Commercial property where the loan is repaid mainly by the business that occupies it, not by rent from unrelated tenants.
The test is about where the repayment comes from, not who holds title. Under the definition in the OCC handbook, a property is owner-occupied when the primary source of repayment is not rental income from third parties unrelated to the owner. In numbers: rent from unaffiliated tenants is less than 50 percent of the source of repayment. At 50 percent or more, the loan is non-owner-occupied.
A manufacturer that buys its plant, a dentist who buys an office condo and a restaurant owner who buys the building all fit. So does a business that rents out a minority of the space. The handbook treats hospitals, golf courses, recreational facilities and car washes as owner-occupied unless they are leased to an unaffiliated party.
This changes the underwriting. The lender studies the operating business: its tax returns, its cash flow and its owners. The building is the collateral, and the business is the repayment. Owner-occupied loans also sit outside the commercial real estate concentration measures in the 2006 interagency guidance, which is one reason many banks seek them out.
How it shows up in the data here
Banks report it on its own call report line. This site shows the owner-occupied nonfarm nonresidential balance each bank held on its report date, and its share of loans. See owner-occupied CRE lenders and the largest books. The filing gives one total per bank. It does not say which property types or which borrowers.
Go further
- Owner-occupied CRE lenders: Banks and credit unions that hold owner-occupied commercial property loans.
- Owner-occupied loan comps: Recent loans on owner-occupied commercial property.
- 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.
- 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.
- Owner-occupied commercial real estate loan checklist: When a business borrows on the building it works in, the lender is underwriting the business first and the building second. The package has to prove both.
- How to read a bank call report as a loan searcher: Every bank files a call report each quarter. One schedule in it lists the bank's loans by kind. Read that schedule and you know what the bank holds. You still do not know what it made last quarter.
Related terms
- Non-owner-occupied commercial real estate: Commercial property where half or more of the loan's repayment comes from rent paid by tenants unrelated to the owner.
- SBA 504 loan: A fixed-asset financing in which a bank lends 50 percent or more, a certified development company funds up to 40 percent through an SBA debenture, and the borrower puts in at least 10 percent.
- SBA occupancy requirement: The rule that a business using SBA money on real estate must occupy at least 51 percent of an existing building, or 60 percent of a new one, and may lease out the rest within set limits.
- 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.
- Global cash flow: The combined cash flow of a borrower, its owners and their other businesses, set against all of the debt payments those same parties owe.
- Special purpose property: A building whose design or construction limits it to the use it was built for, such as a car wash, hotel, gas station or bowling alley.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.