What is a T-12 in commercial real estate?

In commercial real estate, a "T-12" refers to a Trailing Twelve Months financial statement. It's a document that provides a comprehensive overview of a property's financial performance over the past twelve months. The T-12 is crucial for potential investors, lenders, and other stakeholders to assess the current financial health and performance trends of a commercial property.

Key components of a T-12 statement typically include:

1. Income: This section details all the income generated by the property, including rental income, parking fees, service charges, and any other sources of revenue. It provides month-by-month figures, giving a clear picture of the property’s income trends.
2. Expenses: This covers all the operating expenses incurred in maintaining and managing the property. These can include utilities, property management fees, maintenance costs, property taxes, insurance, and more. Like income, expenses are broken down on a monthly basis.
3. Net Operating Income (NOI): This is calculated by subtracting total operating expenses from total income. NOI is a key metric for evaluating the financial performance of commercial real estate, as it reflects the property's ability to generate profit from its core operations.
4. Capital Expenditures: Although not always included, some T-12 statements may also provide details on capital expenditures (CapEx) – significant investments made in the property, like renovations or major repairs.

The T-12 is especially valuable for analyzing properties with fluctuating incomes or expenses, as it offers a more recent and relevant snapshot of financial performance compared to annual statements. It's commonly used in due diligence processes during real estate transactions, allowing buyers and financiers to make informed decisions based on the latest financial data of the property.

In our last startup, Enodo, we built a tool to map T-12s to any chart of accounts using machine learning. At HelloData.ai, we predict income and expense line items in a T-12 (mapped to the CREFC chart of accounts) with less than 10% median error in any U.S. market using a combination of our comparable property detection algorithm and a proprietary machine learning model.