Commercial Mortgage Quick Reference Guide
Click a Term Below
Gross Potential Rent
ADR: Average Daily Rate
Commercial Bridge Loans
CMBS and Conduit Loans CTL: Credit Tenant Lease Debt Service Coverage Ratio Debt Coverage Ratio Debt Yield
Gross Rent Multiplier
GLA: Gross Leasable Area
LIHTC Loan Constant
Recourse Loans TI/LC: Tenant Improvements/Leasing Commission
Skin In The Game
GPR: Gross Potential Rent
Gross potential rent, or GPR, is a calculation of the maximum amount of rental income that a landlord could generate from a property. GPR assumes that a property has 0% vacancy and that there are no rental payment issues. In addition, gross potential rent is based on market rent, which is the average amount of rent that tenants pay for similar properties in the same geographic area.
GPR Example Calculation
If a property has a 12 units, each which has a market rent of $10,000 a month, the property would have a monthly GPR of $120,000, and an annual GPR of $1,440,000, assuming that there is 100% occupancy. GPR can be multiplied by the average occupancy numbers for the property (or, if the property is new, of similar properties in the area) to determine a more accurate estimate of what the potential rent might be. For instance, if the property’s monthly GPR is $120,000 (like in the example above), and the average occupancy rate for the area is 95%, a borrower or lender may estimate that the actual rental income will be closer to $114,000/month.
Other Related Financial Metrics
While GPR is an important financial metric, it’s not the only metric that attempts to help borrowers and lenders understand the profitability of a property. For example, a property’s rent roll actually shows its current rental income, which is affected by both vacancies and non-paying, late, or partially-paying tenants. In addition, T3 and T12 respectively show a property’s previous 3-month and previous 12-month financial numbers, which can also indicate income changes over time and expenses that could cut into a property’s potential profitability.