Trailing Twelve Months TTM meaning
Trailing 12-Months (TTM) Explained
TTM TL;DR
Key points of consideration:
- TTM is short for Trailing Twelve Months, a financial statement.
- A TTM statement represents data from the past 12 consecutive months of operation of an entity, used for reporting financial figures.
- An apartment property's trailing 12 months represent its financial performance for a 12-month period, and is commonly requested by lenders in multifamily finance transactions.
- The last 12 consecutive months provides investors with actionable data that is both up to date and seasonally adjusted.
What is Trailing Twelve Months (TTM) in commercial real estate financing?
Trailing Twelve Months (TTM) is a financial statement that details a commercial real estate project's most recent twelve months of operations. It is used to determine the property's potential profitability and is requested by lenders when financing a commercial real estate project. TTM figures can come from sources like balance sheets, income statements, cash flow statements and more. It is not used for other types of commercial real estate like retail or office properties because tenants for those types of properties typically have leases that extend beyond twelve months.
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How does TTM affect the loan-to-value ratio in commercial real estate financing?
TTM (Trailing Twelve Months) is used to calculate the income and cash flow statements of a commercial real estate project. This information is used to determine the loan-to-value ratio (LTV) of a property. The LTV is calculated by dividing the loan amount by the value of the property. A higher LTV ratio indicates that the loan amount is higher relative to the value of the property. A lower LTV ratio indicates that the loan amount is lower relative to the value of the property. Therefore, TTM can affect the loan-to-value ratio in commercial real estate financing.
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What are the benefits of using TTM in commercial real estate financing?
The benefits of using TTM in commercial real estate financing are numerous. TTM provides a snapshot of a property's financial data for the last 12 months, which can be used to determine the potential profitability of a property. TTM can also be used to compare the performance of a property over time, as well as to compare the performance of different properties. Additionally, TTM can be used to assess the financial health of a property, as well as to assess the risk associated with a particular property.
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What are the risks associated with using TTM in commercial real estate financing?
The risks associated with using TTM in commercial real estate financing include the possibility of decreased net operating income, the need to make principal and interest payments, and the possibility of having to pay back the entire loan prematurely. Additionally, it is important to consider income taxes, the amount of money to be borrowed, and the various financing alternatives available before making a decision.
How can I calculate TTM for commercial real estate financing?
To calculate TTM for commercial real estate financing, you can add the last 12 months of income statements together (if income is recorded monthly), the last four quarterly statements (if it's recorded quarterly), or the last two semi-annual statements (if recorded twice a year). For cash flow statements, you can look at the last 12 months of records. For balance sheet information, you can take the last 12 months of records directly, as balance sheets provide a current "snapshot" of a project's assets, liabilities, and shareholder equity.
You may also want to look at a property's T3, or trailing three months, which looks at the last three months of a property's financial data. Additionally, you may want to look at a property's rent roll, which is a record of the current rental income that a commercial property generates, and its GPM, or gross potential rent, which is the potential rental income of a property at 100% occupancy.
TTM Meaning
TTM is a shortened version of Trailing Twelve Months, and can also be referred to as a T12.
What is TTM?
In apartment property financing, lenders will often request a TTM for the target property. A TTM, short for "trailing twelve months" is a financial statement that details an apartment property’s most recent twelve months of operations. In an apartment property purchase, the subject property’s TTM, along with its rent roll, are highly important forms of documentation that lenders will request from the borrower. TTMs are rarely utilized for other types of commercial real estate like retail or office properties because tenants for those types of properties typically have leases that extend beyond twelve months.
Trailing twelve month statements can be used in a variety of different ways, so a TTM can be calculated using a range of different data. This makes it doubly important to understand what information has gone into creating a TTM, and what the purpose of the data is. TTM figures can come from sources like balance sheets, income statements, cash flow statements and more.
TTM in Finance
Outside of multifamily finance, TTM figures are considered particularly more valuable during periods when an entity’s annual or quarterly numbers are outdated or when the target company has experienced volatility in its growth or profits during its last fiscal period. TTM data can also be scrutinized to help strategize the mitigation of the impact of seasonal changes that affect a company.
On a broader scale, TTM data is standard content to present to stakeholders and investors. A TTM helps to paint a clearer picture of a company’s current financial situation. It is also significantly important internally, and is a valid source of data to rely on when building business strategies, goals, or general planning. Using TTM data when planning and executing strategies for a company helps to ensure that decisions are being made using current and accurate company financial data rather than outdated information from a fiscal year report, which may have been created during a very different financial scenario.
What data is represented in a typical TTM?
TTM data is often requested for a plethora of unique financial transactions. A trailing twelve months report can apply to a broad range of situations and financial reporting, so the data represented in TTMs varies depending on the purpose behind each TTM report. Outside of multifamily, where they are mostly a common request by lenders to assess targeted multifamily property performance, the amount of use cases are a degree of magnitude larger.
A TTM is more than just a financial statement used for acquiring a loan, it is moreso actionable data for business owners, as they are often studied by companies internally to better understand financial growth and observe key performance indicators (KPIs). Accurate TTM data is invaluable for helping assess how well these targets are being met without the risk of errors of delayed reporting. TTM data can also provide more depth on revenue growth and margins and can help business owners mitigate seasonal volatility across different financial periods. The versatility doesn’t end there, either, since it can be used to analyze sales figures as well as price-to-earnings ratio - all of which may be particularly valuable to shareholders.
TTM Revenue
TTM Revenue represents the trailing 12 months (TTM) of revenue for a business. 12 months of up-to-date revenue data can be instrumental in analyzing growth, and can be further utilized to pinpoint precisely where that growth, if any, is coming from. Even so, TTM Revenue is often overlooked in favor of more drilled down reports such as a company’s profitability, or its capability for generating earnings before interest, tax, depreciation, and amortization (EBITDA).
TTM Yield
TTM yield is used specifically to analyze an exchange-traded fund (ETF) or mutual fund’s performance. In this sense, TTM Yield refers to the income a portfolio has returned to investors over the last 12 months, given as a percentage. TTM Yield is determined using the weighted average of yields of all of the holdings within a fund, regardless of whether they are stock, bonds, or other similar funds.