• Shockproof! Training
  • 1.866.237.7228
  • Non-Member

    Membership Check

    Please enter your email address and we will check to see if a membership exists for your organization.

    Check Cancel
  • Account
    • Sign in

      If you have an account, please enter your login information.

      Sign-in

      Find Enrollments

      To quickly access links to materials or Session Access instructions, enter the email address used when enrollment was performed.

      Click "Find Now" to begin search.

      Find Now

      Forgot your password?

      Please provide your email address and we'll email you a reminder.

      Send it to me!

      Subscribe

      Please provide the information below to receive our mailings.

      Subscribe!
      Account Options
      1. Sign In... enter the resource center
      2. Access Materials... find my enrollments
      3. Forgot password?... memories fade
      4. Subscribe... to receive our mailings
      5. Contact us... if you have any questions, just ask
      6. Create a User Account* requires membership
  • Sign-in
  • Home
  • Products
  • Learning Paths
  • Calendar
  • Pricing
  • Communications
  • Contact Us
  • Help
  • About Us
  • Membership Check
  • Account

Instructor Blog - Credit College - Commercial Real Estate

  1. Home
  2. Communications
  3. Instructor Blog
  4. Credit College - Commercial Real Estate

Session #7: Management Assessment, Competitive Forces, and Projected Performance


  • admin

  • 6/5/2019 10:21:27 PM

  • 29

  • Credit College - Commercial Real Estate
  • Copy / Share Link

Q: Where did the 0.519 multiplier used in identifying taxes due on company income used on Slide 35 come from?

A: The 0.519 multiplier is the sum of the maximum state and federal personal income tax rates in 2015 comprised of a 12.3% maximum for the State of California and 39.6% maximum federal tax rate as defined by the IRS. As indicated on Slide 35, we used the multiplier to estimate taxes payable on company earnings. In doing so we determined that the company would need to provide the partners with $37,364 in distributions if the maximum marginal tax rates applied to the partners. Since the maximum marginal income tax rarely applies – in fact, Schumacher's effective personal income tax rate for federal taxation was 27.9% in 2015 rather than 39.6% - the $37.364 is an over-estimate of the amount of distributions necessary to satisfy his personal income tax obligation on company earnings.

Q: Please explain the difference between the Combined Companies Debt Service Coverage (DSC) and Global DSC?

A: The Combined Companies DSC is the combined or total business cash flow for the four companies controlled by Mr. Schumacher divided by the debt service for the four companies. The actual calculation is $695,966 divided by $3,347,019 using information on Slide 47. The result is a combined DSC of 0.21.

Global DSC is defined as combined business cash flow plus the value of Mr. Schumacher’s contribution to global cash flow (GCF).  GCF is calculated by adding the $272,706 value of liquid assets held by Mr. Schumacher to the $695,966 combined business cash flow of the four companies for global cash flow of $968,672. The final step is to divide the $968,672 global cash flow by combined company debt service of $3,347,019. Global DSC is 0.29.

Q: What should be our approach in analyzing income producing property that has no performance numbers as in the case of smaller properties without good accounting records or new construction with no performance?  Is it appropriate to then use reasonable stabilized numbers provided by an appraisal?

A: If appraisal numbers are all you have, you'll need to work with them. Note that it is always wise to check with others familiar with the market and knowledgeable in performance metrics to determine the suitability of stabilized numbers from an appraisal. Knowledgeable contacts like lending colleagues, real estate agents, contractors with whom you have a relationship, or other owners of income-producing property in the area may be able to provide input or clarification as to how reasonable stabilized values are.

In the absence of reliable historic performance measures, it's imperative to pursue these issues to your satisfaction before committing funds.

Categories
  • Commercial Real Estate(33)
    • Commercial Real Estate(32)
    • Questions: Commercial Real Estate - Hands On(1)
  • Contractors(52)
    • Understanding and Analyzing Contractor Financial Statements: Part I of II(32)
    • Understanding and Analyzing Contractor Financial Statements: Part II of II(20)
  • Covenants(11)
    • Complex Loan Structuring(1)
    • Covenant Testing(1)
    • Covenant Use in Controlling Cash Outflows(5)
    • Financial Gap Ratio(1)
    • Financing Gap revisited(1)
    • The Financing Gap Ratio - defined(1)
    • UCA cash flow and debt service coverage?(1)
  • Credit College - Accounting Essentials(107)
    • Session #1: Financial Statement Structure and Composition(39)
    • Session #2: Double Entry Accounting, the Accounting Equation, and Debits and Credits(24)
    • Session #3: Critical Accounting Principles and Assumptions and More Debits and Credits(23)
    • Session #4: Recording Transactions and Creating the Balance Sheet and Income Statement(21)
  • Credit College - Cash Flow(14)
    • Session #1: UCA Cash Flow Statement, Traditional "Cash Flow," and EBITDA(8)
    • Session #2: Cash Impact Analysis, Borrowing Causes Revisited, and Management Assessment(2)
    • Session #3: FASB 95 Statement of Cash Flows Conversion to UCA Cash Flow Statement(1)
    • Session #4: Cash Flow Proxies, Debt Capacity, and the UCA Cash Flow Statement(3)
  • Credit College - Commercial Business(208)
    • Session #1: Analytical Decision Tree and the Credit Write-Up(29)
    • Session #2: Financial Statement Review and Ratio Analysis(43)
    • Session #3: Cash Flow Analysis and Borrowing Causes(34)
    • Session #4: Management Assessment, Projected Cash Flow, and the First Way Out(20)
    • Session #5: Guarantor Analysis and the Second Way Out(30)
    • Session #6: Non-Financial Red Flags and Performance Implications(13)
    • Session #7: Identifying and Mitigating Repayment Risks(21)
    • Session #8: The Credit Write-Up Again(18)
  • Credit College - Commercial Real Estate(218)
    • Session #1: The Credit Write-Up and the CRE Analytical Process(28)
    • Session #2: Ratios, Borrower Cash Flow, and the First Way Out(33)
    • Session #3: Guarantor Analysis, Global Cash Flow, and the Second Way Out(40)
    • Session #4: The Appraisal Report and Approaches to Market Value(9)
    • Session #5: The Income Capitalization Approach and the Cap Rate(24)
    • Session #6: Underwriting Standards. Actual vs. Stabilized NOI, and Breakeven Analysis(54)
    • Session #7: Management Assessment, Competitive Forces, and Projected Performance(16)
    • Session #8: Repayment Risks, Covenants, and the Credit Write-Up Revisited(14)
  • Credit College - Credit Basics(93)
    • General(1)
    • Session #1: Understanding Financial Statements and Business Organizations(34)
    • Session #2: Personal Qualities and Competitive Advantages(8)
    • Session #3: Critical Ratios and The First Necessary Condition for Business Success(28)
    • Session #4: Non-Financial Red Flags, Cash Flow and Second Necessary Condition for Business Success(22)
  • Credit College - Taxes(213)
    • Analysis Using Business Tax Returns(1)
    • Converting business income tax returns into accrual financial statements(1)
    • Employee Retention Credit (ERC)(1)
    • Session #1: Business Income Tax Returns(21)
    • Session #2: The Section 179 Deduction(29)
    • Session #3: Understanding Schedules K-1(19)
    • Session #4: Personal Income Tax Returns and Cash Flow(14)
    • Session #5: Schedule M-1 and the Accrual Income Statement(25)
    • Session #6: Business Income Tax Returns and Ratio Analysis(58)
    • Session #7: Business Income Tax Returns and Cash Flow Analysis(23)
    • Session #8: Cash Based Income Tax Returns(21)
  • Credit Curriculum(1)
  • Credit Write Up(33)
    • Analytical Focus in the Credit Write Up(27)
    • Description and Analysis in the Credit Write-Up(6)
  • Debt Capacity(9)
  • Financial Analysis(55)
    • ACS (Accounting Standards Codification) 842(1)
    • Analysis when one spouse is not a guarantor(1)
    • Auto Dealer analysis(1)
    • Auto Dealership/UCA/Floor-Plan debt(1)
    • Capital Gains(1)
    • Cash distributions, Business cash flow and Guarantor global cash flow(1)
    • Corporate tax return or CPA prepared financial statements?(1)
    • CPA firms and legal firms(1)
    • Credit Analysis Question(1)
    • CSVLI - Cash Surrender Value of Life Insurance(1)
    • Depreciation FAQ(1)
    • Distributions(1)
    • Distributions taken from prior year earnings(1)
    • EBITDA, Defined(1)
    • ESOP financing(1)
    • FAQ - calculating Business Profit (1)
    • Financing Needs(2)
    • Flooring Lines(1)
    • Funded Debt to EBITDA(1)
    • Gain on sale and traditional cash flow(1)
    • Insurance Company statements(1)
    • Language of Business On-Line Classroom Q & A(1)
    • Lending to a Start-up(1)
    • Market and industry data sources(1)
    • More on Depreciation(1)
    • Participations and private equity firms(1)
    • Pitfalls of Partial Analysis(4)
    • Prior Period Adjustments to Retained Earnings(1)
    • Ratios and Messages about Profitability and Cash Flow(12)
    • Schedule L(1)
    • Section 263A(1)
    • Self-Employment Tax(1)
    • Session #1: Business Income Tax Returns(1)
    • Session #2: The Section 179 Deduction(1)
    • SG&A% - Another FAQ(1)
    • SG&BC Course Progress Check Question(1)
    • Syndicated Loans(1)
    • Tax Returns vs. Accrual Statements in Assessing Borrower Risk(2)
    • UCA debt coverage ratio for an interim(1)
  • Five Cs of Credit(10)
  • Fund Accounting(52)
    • Fund Accounting and Municipality Analysis: Part I of II(31)
    • Fund Accounting and Municipality Analysis: Part II of II(20)
    • GASB 68(1)
  • Global Cash Flow(51)
    • Borrower with many corporations(1)
    • Global Cash Flow(50)
  • Healthcare(18)
    • Assessing Hospital Financial Performance(6)
    • Assessing Medical Practices(9)
    • Forces Impacting Hospital Financial Performance(3)
  • Loan Documentation(53)
    • Commercial Loan Documentation(30)
    • Commercial Real Estate Loan Documentation(23)
  • Minimum Financial Data(14)
  • Not for Profit Analysis(24)
  • Personal Income Tax Returns and Cash Flow(65)
    • Session #3: Understanding Schedules K-1(27)
    • Session #4: Personal Income Tax Returns and Cash Flow(38)
  • Problem Loans - Loan Classification(2)
  • Projections(22)
    • Projections and Repayment Sources: Part I of II(13)
    • Projections and Repayment Sources: Part II of II(9)
  • Spreading Financial Statements(6)
  • Stress Testing(1)
  • Testing(2)
    • Exams(1)
    • How do the Credit College exams work?(1)
  • Trusts(2)
    • Trust Returns(1)
    • Trusts(1)
  • UCA Cash Flow(58)
    • Advanced UCA Cash Flow: Part I of II(51)
    • Advanced UCA Cash Flow: Part II of II(4)
    • Related Party Transactions and the UCA Cash Flow Statement(1)
    • Sales Neutral Business Cash Income(1)
    • UCA Cash Flow and Agricultural Loans(1)
  • Working Capital and UCA Cash Flow(27)
Shockproof! Training

PO Box 30304 Walnut Creek, CA 94598
1.866.237.7228 support@shockproof.com

  • About
  • Career Opportunities

© Copyright 2001-2025 Shockproof! Training