What's asset stabilization for Commercial Properties?
I imagine there are several factors that contribute to asset stabilization. 

\&gt; % Occupancy 

\&gt; Credit Tenants

\&gt; Cash Flow / NOI etc. &gt; Mortgage

Is there a standard definition for what's considered a stabilized asset for different property types - office, retail and industrial? or it just really depends on financing and LTV, etc.
[{"id": "gfqbi0s", "text": "In a nut shell, an asset is stabilized when the revenue doesn't change moving forward.. with the exception of cost of living increases.\n\nSometimes historical data is required to show expenses won't increase seasonally.", "replies": [], "depth": 1}, {"id": "gfqbs4v", "text": "Whatever the lender determines as stabilized, and the calculation should be expressly determined in your loan documents.", "replies": [{"id": "gfsgcvc", "text": "Our documentation does not use that verbiage. We  require minimum occupancy and minimum debt service coverage for multifamily. For Senior housing we add a minimum NOI.  \n\nThe ratios are below what a stabilized property will reflect as I would think those would mirror the market at least.", "replies": [{"id": "gfsl57q", "text": "I wasn\u2019t making a statement, not specifically saying the verbiage that goes in the loan documents. \n\nAlso, you didn\u2019t include ratios.", "replies": [{"id": "gfslnx5", "text": "What I was trying to convey is that we as lenders do not refer nor require the property to be stabilized. It might be part of the conversation during our internal approval, but what we aim for is to have occupancy and debt service coverage ratios that give us a cushion.\n\nRatios might be a little different depending on the borrower, but documentation for multifamily will have something like 80% occupancy and 1.25X DSC the majority of the time. But that occupancy might be well below the market rate for that type of property. That is what I would consider as being stabilized. Heck, market rate might be 5% vacancy and that would give us a 1.50X DSC based on our loan amount. We have also not moved to debt yield and stick to DSC.\n\nTLDR: We don't determine stabilization.", "replies": [{"id": "gipgaf2", "text": "Generally how much time should pass for you to determine that there is 80% occupancy and 1.25x dsc a majority of the time\"?", "replies": [{"id": "giptmli", "text": "You need to have it at origination otherwise we will structure the deal with an \"earnout\" provision that will give you the additional funds once you achieve it. We will give you enough money now and the rest later. If you are a established investor, we might do an interest only period for stabilization.", "replies": [{"id": "giq1tgz", "text": "Thanks for this info. Another question if you don't mind... how would one prove the NOI? Bank statements? Tax returns?", "replies": [{"id": "giq31in", "text": "For income producing properties, company prepared financials, tax returns, and rent rolls are the standard.  I have never asked for bank statements although it was noted as a guidance in one of my previous employers.  \n\nRemember that not only will the bank be doing the underwriting, but the lender will visit the property, and we will be getting a third-party appraiser. So there are a lot of checks.", "replies": [{"id": "giq3lxx", "text": "So if I were to have added value to the property and increased the cash flow for the rent roll mid year, would you consider the new rent roll or simply go off the income for the whole year which included the old and new rent?", "replies": [{"id": "giq4c7e", "text": "The new rent roll, and the last month's P&amp;L will support a higher loan amount. But there has to be a story behind it and additional information.\n\nAre the new tenants under leases or month to month? If under leases scan all the leases and provided them as additional backup. Make sure the rent roll is detailed with not just the name, rent amount and unit number, but other info such as (move in date, lease expiration, type of unit ex: 1B/1B, square footage of unit). If you added value a summary of the Capex improvements. If you increased occupancy a rent roll at acquisition or a previous period to compare to the current rent roll. The initial rent roll does not have to have a lot of info.  \n\nThis will help the credit side understand how you got there and give comfort on the stability of the cash flow.", "replies": [{"id": "gixp3qh", "text": "Thank you for all this info. Much appreciated.", "replies": [], "depth": 11}], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gfqgd8h", "text": "Put of curiosity what is it that you\u2019re working on? You ask questions in the sub almost every day that demonstrate you don\u2019t know a lot of depth about CRE but they\u2019re pointed though which makes me think you\u2019re working on some sort of project.", "replies": [{"id": "gfqh34h", "text": "I have shared context in some of the other questions. \n\nWe're developing a software for pricing and revenue management. It's like Real Page yieldstar. \n\n I don't have operating experience in the industry, so I rely on subs like these to learn from those who do.", "replies": [{"id": "gfqrzsv", "text": "Interesting good luck. I don\u2019t know if you can really optimize revenue management outside of hospitality and multi - lot more art than science. Good luck though!", "replies": [{"id": "gfqsn89", "text": "Thanks. \n\nYep. Office, retail and industrial are quite different. We're trying to account for nuances of each property type. \n\nDefinitely a lot more art than Science. but also long term leases, high value, renewal terms and once you set price/terms you're kinda locked in for the length of the lease. So, pretty important to get these decisions right.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gg1o5u1", "text": "no there is no standard definition.  \n\nGenerally a stabilized property operates similar to other market property metrics (ie it has market vacancy, rental rates, and expenses).  No property exactly tracks the market so you are going to get in a huge gray area after that before you hit \"oh yeah that shit show definitely is value add\".  \n\nAs others mentioned your loan docs will have default provisions in regards to this but I'm not really sure that answers your question.  Depending on the range of stabilization needed you certainly may get normal financing on a distressed property with some slight modification (reserves etc).  \n\nThis is a more you know it when you see it thing.  If vacancy in the market is 95 and you are at 90 is that destabilized?  not necessarily.  If its 50 it probably is though.  Some of this is physical too.  If there are large capital costs required that are not in the normal planned maintenance cycles some people would certainly consider that value add (value add basically just means its not stabilized and if you fix whatever is needed, you added value and presumably you make money doing that)", "replies": [], "depth": 1}, {"id": "gg5ugu8", "text": "Stabilization occurs when the property is leased at market rents and vacancy/loss rates are at market-derived levels.", "replies": [], "depth": 1}]