Loan cash flow modelling CRE

Pronto1's picture
Rank: Chimp | 13

Hi all,

I'm curious to learn more about the real estate debt side and am currently engaged with working on CRE loan cash flow modeling. Preferably I like to have a cash trap/cash sweep mechanism in my cash flow. How would you advise to build this into your loan cash flow? I assume one starts with the cash flow after debt service and trap/sweep that amount into a separate account. Looking forward to hear your input!

Many thanks!

Comments (3)

Dec 1, 2019

Structure in a loan generally isn't modeled unless there is a specific reason (low debt yield/dscr, upcoming large tenant rollover, etc). Generally in the face of something like that, you would sweep until a certain threshold is hit, say a debt yield above 10%, a dscr above 1.25x or enough money to revenant space.

So you really need to know what problem you are solving before you build any type of sweep into a model.

Dec 2, 2019

You would have all the NCFADS accumulate into an account that is only distributed when when a DSCR test is hit. The DSCR test, for example, could be 1.25x for the preceding 3 months or however it is written.

You would write a nested if statement that would distribute the cash out of the account if the DSCR for all months is surpassed, if not the cash keeps accumulating. You would have a BOP Cash Account Balance line, NCFADS for Period line, Distributed Cash in Period line, and EOP Cash Account Balance line.

    • 1
Dec 2, 2019
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