Systems and methods for evaluating commercial real estate property using stochastic vacancy information

• US 20030078878A1
• Filed: 10/22/2001
• Published: 04/24/2003
• Est. Priority Date: 10/22/2001
• Status: Abandoned Application

• Current Assignee: General Electric Capital Corporation (General Electric Company)
• Original Assignee: General Electric Capital Corporation (General Electric Company)
• Inventors: Opsahl-Ong, Lorinda R.
• Application Number:
  US10/045,468
• Publication Number:
  US 20030078878A1
• Time in Patent Office: Days
• US Class Current: 705/38
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof

Abstract

Systems and methods are provided for evaluating a property using stochastic vacancy information. According to one embodiment, a first stochastic value associated with a property is determined. For example, an interest rate or a market rent associated with the property may be determined. A second stochastic value, associated with vacancy information, is also determined. The first and second stochastic values are then used to predict income and/or debt service coverage ratio information associated with the property. The determinations of the stochastic values can be repeated in accordance with a Monte Carlo simulation to evaluate a potential loan associated with the property.

Claims

1. A method of evaluating a property, comprising:

determining a first stochastic value associated with the property;

determining a second stochastic value associated with the property, the second stochastic value being associated with vacancy information; and

predicting income associated with the property based on the first and second stochastic values.

2. The method of claim 1, wherein said determinations of the first and second stochastic values are repeated, and said predicting is performed in accordance with a Monte Carlo simulation to determine an income distribution.

3. The method of claim 1, wherein the first stochastic value is associated with an interest rate yield curve simulation.

4. The method of claim 1, wherein the first stochastic value is associated with a market rent forecast.

5. The method of claim 4, wherein the first stochastic value is further associated with a market rent volatility model.

6. The method of claim 1, wherein the first stochastic value is associated with at least one of:

(i) property expense information, (ii) capitalization rate information, and (iii) lease term information.

7. The method of claim 1, wherein the second stochastic value comprises vacancy time information.

8. The method of claim 7, wherein the vacancy time information comprises a vacancy time distribution.

9. The method of claim 7, wherein the vacancy time information is based on at least one of:

(i) market demand information, (ii) market vacancy information, and (iii) market supply information.

10. The method of claim 7, wherein vacancy time information is associated with a tenant renewal prediction.

11. The method of claim 1, wherein an evaluation is further based on at least one of:

(i) potential loan information, (ii) a lease structure, (iii) a rent, (iv) a scheduled rent increase, (v) a rent term, (vi) a debt term, (vii) a cash flow trigger, (viii) a flow-through lockbox, (ix) an earnout, (x) an interest reserve, (xi) debt information, (xii) an interest rate cap assumption, (xiii) operating expense information, and (xiv) management fee information.

12. The method of claim 1, wherein said predicting is performed for a plurality of properties.

13. The method of claim 12, wherein a cross-correlation matrix is utilized for the stochastic variables.

14. The method of claim 12, wherein said predicting is performed for each of the plurality of properties based on the first and second stochastic values.

15. The method of claim 1, wherein said predicting is performed for a property having a plurality of units.

16. The method of claim 1, wherein said predicting is performed for a plurality of time periods.

17. The method of claim 1, wherein said predicting comprises predicting net operating income information.

18. The method of claim 1, further comprising:

predicting the value of the property investment based on N years of discounted operating income returns, and the value of a sale in year N using a stochastic cap rate.

19. The method of claim 1, wherein said predicting comprises calculating debt service coverage ratio information.

20. The method of claim 19, wherein the debt service coverage ratio information is calculated based on net operating income information, operating expense information, management fee information, and debt service information.

21. The method of claim 19, further comprising:

evaluating a potential loan based on the debt service coverage ratio information.

22. The method of claim 21, wherein said evaluating comprises comparing the debt service coverage ratio information with a pre-determined value.

23. The method of claim 21, further comprising:

adjusting a potential loan parameter based on said evaluation.

24. The method of claim 19, further comprising:

predicting a loan workout result.

25. The method of claim 24, wherein said predicting is based on at least one of:

(i) a borrower deferred tax liability, (ii) a borrower litigation history, (iii) a loan amount, (iv) a borrower worth, (v) other borrower loans, (vi) loan to value information, (vii) borrower equity, and (viii) borrower capital.

26. The method of claim 24, wherein said predicting is based on a stochastic forecast.

27. The method of claim 24, wherein the loan workout result is associated with a predicted loss amount.

28. The method of claim 1, wherein said predicting comprises calculating loan to value information.

29. The method of claim 28, further comprising:

evaluating a potential loan based on the loan to value information.

30. The method of claim 29, wherein said evaluating comprises comparing the loan to value information with a pre-determined value.

31. The method of claim 29, further comprising:

adjusting a potential loan parameter based on said evaluation.

32. A computer-implemented method of evaluating a property, comprising:

determining a series of stochastic interest rate values associated with the property over a period of time;

determining a series of stochastic market rent values associated with the property over the period of time;

determining a series of stochastic vacancy values associated with the property over the period of time;

predicting debt service coverage ratio information associated with the property based on the stochastic values, wherein said determinations of the stochastic values are repeated, and said predicting is performed in accordance with a Monte Carlo simulation; and

evaluating a potential loan based on the debt service coverage ratio information.

33. An apparatus, comprising:

a processor; and

a storage device in communication with said processor and storing instructions adapted to be executed by said processor to;

determine a first stochastic value associated with a property,

determine a second stochastic value associated with the property, the second stochastic value being associated with vacancy information, and

predict income associated with the property based on the first and second stochastic values.

34. The apparatus of claim 33, wherein said storage device further stores at least one of:

(i) an interest rate information database, (ii) a market rent database, (iii) a vacancy information database, and (iv) an evaluation database.

35. A medium storing instructions adapted to be executed by a processor to perform a method of evaluating a property, said method comprising:

determining a first stochastic value associated with the property;

determining a second stochastic value associated with the property, the second stochastic value being associated with vacancy information; and

predicting income associated with the property based on the first and second stochastic values.

36. A method of evaluating a property, comprising:

determining a stochastic vacancy value associated with the property; and

predicting income associated with the property based on the stochastic vacancy value.