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  • Writer's pictureSebastian Torres


This is a great article summarizing the different NOIs used during transaction negotiations. The author explains you have seller's actual NOI, seller's proforma NOI, buyer's adjusted actual NOI, and buyer's proforma NOI. Based on where I typically sit during these negotiations I would like to include a fifth NOI that should be considered, the lender's.

Lender underwriting is generally more conservative than the market and is an important consideration when identifying a property and accurately determining the loan proceeds available to you. To keep us on our toes, every lender has different underwriting models they use internally. Some use market cap rates while others use a standard cap rate by asset type. Some include TI/LC costs above the line and some below.

While the four NOIs mentioned in the article are important, don't forget about that fifth one.

Just as a refresher:

Gross Potential Rent (annual rent for all signed leases plus vacant space at the market rent)

Plus: Other income (tenant reimbursements, parking, percentage rent, etc.)

Less: Vacancy (as a percent of the gross potential rent)

Equals: Effective Gross Income

Less: Operating Expenses (excluding tenant improvements, leasing commissions, capital improvements, and debt payments)

Equals: Net Operating Income

Contributed by Sebastian Torres, Vice President


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