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Most
common industrial property types are warehouse, manufacturing and flex space.
Warehouse could be single tenant and multi-tenant. Manufacturing can be light
and heavy and flex space can accommodate different type of industrial
operations. Stability and profitability of the tenant could be major factor in
industrial real estate financing.
Debt
Service Coverage measures a mortgaged property's ability to cover monthly
payments defined as the ratio of net operating income over the mortgage
payments. DSCR (debt service coverage ratio), of less than 1.0 means that there
is insufficient cash flow generated by the property to cover required debt
payments. Generally, 1.25 to 1.50x DSCR is required to get best terms on a loan,
depending on the quality of the location of the market, the property and the
existence and quality of major tenants.
The
ratio between the principal amount of the mortgage balance to the current value
of the underlying real estate collateral is referred to as LTV. Typically up to
75% maximum LTV in first position for permanent financing is available of
preferred terms. Higher leveraged requirements are possible but require much
higher interest rates. Interest rates are based upon the quality of the real
estate and the credit strength of the deal.