An appraiser's estimate of what a property will be worth on the future date it is projected to reach stabilized occupancy.
The OCC handbook defines the prospective market value upon stabilization, called the as-stabilized value, as an estimate of the property’s market value as of the date it is projected to achieve stabilized occupancy. Stabilized occupancy is the level the property is expected to reach after being exposed to the market for lease-up over a reasonable period, on terms comparable to similar properties.
It is one of two prospective values. The as-complete value is the estimate for the day construction finishes, when the building may still be empty. The as-stabilized value comes later, once the building is leased. Both differ from the as-is value, which describes today.
Lenders use the stabilized figure to judge the end of the plan: whether the finished, leased property will support a permanent loan large enough to repay the construction or bridge loan. The handbook says a bank’s file should hold appraisals on an as-is and as-completed or as-stabilized basis that state when stabilized occupancy is expected.
Because this value rests on projected rents and a projected date, a lender will test both. If rents during lease-up come in below the projection, the handbook notes, loan-to-value at completion can end up higher than planned. Know the rent, occupancy and date your appraisal assumed.
How it shows up in the data here
Not in the data. Appraisals are private and no filing on this site reports a prospective value. Banks do report construction and land balances, shown under construction lenders. To see what a projected income supports, run it through the maximum loan calculator.
Go further
- Maximum loan calculator: Loan size from stabilized income, coverage and loan-to-value.
- Construction lenders: Banks and credit unions with construction and land loans.
- Maximum loan calculator: The loan each test allows: DSCR, LTV and debt yield side by side, and which one binds.
- LTV and LTC calculator: Loan to value and loan to cost, the equity a lender will ask for, and the federal supervisory limit for the property type.
- Construction loan package checklist: A construction lender is lending against a building that does not exist yet. The package has to show what it will cost, who will build it, where every dollar comes from, and how the loan gets repaid when it is done.
- How bankers evaluate a commercial loan deal: A credit officer asks one question five ways: how will this loan be repaid, and what happens if it is not? Knowing the five tests lets you size a request before you send it.
Related terms
- As-is value: The market value of a property in its actual physical condition, use and zoning on the appraisal's effective date, with no credit for planned work.
- As-complete value: An appraiser's estimate of what a property will be worth on the date construction is expected to be finished.
- Appraisal: A written, independent opinion of a property's market value as of a specific date, prepared by a qualified appraiser.
- Lease-up: The period after a building is finished or renovated while it fills with tenants and its income climbs toward a stable level.
- Pro forma: A projection of a property's or project's future income, expenses and cash flow, built on stated assumptions and not on past results.
- Take-out loan: The permanent loan that pays off a construction loan, or the commitment from a lender to make that loan once the project is finished and leased.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.