OOCRE (Owner Occupied Commercial Real Estate) is typically a

commercial property Commercial property, also called commercial real estate, investment property or income property, is real estate (buildings or land) intended to generate a profit, either from capital gains or rental income. Commercial property includes office bu ...

of one of the following types: *

Office An office is a space where an Organization, organization's employees perform Business administration, administrative Work (human activity), work in order to support and realize objects and Goals, plans, action theory, goals of the organizati ...

(Office Buildings and/or Office Condos) *Industrial (Including warehouses and manufacturing facilities) *Retail *

Shopping Center A shopping center (American English) or shopping centre (Commonwealth English), also called a shopping complex, shopping arcade, shopping plaza or galleria, is a group of shops built together, sometimes under one roof. The first known collec ...

*Agricultural *Hotel & Motel *Senior Housing / Assisted Living Facilities *

Health Care Health care or healthcare is the improvement of health via the prevention, diagnosis, treatment, amelioration or cure of disease, illness, injury, and other physical and mental impairments in people. Health care is delivered by health profe ...

*Special Purpose Unimproved land, Multifamily Homes, and Residential Income Homes are not recognized by most banks or lending institutions as OOCRE. OOCRE is a description utilized to describe the use or utility that the owner will have with the property. Typically an operating entity (

Corporations A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and r ...

, Partnerships, LLC, etc...) will own the property with the purpose of running business operations out of it or interacting with customers in there.

Financing

OOCRE is distinct from commercial investment property and is viewed differently. In investment properties, the building generates

cash flow A cash flow is a real or virtual movement of money: *a cash flow in its narrow sense is a payment (in a currency), especially from one central bank account to another; the term 'cash flow' is mostly used to describe payments that are expected ...

that services the

debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The ...

with

banks A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Because ...

. The duration, dollar amount, and

credit quality A credit rating is an evaluation of the credit risk of a prospective debtor (an individual, a business, company or a government), predicting their ability to pay back the debt, and an implicit forecast of the likelihood of the debtor defaultin ...

of the

tenants A leasehold estate is an ownership of a temporary right to hold land or property in which a lessee or a tenant holds rights of real property by some form of title from a lessor or landlord. Although a tenant does hold rights to real property, a l ...

determine in part a bank's willingness to lend. In OOCRE lending, the cash flow to service the bank debt is typically driven by the cash flow of the underlying business. Therefore, in lieu of reviewing

leases A lease is a contractual arrangement calling for the user (referred to as the ''lessee'') to pay the owner (referred to as the ''lessor'') for the use of an asset. Property, buildings and vehicles are common assets that are leased. Industrial ...

, a bank reviews the health of the business through financial analysis. Typical Bank loan terms on an OOCRE: *

Amortization Amortization or amortisation may refer to: * The process by which loan principal decreases over the life of an amortizing loan * Amortization (accounting), the expensing of acquisition cost minus the residual value of intangible assets in a system ...

Period are typically 15, 20 or 25 years. *Term period 5 to 25 years, if it does not match the amortization period, it is considered a

balloon payment mortgage A balloon payment mortgage is a mortgage which does not fully amortize over the term of the note, thus leaving a balance due at maturity.Wiedemer, John P, ''Real Estate Finance, 8th Edition'', p 109-110 The final payment is called a ''balloon pa ...

*Rates: most banks prefer to lend at variable rates (typically tied to Prime Rate or LIBOR). Some banks offer fixed rates for a term period. *

Prepayment penalties Prepayment is the early repayment of a loan by a borrower, in part or in full, often as a result of optional refinancing to take advantage of lower interest rates.Lemke, Lins and Picard, ''Mortgage-Backed Securities'', Chapter 4 (Thomson West, 201 ...

are very common, yield maintenance is one of the most typical forms of prepayment penalty. Moreover, some institutions charge flat fees and percentages that typically range from 1% to 5% of the unpaid principal if the loan is paid in full or partially by more than the scheduled payment by the amortization period.

References

{{Reflist Commercial real estate