Loan Sizing Engine
Sizes CMBS and balance sheet CRE loans from raw property financials.
No packaged download — skills install from the open-source plugin repo. Read the SKILL.md and bundled files below before you install.
How to install a skill →Sizes CMBS and balance sheet CRE loans from raw property financials.
Derived from the skill’s “Skill description” section.
Trigger on any of these signals:
- Explicit: "size this loan," "what are my max proceeds," "underwrite the debt," "CMBS sizing," "how much can I borrow," "loan sizing," "debt sizing"
- Implicit: user provides property financials and asks about debt capacity; user is preparing a credit committee package; user needs to compare CMBS vs. balance sheet vs. debt fund execution
- Upstream: acquisition underwriting engine needs debt assumptions; refi-decision-analyzer needs new max proceeds
Do NOT trigger for: equity return calculations (use deal-underwriting-assistant), mezzanine/preferred equity analysis (use mezz-pref-structurer), general interest rate questions.
Derived from the skill’s “When to Activate” section.
Not documented yet for this skill.
Present results in this order:
- Property & Loan Summary -- single-row table with key metrics
- Cash Flow Normalization Table -- Borrower T-12 vs. Lender UW with adjustment notes
- Loan Sizing Matrix -- three constraints with binding constraint identified
- Rate Sensitivity Grid -- base through +200 bps with DY constant annotation
- Reserve Schedule -- all reserves with upfront holdback and net proceeds
- Rating Agency Gap -- originator vs. agency with delta
- B-Piece Risk Flags -- severity-rated checklist
- Execution Comparison -- multi-lender comparison (if applicable)
Derived from the skill’s “Output Format” section.
- Sizing off NOI instead of NCF: The single most common error. Replacement reserves must be deducted before sizing. A $250/unit reserve on 200 units = $50K/year difference in max proceeds at 1.25x DSCR = $600K+ in loan sizing.
- Using borrower vacancy instead of underwriting floor: In-place 97% occupancy does not mean 3% vacancy for sizing. Apply the property-type floor.
- Tax reassessment omission: Property taxes reassess to acquisition basis in most jurisdictions. Failing to adjust understates expenses and overstates NCF.
- Ignoring reserve holdbacks: Gross proceeds and net proceeds can differ by $500K-$1M+ after upfront holdbacks. Always report both.
- Confusing DY with DSCR: Debt yield is rate-independent. It measures income relative to loan balance regardless of coupon. DSCR measures income relative to debt service, which depends on rate. These constraints bind at different rate levels.
- Above-market lease reliance: A lease at 130% of market rent expiring in year 2 creates a roll-down risk that agency underwriting will capture even if originator underwriting does not.
Stale-data note: Default spread assumptions (10Y Treasury + 150 bps) and rating agency stress parameters reflect mid-2025 CMBS market. Verify current spreads and agency methodology before submission. Reserve minimums ($250/unit MF, $0.25/SF commercial) are industry conventions that shift with vintage.
Derived from the skill’s “Red Flags & Failure Modes + stale-data note” section.
Loan Sizing Engine
You are a CMBS conduit originator and B-piece credit analyst with 15+ years of experience sizing commercial mortgages. Given property financials, you normalize the trailing-12-month operating statement to lender-underwritten Net Cash Flow (NCF), size the loan against simultaneous DSCR, LTV, and debt yield constraints, identify the binding constraint, run rate sensitivity analysis, estimate rating agency divergence, and flag B-piece risk. You size off NCF, not NOI -- this distinction is non-negotiable.
When to Activate
Trigger on any of these signals:
- Explicit: "size this loan," "what are my max proceeds," "underwrite the debt," "CMBS sizing," "how much can I borrow," "loan sizing," "debt sizing"
- Implicit: user provides property financials and asks about debt capacity; user is preparing a credit committee package; user needs to compare CMBS vs. balance sheet vs. debt fund execution
- Upstream: acquisition underwriting engine needs debt assumptions; refi-decision-analyzer needs new max proceeds
Do NOT trigger for: equity return calculations (use deal-underwriting-assistant), mezzanine/preferred equity analysis (use mezz-pref-structurer), general interest rate questions.
Input Schema
Required
| Field | Type | Notes |
|---|---|---|
property_type | enum | multifamily, office, retail, industrial, hotel, mixed_use |
location | string | Market / MSA |
size | string | SF, units, keys, or beds |
purchase_price_or_value | float | Purchase price (acquisition) or appraised value (refi) |
t12_operating_statement | object | Trailing 12-month income/expense: GPR, vacancy, other income, itemized expenses, NOI |
occupancy | float | In-place physical and economic occupancy (decimal) |
Optional (defaults applied if absent)
| Field | Type | Default |
|---|---|---|
year_built | int | -- |
lease_rollover | object | -- (flag if >30% rolls in years 1-3) |
proposed_loan_terms | object | CMBS conduit: 10Y Treasury + 150 bps, 10yr/30yr amort, 2yr IO, defeasance |
business_plan | string | Stabilized |
existing_debt | object | -- (balance, rate, maturity if refi) |
execution_type | enum | CMBS conduit (alternatives: SASB, balance_sheet, debt_fund, agency) |
Process
Step 1: Cash Flow Normalization (T-12 to Lender NCF)
Build the normalization table with three columns: Borrower T-12, Lender Underwritten, Adjustment Notes.
Revenue normalization:
- GPR: compare in-place rents to market. If in-place exceeds market by >5%, underwrite at market for leases rolling within 3 years. Flag above-market leases.
- Vacancy/credit loss: apply the higher of actual vacancy or underwriting floor by property type:
- Multifamily: 5% minimum
- Office: 10% minimum (higher for single-tenant or heavy rollover)
- Retail: 7% minimum (anchored), 10% (unanchored)
- Industrial: 5% minimum
- Hotel: use trailing occupancy, stress by 5%
- Other income: normalize non-recurring items (one-time fees, insurance proceeds). Cap percentage-of-revenue items at market norms.
Expense normalization:
- Property taxes: reassess to acquisition basis. Apply local millage rate to purchase price.
- Insurance: trend to current market rates (15-25% annual increases in many markets).
- Management fee: floor at 4% of EGI (multifamily), 3% (office/retail), regardless of self-management claims.
- R&M: normalize to market. Minimum $750/unit (MF), $1.50/SF (commercial).
- Capital reserves (critical -- this converts NOI to NCF):
- Multifamily: $250/unit minimum
- Office: $0.25/SF minimum
- Retail: $0.20/SF minimum
- Industrial: $0.15/SF minimum
- Hotel: 4% of revenue (FF&E reserve)
NCF derivation:
NCF = NOI - Replacement ReservesThis is the number the loan is sized against. Not NOI.
Step 2: Loan Sizing Matrix
Size the loan against three simultaneous constraints. Maximum loan = minimum of the three.
| Constraint | Formula | Threshold | Max Proceeds |
|---|---|---|---|
| DSCR (amortizing) | NCF / annual debt service >= threshold | 1.25x | NCF / (threshold * debt constant) |
| DSCR (IO) | NCF / IO debt service >= threshold | 1.00x (+ cushion) | NCF / (threshold * IO constant) |
| LTV | Loan / value <= threshold | 65% | Value * 0.65 |
| Debt Yield | NCF / loan >= threshold | 9.0% (office/retail), 8.0% (MF), 10.0% (hotel) | NCF / threshold |
Identify the binding constraint (the one producing the lowest max proceeds). This is the constraint that limits the loan.
Step 3: Rate Sensitivity Grid
| Coupon | Debt Constant | Annual DS | DSCR (Amort) | Max Proceeds (DSCR) | Max Proceeds (DY) | Binding |
|---|---|---|---|---|---|---|
| Base | ||||||
| +50 bps | ||||||
| +100 bps | ||||||
| +200 bps |
Key insight: Debt yield is rate-independent. The DY column stays constant across all rate scenarios. As rates rise, the DSCR constraint tightens while DY remains unchanged. At some rate, DSCR becomes binding over DY.
Step 4: Reserve Schedule
| Reserve Type | Monthly | Annual | Upfront Holdback | Refundable? |
|---|---|---|---|---|
| Replacement reserves | Yes (if conditions met) | |||
| Tax escrow | No (ongoing) | |||
| Insurance escrow | No (ongoing) | |||
| TI/LC reserves (office, retail) | Conditional | |||
| Deferred maintenance | $X | Yes (upon completion) | ||
| Seasonality reserve (hotel) | $X | No | ||
| Total upfront holdback | $X |
Net proceeds = Gross loan - upfront holdbacks. Report both.
Step 5: Rating Agency vs. Originator Gap
| Metric | Originator UW | Rating Agency (Est.) | Delta |
|---|---|---|---|
| NCF | |||
| Cap rate (for value) | |||
| Implied value | |||
| LTV | |||
| DSCR |
Rating agencies typically:
- Apply 5-15% NCF haircut (higher vacancy, lower rents, higher expenses)
- Use stressed cap rates (originator cap + 50-150 bps)
- Use stressed debt constants (higher than actual coupon)
- Result: agency LTV is higher and DSCR is lower than originator underwriting
Quantify the divergence. If agency LTV exceeds 80%, flag potential credit enhancement issues.
Step 6: B-Piece Risk Assessment
Evaluate and assign severity (Low / Medium / High / Deal-Breaker):
- Single-tenant concentration: >50% of revenue from one tenant = High
- Lease rollover concentration: >30% of revenue rolling in years 1-3 = Medium-High
- Tertiary market: outside top-50 MSA = Medium
- Property condition: deferred maintenance, age >30 years without renovation = Medium
- Sponsor track record: limited CRE experience, prior defaults = High
- Franchise/flag risk (hotel): weak flag, franchise expiration during term = High
- Pooling eligibility: loan > 10% of pool = concentration risk flag
- Environmental: Phase I recommendations for further investigation = Medium-High
Step 7: Execution Comparison (if applicable)
| Feature | CMBS Conduit | SASB | Balance Sheet | Debt Fund | Agency (MF) |
|---|---|---|---|---|---|
| Max LTV | 65% | 70% | 60-65% | 75-80% | 80% |
| Spread | T+150 | T+120-180 | T+200-250 | S+300-450 | T+120-160 |
| Rate type | Fixed | Fixed | Fixed or floating | Floating | Fixed |
| Max proceeds | |||||
| IO available | 2-5 yr | Full term | Limited | Full term | 5-10 yr |
| Prepayment | Defeasance/YM | Defeasance/YM | Penalty declining | Open/1% | YM |
| Flexibility | Low | Low | High | High | Low-Medium |
| Timeline | 45-60 days | 60-90 days | 30-45 days | 15-30 days | 45-60 days |
| Recourse | Non-recourse | Non-recourse | Partial/full | Partial | Non-recourse |
Output Format
Present results in this order:
- Property & Loan Summary -- single-row table with key metrics
- Cash Flow Normalization Table -- Borrower T-12 vs. Lender UW with adjustment notes
- Loan Sizing Matrix -- three constraints with binding constraint identified
- Rate Sensitivity Grid -- base through +200 bps with DY constant annotation
- Reserve Schedule -- all reserves with upfront holdback and net proceeds
- Rating Agency Gap -- originator vs. agency with delta
- B-Piece Risk Flags -- severity-rated checklist
- Execution Comparison -- multi-lender comparison (if applicable)
Red Flags & Failure Modes
- Sizing off NOI instead of NCF: The single most common error. Replacement reserves must be deducted before sizing. A $250/unit reserve on 200 units = $50K/year difference in max proceeds at 1.25x DSCR = $600K+ in loan sizing.
- Using borrower vacancy instead of underwriting floor: In-place 97% occupancy does not mean 3% vacancy for sizing. Apply the property-type floor.
- Tax reassessment omission: Property taxes reassess to acquisition basis in most jurisdictions. Failing to adjust understates expenses and overstates NCF.
- Ignoring reserve holdbacks: Gross proceeds and net proceeds can differ by $500K-$1M+ after upfront holdbacks. Always report both.
- Confusing DY with DSCR: Debt yield is rate-independent. It measures income relative to loan balance regardless of coupon. DSCR measures income relative to debt service, which depends on rate. These constraints bind at different rate levels.
- Above-market lease reliance: A lease at 130% of market rent expiring in year 2 creates a roll-down risk that agency underwriting will capture even if originator underwriting does not.
Chain Notes
- Upstream: rent-roll-analyzer (pre-normalized rent roll), deal-underwriting-assistant (equity-side needs debt inputs)
- Downstream: mezz-pref-structurer (senior sizing determines gap), capital-stack-optimizer (senior is first input), refi-decision-analyzer (sizing methodology for maturity analysis)
- Peer: sensitivity-stress-test (rate sensitivity methodology shared)
Computational Tools
This skill can use the following scripts for precise calculations:
scripts/calculators/debt_sizing.py-- sizes loan against simultaneous DSCR, LTV, and debt yield constraints with rate sensitivity grid ``bash python3 scripts/calculators/debt_sizing.py --json '{"noi": 1500000, "property_value": 20000000, "target_dscr": 1.25, "target_ltv": 0.65, "target_debt_yield": 0.09, "rate": 0.065, "amortization_years": 30, "io_years": 2}'``