C-RETS cheat sheet

Property types: office, retail, industrial, multifamily, hospitality, self-storage, medical office, mixed-use; each has distinct lease structures and valuation drivers.

Usable vs. rentable area: rentable area includes a load factor (common area add-on); office load factors commonly run 10-20%, so rent per rentable square foot differs from rent per usable square foot.

Lease types by expense recovery: gross (landlord pays operating expenses), modified gross (landlord pays a base year or base amount), NNN/triple net (tenant pays base rent plus pro rata taxes, insurance, CAM).

CAM reconciliation: tenant share equals tenant's rentable square feet divided by total rentable square feet, applied to recoverable operating expenses; caps, exclusions, and gross-up provisions modify the result.

Lease term components: commencement date, rent commencement date, expiration, renewal options, termination rights, TI allowance, free rent, and escalations (fixed, CPI-indexed, or market reset).

Escalation math: fixed bumps compound annually; a 3% annual bump on $30.00/SF yields $30.90 in year two, $31.83 in year three; CPI escalations are typically floored and capped.

Standard lease measurement bodies: BOMA (office/industrial), and industry conventions for retail (GLA) and multifamily (unit count and net rentable area).

Due diligence scope: title and survey, Phase I ESA, property condition assessment, zoning and entitlements, estoppel certificates, and rent roll verification.

NOI = effective gross income minus operating expenses, excluding debt service, capital expenditures, depreciation, and income taxes.

Effective gross income = potential gross income minus vacancy and collection loss plus other income; vacancy and credit loss are modeled explicitly, not assumed away.

Cap rate = NOI / property value (or price); rearranged, value = NOI / cap rate. Cap rate is an unlevered, year-one going-in yield.

Cash-on-cash return = before-tax cash flow / equity invested; before-tax cash flow = NOI minus annual debt service.

Debt service coverage ratio (DSCR) = NOI / annual debt service; lenders commonly require 1.20x-1.35x, with lower thresholds for stabilized multifamily.

Loan-to-value (LTV) = loan amount / appraised value; loan amount is typically the lesser of the LTV-constrained and DSCR-constrained amounts.

IRR is the discount rate that sets NPV of all cash flows to zero; equity IRR uses initial equity outflow, annual before-tax cash flow, and net sale proceeds.

Equity multiple = total distributions / equity invested; it ignores timing, so pair it with IRR and hold period.

Direct capitalization is a single-year method; DCF discounts multi-year cash flows plus reversion. Reversion value often uses a terminal cap rate applied to forward NOI.

Vacancy rate = vacant square feet / total inventory square feet; availability rate also counts space marketed but still occupied under an active lease.

Absorption = change in occupied square feet over a period; net absorption = leased (occupied) space added minus space vacated.

Construction pipeline (under construction plus proposed) relative to inventory signals future supply pressure; compare to trailing average annual absorption.

Market rent vs. contract rent: contract rent is the in-place lease rate; the spread drives rollover risk and mark-to-market upside.

Submarket analysis beats metro-level averages for pricing: micro-location, access, amenities, and tenant mix drive rent and cap rate dispersion.

Employment drivers: office tracks office-using employment; industrial tracks trade, logistics, and e-commerce; multifamily tracks household formation and wage growth.

Cap rate compression/expansion is driven by interest rates, credit availability, investor demand, and perceived growth and risk in the submarket.

Comparable sale selection: same property type, similar size, submarket, vintage, lease profile, and transaction date; adjust for differences rather than applying the average blindly.

Purchase and sale agreement (PSA) core terms: price, earnest money, due diligence period, closing date, representations and warranties, and prorations.

Earnest money is typically hard (non-refundable) at expiration of the due diligence period; the deposit amount and go-hard date are negotiated leverage points.

Contingencies to clear: financing, due diligence, title/survey, environmental, and tenant estoppels; each has a deadline tracked on a closing checklist.

Estoppel certificates: tenants confirm lease terms, rent, deposits, and defaults; lenders and buyers require them, and PSA usually sets a required percentage of rent roll.

Prorations at closing: rents, CAM, taxes, and utilities are allocated by day; security deposits transfer as a credit to the buyer.

1031 exchange timing: 45 days to identify replacement property and 180 days to close (or the tax return due date, whichever is earlier).

Broker commission structures: percentage of price, flat fee, or graduated; listing agreements specify exclusivity, term, and co-brokerage splits.

Closing documents: deed, bill of sale, assignment of leases, tenant notice letters, title policy, and settlement statement; coordinate lender and title company deliverables.

Post-closing: transfer of leases, service contracts, warranties, and tenant contact data; reconcile final CAM and true-up items per the PSA.