Commercial property where half or more of the loan's repayment comes from rent paid by tenants unrelated to the owner.
This is the investor side of commercial property: office, retail, industrial and similar buildings held for rent. The OCC handbook’s test is that 50 percent or more of the source of repayment comes from rental income paid by parties unaffiliated with the owner. The handbook also treats hotels, motels, dormitories, nursing homes, assisted living facilities and mini-storage as non-owner-occupied.
The lender underwrites the property first. It will ask for the rent roll, the leases, operating statements and a debt service coverage figure based on net operating income. The sponsor’s liquidity and track record come second, though they still count.
Regulators watch how much of this lending a bank holds. The 2006 interagency guidance flags a bank for closer review when its commercial real estate loans, as defined there, reach 300 percent or more of total capital and that book has grown 50 percent or more in the prior 36 months. A bank near that screen may slow down on new investor loans while staying open to owner-occupied ones, so a lender’s current book matters when you pick whom to call.
How it shows up in the data here
Banks report the balance on its own call report line. This site shows the non-owner-occupied nonfarm nonresidential balance each bank held on its report date. See investor CRE lenders, the largest books and loan comps. Banks report no loan-level data for office, retail or industrial, so the filing cannot tell you which property types a bank holds.
Go further
- Investor CRE lenders: Banks and credit unions that hold loans on income-producing commercial property.
- Search by investor CRE flag: Institutions with a meaningful non-owner-occupied book.
- DSCR calculator: Cash flow over debt service. Type the cash flow and the loan terms, see the ratio and the cushion before it falls to 1.00x.
- Debt yield calculator: Cash flow over the loan. The one ratio that ignores the rate, the amortization and the cap rate.
- Investor commercial real estate loan checklist: On an investor property the rent pays the loan. The package is the evidence for the rent: who pays it, for how long, what it costs to collect, and who stands behind the borrower if it stops.
- The CRE concentration guidance, explained: Bank regulators watch how much commercial real estate a bank holds against its capital. The guidance sets two screens. It does not set a limit, and it does not count owner-occupied buildings.
Related terms
- Owner-occupied commercial real estate: Commercial property where the loan is repaid mainly by the business that occupies it, not by rent from unrelated tenants.
- CRE concentration: A bank's commercial real estate loans measured against its capital. Federal guidance from 2006 flags 300 percent of total capital, with 50 percent growth in 36 months, for closer review.
- Net operating income (NOI): A property's annual income minus its operating expenses, before loan payments, income taxes and depreciation. It is the top number in DSCR and debt yield.
- Debt service coverage ratio (DSCR): Net operating income, or business cash flow, divided by the loan payments due in a year. It shows how many dollars come in for each dollar of debt service.
- NNN lease (triple net): A lease where the tenant pays rent plus the property's operating costs, typically taxes, insurance and maintenance. The exact split is whatever the lease says.
- Rent roll: A list of every unit or space in a property showing the tenant, the rent, the lease dates and what is vacant, as of a stated date.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.