side-letter terms are not visible to other LPs unless an MFN election is triggered.
MFN provisions can cascade through the LP base if a side-letter term is later granted to a smaller LP. Track every side letter against an MFN election schedule before granting new terms.
Single-borrower CMBS (SASB) · Lender types: A CMBS execution in which a single loan (or a single sponsor's portfolio) is securitized as a standalone bond issuance.
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Used for $100M+ trophy loans. Bondholders see one collateral story, one sponsor, one asset (or portfolio), instead of a diversified pool.
SASB lets institutional sponsors get tighter pricing and bespoke structure than conduit can deliver, at the cost of a longer, more expensive issuance process.
Single-tenant net lease (STNL) · Industrial: A property leased entirely to one tenant under a long-term NNN lease, common in industrial, retail, and some office.
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STNL deals are essentially a credit play on the tenant. The asset has minimal management; the bond-like cash flow comes from the tenant's lease.
STNL underwriting starts with tenant credit. Investment-grade tenants get tight cap rates; weaker credit gets wider.
Skilled nursing facility (SNF) · Agency programs: A licensed senior-care facility providing 24-hour skilled nursing care, post-acute rehabilitation, and long-stay care. Revenue mix typically Medicare Part A (post-acute), Medicaid (long-stay), and private pay.
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SNFs provide the highest level of senior care outside hospitals. Payor mix drives the financing options: high-Medicaid SNFs (60%+) face a narrower lender options and depend on HUD 232 LEAN; Medicare and private-pay SNFs have broader bank and CMBS access.
When financing or refinancing a skilled-nursing asset. Per CMS data, Medicaid mix above 60% to 70% materially constrains the lender pool. Operator track record on AHCA / state surveys is the underwriting focal point.
Small Balance Loan (SBL) · Agency programs: Freddie Mac's multifamily former Small Balance Loan program for loans of $1 million to $7.5 million. New applications ended April 30, 2026. New small loans are Conventional Small, generally $2 million to $10 million. Streamlined underwriting and standardized terms.
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Designed for smaller multifamily owners and operators who would otherwise default to bank product. Pricing competitive with regional banks; non-recourse.
Conventional Small is Freddie Mac’s current small multifamily execution, generally $2 million to $10 million. The prior Small Balance Loan program stopped taking applications on April 30, 2026.
SNDA (subordination, non-disturbance, and attornment) · Loan structure: A three-party agreement among lender, landlord, and tenant: the tenant subordinates to the mortgage, the lender promises not to disturb the tenant on foreclosure, and the tenant agrees to attorn to the lender as new landlord.
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Major tenants demand SNDAs as a condition of signing a lease or an estoppel. The non-disturbance piece is what protects them from being kicked out at foreclosure.
Lenders condition many large new-lease approvals on getting an SNDA from the tenant. Negotiating SNDAs is part of leasing and part of financing.
SOFR (Secured Overnight Financing Rate) · Pricing & spreads: The Secured Overnight Financing Rate published by the Federal Reserve Bank of New York, based on Treasury repo transactions. The replacement for LIBOR as the standard floating-rate benchmark for U.S. CRE bridge loans.
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SOFR is roughly equivalent to a 1-day risk-free rate. Term SOFR (1-month, 3-month) is the forward-looking version of SOFR, published by its administrator from SOFR derivatives markets and used as the index on most CRE bridge loans.
Bridge loans price as SOFR plus spread. Cap strike selection, swap pricing, and rate-stack readouts all reference SOFR. The SOFR-Treasury basis affects the relative cost of bridge vs. perm.
SOFR rate cap · Pricing & spreads: An interest-rate derivative purchased by floating-rate borrowers that limits the maximum SOFR rate the loan will pay. Required by most bridge lenders.
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You buy the cap from a counterparty (typically a bank), pay a one-time premium up front, and the cap pays you back the difference if SOFR rises above the strike during the cap's term.
Cap cost depends on strike, term, notional, and rate volatility, frequently a six-figure expense at closing and a non-trivial replacement cost at extension.
Sources and uses · Process & docs: A two-column schedule showing where the deal's capital comes from (loan, equity, mezz, seller carry) and where it goes (purchase, capex, fees, reserves, working capital).
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Sources must equal uses. Tracking changes to S&U through the deal is how every closing dollar gets tied out.
Late-breaking changes (a smaller loan, a larger capex line, a closing-cost surprise) are absorbed by the equity line. Sponsors need to know the cap on that line.
Special Flood Hazard Area (SFHA) · Underwriting & metrics: FEMA-mapped area where flood insurance is mandatory under federal law for federally regulated lender financing. Zones AE, A, V (and subsets). Determined by Standard Flood Hazard Determination Form (SFHDF) at closing.
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SFHA triggers mandatory NFIP coverage at federal limits ($500K per building / $500K contents commercial), excess private flood up to replacement cost, monthly flood escrow, and (frequently) sizing concessions on lender DSCR / debt yield. Zone X is recommended-only.
On every CRE acquisition, refinance, and construction financing, flood-zone determination is a hard closing condition. Properties on the SFHA boundary flagged for closer review during third-party engineering.
Special purpose entity (SPE) · Loan structure: A bankruptcy-remote borrowing entity formed to own a single property and incur the loan. Required by virtually all institutional lenders.
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The SPE structure isolates the property from the sponsor's other assets and liabilities. Lenders rely on the SPE plus an independent director (on larger deals) to control bankruptcy risk.
Loan docs spell out SPE covenants in detail. Violating them, commingling funds, taking on outside debt, can trigger springing recourse.
Special servicer · Workout & default: In CMBS loans, the party that takes over a loan when it defaults or hits a workout trigger. Acts on behalf of bondholders and has meaningful discretion in negotiating outcomes.
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Special servicers are paid for performance and resolution, not for relationship preservation. They focus on bondholder loss minimization, which can favor or punish the borrower depending on the math.
Once a CMBS loan transfers to special servicing, fee accrual, lockbox activation, and decision-making authority all change. Borrowers should engage early.
Sponsor liquidity · Underwriting & metrics: The verifiable liquid assets (cash, marketable securities, undrawn lines) of the loan principals.
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Lenders typically require liquidity equal to 5 to 10% of the loan amount, post-closing. Construction lenders require materially more.
Liquidity covenants test against the actual covenant level, not what was true at closing. Distributions, redemptions, and adverse markets can put a sponsor offside fast.
Sponsor net worth · Underwriting & metrics: The total assets minus liabilities of the loan principals, used as a baseline for guaranty enforceability and lender comfort.
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Most lenders require net worth equal to or greater than the loan amount. Real estate net worth typically dominates the schedule; lenders apply haircuts.
Net worth is the headline; liquidity is the substance. Lenders chase both, but liquidity is what funds a cost overrun or tax escrow shortfall.
Spread · Pricing & spreads: The lender's margin above the benchmark rate. All-in rate equals benchmark plus spread.
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Spread is where competition shows up in pricing. Two lenders quoting off the same Treasury index will land at different all-in rates because their spreads reflect their cost of capital, the deal risk, and how badly they want the loan.
When you compare term sheets, isolate the spread before anything else. The benchmark is the same for everyone on a given day; the spread is the lender talking.
Springing recourse · Loan structure: A loan structure in which a non-recourse loan becomes full-recourse upon a defined trigger event, most commonly a voluntary bankruptcy filing.
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Different from a loss-liability carve-out, which covers the loss the act causes rather than the full loan balance. Springing recourse converts the entire loan to recourse, a much larger personal exposure.
Filing an SPE-borrower into bankruptcy without lender consent is the classic springing-recourse trigger. Litigation around modifications and workouts often hinges on whether a trigger occurred.
Stabilized occupancy · Underwriting & metrics: The occupancy level at which a property is considered fully leased under normal market conditions, typically 90 to 95% depending on asset class.
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Bridge and construction loans set a stabilization trigger (occupancy + DSCR + sometimes time held) that opens the take-out, the IO burn-off, or the recourse burn-off.
Missing the stabilization trigger is a soft default that often forces a modification or extension fee. Build the trigger thresholds into your operating plan.
Stabilized yield (yield on cost) · Pricing & spreads: Stabilized NOI divided by total project cost (purchase plus capex). The development equivalent of cap rate.
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If you spend $30M to build a property that produces $2.1M of stabilized NOI, your yield on cost is 7.0%. The spread between that and the market exit cap is the development premium.
Construction and value-add deals only pencil if the yield on cost beats the exit cap by enough to compensate for execution risk.
Step-down prepayment · Loan structure: A prepayment penalty that declines over the loan term, for example, 5% in year one, 4% in year two, and so on.
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The most flexible of the major prepayment structures. Common on agency loans and bank product. Easy to model, easy to plan a sale around.
Step-down is borrower-friendly, there is no Treasury math involved, just a known schedule. Worth pushing for in a flat-rate environment.
Stored materials · Construction & development: Construction materials purchased and stored either on-site or at a bonded supplier or fabrication shop, against which the lender will fund a draw at typically 80% to 100% of invoice subject to insurance and identification requirements.
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Long-lead items like switchgear, elevators, and HVAC equipment often require purchase 6 to 12 months before installation. Stored-materials funding lets the sponsor pay for them without funding out of equity.
Negotiate stored-materials terms at the loan-document stage. Default lender draft often only allows on-site stored materials; sponsor-friendly draft expands to off-site bonded suppliers.
Stress DSCR · Underwriting & metrics: Stress DSCR is coverage recalculated at a higher rate than the current rate, often the rate-cap strike.
In plain English
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Common on bridge loans where the lender wants comfort that the take-out works in a higher-rate world. The stress test often binds the loan size more than current-rate DSCR.
If the stress DSCR doesn't clear 1.20x, the lender will size you down to a level where it does. The take-out cap rate matters as much as today's NOI.
Subordination · Loan structure: An agreement by one party (a lender, a tenant, a ground lessor) to be junior in lien priority or claim to another.
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Tenants subordinate their leases to the mortgage so the lender can foreclose with clean title. Mezz lenders subordinate to the senior. Each subordination is documented and matters at default.
An unsubordinated lease, ground lease, or easement can block a foreclosure or tank a sale price. Title work catches most of these; the messy ones don't show up until workout.
Subordination agreement · Loan structure: Subordination agreement is the contract that sets payment priority and enforcement rights between two lenders, or between a lender and another party, on the same property.
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When a deal has more than one capital provider, subordination defines who gets paid first, who can cure a default, and when each party can foreclose or take action.
On capital-stack deals, the subordination agreement is as important as the loan documents themselves. Negotiate cure-period length and standstill mechanics before closing.
Subordination agreement (seller second) · Loan structure: A recorded three-party agreement (senior, junior / seller, borrower) that governs lien priority, payment-blocker triggers, cure rights, and standstill on remedies between the senior CRE first mortgage and the seller's junior carry-back.
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Senior demands typically include: combined CLTV cap (often 75% to 85%), standstill window (90 to 180 days), payment-blocker on senior default, consent to junior modifications, and approval of junior key terms (coupon, payment, maturity). Junior protections include cure rights and right to purchase senior at par on default.
The subordination agreement is the document that controls actual remedies on default, far more important than the underlying note terms in most workouts. Standard lender drafts leave the seller with limited practical remedies; counsel-negotiated drafts are materially better.
Subscription line / capital call facility · Lender types: A revolving credit facility secured by the unfunded capital commitments of a private fund's limited partners. The fund draws on the facility for short-term working capital and repays from LP capital calls within 60 to 90 days.
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Subscription lines bridge the gap between when a fund needs cash (to close on an asset) and when LPs are called. They are sized off the LP commitment base, not the fund's underlying assets.
Used aggressively, sub lines defer the LP IRR clock, which boosts headline IRR but raises ILPA-aligned investor concerns. Most sub lines now carry a 90-day to 12-month maximum hold rule.
Supplemental loan · Loan structure: A second mortgage from the same agency lender on top of an existing first mortgage, used to take out new equity as a property's value or NOI grows.
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Common on Fannie Mae and Freddie Mac multifamily. The supplemental loan layers on top of the existing senior; pricing reflects the combined-leverage profile.
Supplementals are how agency borrowers tap appreciation without refinancing, and without paying yield maintenance. Useful, but watch the combined DSCR.
Swap breakage cost · Pricing & spreads: The mark-to-market unwind cost of an interest-rate swap at termination, the present value of the difference between the swap's fixed rate and current market swap rate over the remaining term, multiplied by notional.
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Swap-priced bank loans use a separate swap to convert floating to fixed. At payoff, the swap must be unwound. If rates have fallen since origination, the borrower owes breakage; if rates have risen, the borrower receives a windfall.
Swap breakage is in addition to any prepayment penalty in the loan documents. Always model both numbers when evaluating a swap-priced bank loan against a fixed-rate alternative.
Swap rate · Pricing & spreads: The fixed leg of an interest-rate swap of matching maturity. Some lenders price off swaps instead of Treasuries.
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Banks that fund themselves in the swap market quote loans at swap rate plus a spread. The swap-Treasury spread (the 'swap spread') moves on its own and can favor or punish swap-priced lenders versus Treasury-priced ones on any given day.
Comparing a swap-priced bank quote to a Treasury-priced life-co quote means converting both to the same benchmark before you can call a winner.
Swap spread · Pricing & spreads: The spread between the matching-tenor swap rate and Treasury yield. Reflects dealer-balance-sheet capacity and counterparty credit risk; normally positive, occasionally inverts during funding stress.
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Bank perm prices over the swap curve; life-co perm prices over Treasury. When the swap spread widens, bank perm gets relatively more expensive vs. life-co. When it inverts, the opposite.
Compare the all-in rate and rate-setting terms when lenders use different reference curves. A particular mix of lender types is not necessary for every transaction.

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T-3 annualized · Underwriting & metrics: The most recent three months of operations multiplied by four, used to capture recent run-rate that the T-12 may not reflect.
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Useful for properties with recent rent bumps, lease-up trajectories, or new operational changes. Lenders often weight T-12 and T-3 together.
T-3 is the seller's friend in a rising-rent market and the lender's friend in a falling-rent market. Both sides cite the one that helps their case.
Targeted Affordable Housing (TAH) · Agency programs: Freddie Mac's lending platform for affordable multifamily, loans on properties with rent and income restrictions.
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TAH includes preservation, new production, and credit-enhanced bond executions. Often paired with LIHTC equity and/or HUD soft debt.
TAH pricing is meaningfully tighter than conventional Freddie. Designation and underwriting are program-specific.
Tax credit equity pricing · Pricing & spreads: The dollar amount investors pay per dollar of tax credit allocated. LIHTC pricing typically runs $0.85 to $0.95 per credit; HTC and NMTC pricing varies more widely with deal-specific risk.
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Pricing reflects the time value of money, projected investor IRR, deal-specific risk (recapture, completion, lease-up), and supply-demand for tax credits in the syndication market.
A 5-cent move in LIHTC pricing on a $1B deal is $50M of capital. Bridge sizing should be set against current pricing, not optimistic underwriting.
Tax credit recapture · Construction & development: An IRS rule requiring the tax credit investor to repay claimed credits (with interest) if the underlying property fails to maintain qualifying use during the compliance period, 15 years for LIHTC, 5 years for HTC.
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If the project fails its compliance test (rent above LIHTC limits, sale of HTC property, change of NMTC business activity), the investor is entitled to indemnity from the developer or sponsor.
Bridge lenders consider recapture risk in their advance rate. Most tax-credit equity syndications include tight operating covenants and reserves to insulate the investor from recapture.
Term sheet · Process & docs: A non-binding (or partly binding) summary of the proposed loan terms, amount, rate, term, amortization, prepay, recourse, fees, closing conditions.
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Term sheets get traded back and forth before a binding application or commitment is signed. Most of the loan economics get decided at the term-sheet stage.
The good-faith deposit is paid at term-sheet acceptance. From that point, the borrower is paying for third-party reports out of pocket.
Third-party reports · Process & docs: The set of independent reports a lender requires before closing, appraisal, environmental, property condition, ALTA survey, sometimes seismic, zoning, or radon.
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Funded out of the good-faith deposit, ordered by lender's counsel, delivered to the lender first. Borrowers see them when the lender shares them.
Third-party report timing usually controls the closing date. Earlier orders mean earlier closings.
TI/LC reserves · Underwriting & metrics: Lender-required escrows for future tenant improvements (TI) and leasing commissions (LC) tied to expected rollover.
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Calculated from the rent roll and a per-square-foot assumption (e.g. $40/sf TI, 4% LC for office). The reserve gets funded from monthly cash flow until the schedule is filled.
Heavy TI/LC reserves can drop distributable cash flow by 200 to 400 bps of yield. Modeling them is the difference between a deal that 'works on paper' and one that delivers cash.
Title insurance · Process & docs: An insurance policy that protects against losses from defects in the title to the property, outstanding liens, missing heirs, errors in prior conveyances.
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Lender's title policy protects the lender's lien up to the loan amount. Owner's title policy protects the buyer's equity up to the purchase price.
Title premiums are a real closing cost, typically 0.3 to 0.6% of the insured amount, varying by state. Endorsements add further cost but can fix specific exceptions.
Trailing 12 (T-12) · Underwriting & metrics: The most recent 12 months of actual property operations, used as the baseline for underwriting cash flow.
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Lenders start with the T-12, then make adjustments, adding stabilized rents, removing one-time items, normalizing taxes and insurance, to arrive at an underwritten NOI.
When the seller's T-12 doesn't tie to the rent roll, the buyer's broker has a problem. T-12 vs. T-3 annualized vs. proforma is where most underwriting disputes live.
Treasury rate · Pricing & spreads: The yield on a U.S. Treasury bond of matching maturity, used as the benchmark for fixed-rate commercial real estate loans.
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A 10-year fixed-rate loan typically prices at the 10-year Treasury yield plus a spread. When the Treasury moves, the loan rate moves, even before the lender adjusts the spread.

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UCC-1 financing statement · Loan structure: A public filing under Article 9 of the Uniform Commercial Code that perfects a lender's security interest in personal property, including, for mezz lenders, equity interests in the borrower SPE.
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Real-estate lenders perfect their lien with a recorded mortgage. Mezz lenders perfect with a UCC-1 against the equity. Foreclosing under the UCC is faster than foreclosing the real estate.
Title and UCC searches catch existing liens. Surprises here at closing usually mean an undisclosed prior loan or a stale filing that needs termination.
Underwriting · Process & docs: The lender's analysis of the borrower, property, and loan request to determine whether and on what terms to lend.
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Includes credit review, cash-flow analysis, market analysis, structural review, and (for some lenders) committee approval. Underwriting starts at term sheet and continues through closing.
Surprises that surface in underwriting (rent-roll discrepancies, sponsor SREO issues, market fundamentals) reshape the loan. Front-loading honest information avoids late-stage repricing.
Underwritten NOI · Underwriting & metrics: The NOI a lender uses to size the loan, derived from T-12 (and sometimes T-3) with adjustments for vacancy, taxes, insurance, reserves, management fee, and bad debt.
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Almost always lower than the seller's stated NOI. Lender NOI is the number that drives DSCR and debt-yield tests at sizing.
The gap between seller NOI and underwritten NOI is the gap between the loan you wanted and the loan you got. Identify the gap before you sign the term sheet.
Unrelated business taxable income (UBTI) · Loan structure: Income that flows through to a tax-exempt investor (pension, endowment, IRA) from debt-financed real estate. UBTI is taxable to the otherwise tax-exempt owner unless a section 514(c)(9) exception applies. A tax-exempt corporation is taxed at corporate rates. A pension, IRA, or other trust is taxed at trust rates.
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Pension funds and endowments lose their tax-exempt status on the leveraged portion of their CRE returns. The §514(c)(9) qualified-organization exception is the standard workaround for qualified pensions and certain educational endowments.
When tax-exempt LPs are in the equity stack, the GP must structure leverage to fit §514(c)(9) tests or the pension's after-tax return collapses. REIT-blocker structures are the alternative when §514(c)(9) doesn't fit.
USRPHC · Loan structure: A U.S. corporation whose U.S. real property interests make up at least 50% of the fair market value of its trade-or-business assets. Stock in a USRPHC is itself a USRPI, triggering FIRPTA on stock sales.
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USRPHC status converts what would be a non-U.S. stock sale into a FIRPTA-taxable transaction. The 50% asset test is measured at the testing date and on certain other dates.
Foreign-LP-friendly fund structures often work hard to keep portfolio companies below the USRPHC threshold or rely on the domestically-controlled REIT exception.

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Vacancy · Underwriting & metrics: The percentage of a property's leasable area or units that is unoccupied. Lender pro formas typically apply a market vacancy assumption (5 to 10%) on top of physical vacancy.
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Even a fully leased building gets underwritten with a vacancy line, there is no such thing as zero vacancy in a long-term hold.
Vacancy assumptions matter most on tight-cap-rate deals. A 200 bps vacancy adjustment can shift NOI enough to size the loan down materially.

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WALT (weighted average lease term) · Underwriting & metrics: The average remaining term of all leases in a property, weighted by base rent. A key tenancy metric for office, industrial, and retail underwriting.
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Longer WALT generally supports higher leverage and tighter pricing. A 7-year WALT office building is a fundamentally different lender conversation than a 3-year WALT building.
WALT shorter than the loan term means rollover risk inside the loan, and likely a TI/LC reserve requirement that reduces distributable cash flow.
Wildland-urban interface (WUI) · Underwriting & metrics: Areas where built environment meets wildland fuels and faces materially elevated wildfire risk. Mapped at the state and federal level; California, Oregon, Colorado, Washington, and Mountain-West WUI zones face the most acute insurance market hardening.
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WUI commercial assets have seen multiple admitted-market carriers withdraw since 2017 to 2020 wildfire seasons. Many WUI CRE assets are now on California FAIR Plan or other state residual markets with private excess wildfire stacked above. Combined cost has roughly doubled since 2018 on many WUI California assets.
On any Western U.S. CRE acquisition or refinance. Defensible-space documentation, ignition-resistant assemblies, and on-site suppression systems can materially improve lender treatment.
Wind deductible buy-down · Underwriting & metrics: A separate insurance policy (or endorsement) that sits inside the named-storm deductible and pays the difference between the contractual deductible and a target lower deductible (e.g., 5% to 1%). Provided by E&S, London and specialty domestic markets.
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Cost typically 0.20% to 0.60% of total insured value annually on a Florida or Louisiana coastal asset; Carolina and Texas tier-one slightly less. Confirms with the lender as part of the insurance schedule before binding, non-credited coverage is a real cost without a financing benefit.
On coastal CRE assets where the contractual named-storm deductible exceeds borrower per-event liquidity. Lender treatment varies, CMBS / agency stricter, debt fund / life-co more flexible.
Wraparound mortgage · Loan structure: A junior mortgage from buyer to seller for the full purchase price minus the buyer's down payment, the seller's existing senior mortgage stays in place and the seller services it from the buyer's payments.
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Buyer pays seller a monthly amount that includes the underlying senior debt service plus an additional spread; the seller pays the senior and keeps the spread. Most modern senior CRE loan documents prohibit wraps without consent (due-on-sale clause).
Wraps work primarily on assumable senior loans (HUD 223(f), HUD 232 LEAN, certain agency, some life-co loans). Outside that bench, the senior consent issue typically blocks the wrap. Counsel review essential, wrap structures must be reviewed with state-specific counsel.

Y

Yield maintenance · Loan structure: A prepayment penalty calculated to make the lender whole on the interest they would have received if the loan had been held to maturity, discounted at a Treasury rate.
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Common on life-company and bank perm debt. The penalty rises when rates fall and shrinks when rates rise, economically equivalent to a make-whole on a corporate bond.
Obtain a prepayment estimate based on the loan documents and proposed payoff date. The amount can materially affect a sale or refinance.

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