Rent rolls and trailing-twelve statements

Every commercial income-property file starts with two spreadsheets that must agree. The rent roll lists each tenant, the suite, the area, the start and end of the term, the rent, the expense recoveries, the security deposit, any free rent or abatement still running, and options. Vacant suites are rows, not a footnote. The trailing-twelve operating statement, the T-12, is twelve months of collections and expenses, usually month by month, tied to the same building. Capital Market Funds arranges the loan from those documents. It does not replace them with a teaser.

Lenders compare billed rent on the roll to collected rent on the T-12. A gap is delinquency, free rent, or a tenant who is gone but still on the roll. Expense reimbursements on the roll should show up as recovery income, not as base rent. Percentage rent belongs on its own line with the sales report that supports it. A single annual total with no months hides a tenant who stopped paying in month nine. The checklist that sits next to these two documents is commercial loan documents.

Normalization is subtraction, not optimism

Underwriters remove income that will not recur: a lease termination fee, a one-time CAM true-up that will not repeat, and rent from a tenant who has given notice. They remove or adjust expenses that are not at market, including a related-party management fee far from what a third party would charge, and they add expenses the sponsor is not yet paying, such as reserves discussed on the TI and reserve note. They do not add 'upside' rent until a signed lease or a completed renovation supports it. Below-the-line items, capital costs, and debt service are not operating expenses, and they should not be buried in repairs so the net operating income looks smaller or larger than the building.

Red flags that stall a file are predictable. A roll dated six months ago. Tenants marked 'MTM' with no explanation. A related party paying a large share of rent. Residential units mixed into a commercial roll without a unit mix. Personal expenses of the sponsor in repairs. A T-12 that is actually a budget labeled as actual. Grocery centers add anchor sales reports and co-tenancy exposure, which the grocery pillar treats as property-specific. The calculator at DSCR will divide the net income you type by a payment you type. It will not audit the T-12.

What to send on the first pass

A rent roll dated within the last month, a T-12 through the same month, the general ledger detail for any line that looks lumpy, and a note that says which tenants are related parties. If you have a budget, label it as a budget and keep it off the actuals tab. Arrears should be an aging, not a silent reduction of rent. That package is enough for a first read of which capital source might fit. It is not an application and not a commitment.

The office is 7373 E Doubletree Ranch Rd #255, Scottsdale, AZ 85258. The phone is (480) 495-8072. Capital Market Funds, LLC - CBK-2007014 - Commercial Mortgage Banker and NMLS 1445066. A pretty offering memorandum does not replace the roll and the T-12.