What is a CRE sources and uses statement? A CRE sources and uses statement is a one-page summary of every dollar funding a transaction (the sources) set against every dollar the transaction spends (the uses), built so that total sources exactly equal total uses. It is the financial spine of a closing: it sizes the equity check, confirms the capital stack balances, and exposes any cost that was missed before the wire goes out. Using Claude to build one means extracting figures from the term sheet, purchase agreement, and cost estimates and assembling a balanced statement in minutes instead of a morning of spreadsheet wrangling. This workflow lives inside our complete guide to AI CRE finance and capital markets.
Key Takeaways
- A sources and uses statement must balance: total sources of capital equal total uses, and the common equity is the plug that makes the two sides tie.
- Uses include far more than the purchase price: closing costs, loan and financing fees, reserves, due diligence, and acquisition fees all belong on the statement.
- Claude extracts the loan amount from the term sheet, the price from the purchase agreement, and the cost estimates from your diligence file, then assembles a balanced statement and flags anything missing.
- A sources and uses statement is not a closing settlement statement; it covers the entire capital stack and the full cost to capitalize the deal, not just the escrow math.
- The equity figure the statement produces is the number every return metric depends on, so an incomplete uses side quietly overstates your returns.
Why Sources and Uses Is the Statement Everything Else Depends On
Every return metric in commercial real estate starts from how much equity the deal actually requires. Cash-on-cash return is annual pre-tax cash flow divided by total cash invested, and the internal rate of return (IRR) discounts cash flows against that same initial equity. If the uses side of your statement is light by two hundred thousand dollars of financing fees and reserves, your equity is understated, and every return number you show an investor is too high. The sources and uses statement is where that error is caught or created.
It is also the document that proves the capital stack closes. Senior debt, any mezzanine or preferred equity, seller financing, and common equity have to add up to exactly what the deal costs to acquire and capitalize. Building it forces you to confront the full cost of the transaction rather than the sticker price, which is why experienced sponsors treat it as the first real test of whether a deal is funded. The same rigor underpins our work on the AI data center financing capital stack, where layered capital makes the balance especially unforgiving.
The Two Sides of the Statement
The uses side lists everything the deal spends. The largest line is the purchase price, but a complete uses side also includes closing costs such as title insurance, legal fees, and transfer taxes; financing costs such as loan origination or commitment fees, lender legal, and an interest rate cap on a floating-rate loan; reserves for capital expenditures, operating shortfalls, and prepaid interest; due diligence costs including third-party reports; and any acquisition fee the sponsor charges. Leaving reserves and financing costs off the uses side is the most common error, and it is exactly the kind of omission Claude is good at catching when you give it the full document set.
The sources side lists everything that funds those uses. Senior debt comes from the lender term sheet. Subordinate capital, whether mezzanine debt or preferred equity, comes from its own term sheet. Assumed debt or seller financing appears if the structure includes it. Common equity, usually a general partner and limited partner split, is the final line, and it is the plug: common equity equals total uses minus all the debt and subordinate sources. When the two sides tie to the dollar, the statement balances and the equity raise is confirmed.
How Claude Builds the Statement From Your Documents
Claude's value here is extraction and reconciliation across documents that live in different files. Load the lender term sheet, the purchase and sale agreement, your closing cost estimate, and any subordinate capital term sheet into a Claude Project, then ask it to build a sources and uses statement. Instruct it to pull the loan amount and financing fees from the term sheet, the purchase price and any credits from the purchase agreement, and the reserve and third-party costs from your estimate, and to compute the required common equity as the balancing figure.
A worked example makes the mechanics concrete. Suppose the purchase price is ten million dollars. Uses also include two hundred fifty thousand in closing costs, one hundred thirty thousand in loan and financing fees, eight hundred thousand in a renovation reserve, two hundred thousand in an operating and interest reserve, fifty thousand in due diligence, and a one hundred fifty thousand acquisition fee, for total uses of eleven million five hundred eighty thousand dollars. On the sources side, a senior loan provides six million five hundred thousand and a preferred equity tranche provides one million. The common equity plug is therefore eleven million five hundred eighty thousand minus seven million five hundred thousand, or four million eighty thousand dollars. Sources now equal uses, and the statement balances. Claude assembles this in one pass and, just as usefully, tells you when a number is missing, for example when a term sheet references a rate cap whose cost has not been added to uses.
Reconciling the Capital Stack and Catching Errors
The reconciliation step is where a Claude-built statement earns its keep. Ask the model to confirm the loan amount implies a loan-to-value (LTV) consistent with the term sheet, where LTV equals loan amount divided by value, and to check that the implied leverage and the equity raise match what the deal was structured around. Have it list any use that commonly appears but is absent from your inputs, since a silent omission is more dangerous than an obvious one. The discipline mirrors the document-comparison work in our guide to Claude CRE term sheet abstraction, where the goal is to make every lender quote and cost directly comparable and complete.
Because the equity figure flows directly into the promote and distribution math, a clean sources and uses statement is the foundation for the next model in the stack. Once equity is fixed, that number feeds the AI waterfall modeling of GP and LP splits, where the contributed capital sets the preferred return base and the catch-up tiers. Sponsors who want this entire chain built once and reused on every deal can work with The AI Consulting Network to standardize it.
Where Human Judgment Still Owns the Statement
Claude assembles and checks the statement; it does not decide the structure. How much leverage to take, whether to use preferred equity or mezzanine debt, how large a reserve a lender will require, and what acquisition fee is appropriate are judgment and negotiation calls. Claude also relies on the documents you give it, so a financing fee buried in a side letter it never saw will not appear. Treat the model's output as a fast, well-organized first draft to verify against the actual closing figures, and confirm the final numbers against the settlement statement at closing. For organization-wide benchmarks on commercial lending terms and volumes, the Mortgage Bankers Association publishes useful context on where the market is pricing debt. If you want hands-on help wiring this into your deal process, Avi Hacker, J.D. at The AI Consulting Network builds these workflows for sponsors and investors.
Frequently Asked Questions
Q: What is the difference between a sources and uses statement and a closing settlement statement?
A: A sources and uses statement summarizes the entire capital stack and the full cost to capitalize the deal, including reserves and fees a buyer funds outside escrow. A closing settlement statement covers only the escrow-level debits and credits at closing. The first is a financing tool; the second is a closing document.
Q: Why must sources always equal uses?
A: Because every dollar the deal spends has to be funded by a dollar of capital. If the two sides do not tie, either a cost is unfunded or a source is unaccounted for. The common equity line is the plug that forces the balance, which is exactly why an incomplete uses side understates the equity required.
Q: Can Claude pull the numbers straight from a PDF term sheet?
A: Yes. Claude extracts the loan amount, rate, fees, and reserve requirements from a term sheet and places them on the correct side of the statement. Always verify the extracted figures against the source, especially fees and reserves, before relying on the equity total.
Q: Does the acquisition fee go in sources or uses?
A: The acquisition fee is a use, because it is a cost the deal pays, typically to the sponsor. It is funded by the capital raised on the sources side, which means it increases the equity the deal must bring in.