CRE Glossary
This is a helpful list of industry terms and what they mean or refer to.
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Debt Service Coverage Ratio (DSCR)
A financial ratio used to evaluate a properties ability to produce income at a level necessary to cover its debt obligations. It is calculated by dividing a properties Net Operating Income (NOI) by its Debt Service.
Debt Yield
A key metric in commercial real estate used to evaluate the risk and potential return of a loan on a property. It is calculated as Net Operating Income divided by the Total Loan Amount.
Gross Operating Income (GOI)
Potential Gross Income (assuming all units are fully occupied) less losses due to vacant units and uncollected rent.
London Inter-Bank Offered Rate (LIBOR)
A prior benchmark interest rate that reflected the cost of banks lending to each other. It was phased out in 2021 and has been replaced primarily by the Secured Overnight Financing Rate (SOFR).
Loan-to-Cost (LTC)
A key metric in commercial real estate used to evaluate the level of debt in relation to a properties or projects cost. It is calculated as Loan Amount divided by the Total Project Cost
Loan-to-Value (LTV)
A key metric in commercial real estate used to evaluate the level of debt in relation to a properties value. It is calculated as the Loan Amount divided by the properties Appraised Value.
Net Operating Income (NOI)
A key metric in commercial real estate used to evaluate the profitability. It is calculated as the Gross Operating Income less the Operating Expenses.
Operating Expenses (OpEx)
All costs related to maintaining and operating the property. These include Management Fees, Administrative Expenses, Utilities, Repairs and Maintenance, Common Area Maintenance, Insurance, and Property Taxes.
Sizer
A financial tool used by lenders and investors to evaluate and determine the maximum loan amount that can be secured against a commercial property.
Secured Overnight Financing Rate (SOFR)
A benchmark interest rate that reflects the cost of borrowing cash overnight, secured by U.S. Treasury securities.