When analyzing the financial health of commercial real estate properties, it’s common to look at performance over specific timeframes—both past and projected. One of the most widely used retrospective periods, especially for multifamily properties, is the Trailing Twelve Months (TTM).
What Does TTM Mean?
TTM refers to the most recent 12-month span of financial data, ending with the last completed month. For instance, if today is any date in March, the TTM would cover February of the previous year through February of the current year. This time frame continuously updates each month, offering a rolling view of performance.
Why Is TTM Important in Real Estate?
Lenders, investors, and analysts often use TTM financials to understand a property’s recent performance trends. This is particularly useful for multifamily assets, where leases typically run on an annual basis. The TTM data can provide insights into current cash flow, profitability, and changes in financial status over the past year.
To gain deeper insights, the TTM is often compared with the T3 (trailing 3 months). If trends seen in the TTM are mirrored or accelerated in the T3, it strengthens confidence in those patterns. If the T3 deviates, it could indicate a shift or reversal in the trend.
How TTM Financials Support Property Evaluation
Evaluating a property’s performance using TTM financials alongside a rent roll can provide a robust picture, especially for leased assets. For multifamily properties, this pairing offers clarity on rent income, while for commercial assets with longer lease terms, the rent roll helps contextualize revenue data.
Preparing TTM Financial Statements
If you’re required to provide TTM financials, it’s a good idea to check with the requesting party—whether a lender or partner—on exactly what’s needed. Typically, you may have to:
- Generate an income statement if the TTM doesn’t align with regular quarterly or annual reporting.
- Produce a cash flow statement under the same conditions.
- Provide a current balance sheet, which should already be up to date.
Calculating TTM in Practice
To determine the TTM for a specific date:
- Identify the most recent full month—it’s the final month of the TTM.
- Count back 11 months to mark the beginning.
So, if you’re in early November 2023, your TTM period would span November 2022 through October 2023.
At times, TTM may align with quarterly or annual periods (e.g., January for annual, April for Q1), but it remains a rolling monthly window regardless of fiscal calendars.
Where TTM Is Most Applicable
TTM analysis can technically be used for all types of commercial real estate, but it’s most beneficial for income-generating properties with consistent lease terms. Multifamily properties are a prime example, given their standard one-year leases. By contrast, TTM data may be less revealing for undeveloped land or commercial buildings with multi-year leases.
Still, even in those cases, reviewing TTM financials alongside other documents can offer valuable insights.
Conclusion
Providing TTM financials is a standard part of the due diligence process in commercial real estate—especially for multifamily assets. Keeping financial records current makes this request easier to fulfill and helps facilitate financing, acquisition, or investment decisions.