Glossary of Terms

1031 Exchange (aka like-kind exchange)

A method of deferring capital gains taxes on the sale or disposition of an asset held for business or investment purposes by exchanging the asset, 

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180-Day Exchange Period

Under IRC Section 1031, an exchanger or taxpayer executing a delayed exchange has 180 calendar days from the closing date of the sale

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200% Rule

Under IRC Section 1031, an exchanger or taxpayer executing a delayed exchange has 45 calendar days from the closing date

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45-Day Identification Period

Under IRC Section 1031, an exchanger or taxpayer executing a delayed exchange has 45 calendar days from the closing date of the sale of their

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721 UPREIT Exchange

The same tax deferral benefits are achieved as with a 1031 exchange. Capital gains taxes are deferred until such time as the exchanger sells 

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95% Rule

Under IRC Section 1031, an exchanger or taxpayer executing a delayed exchange has 45 calendar days from the closing date of the sale of their

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Absolute Triple Net Lease

Also known as a bondable lease, the most extreme form of NNN Lease, in which the tenant is responsible for all property related risks. 

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Absorption

The rate at which rentable space is leased within a market or submarket over a given period of time. Gross absorption measures total square feet

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Accommodator

An independent person, company, or entity that enters into a written agreement with the exchanger to facilitate the transfer of proceeds

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Accredited Investor

An accredited investor, also referred to as a sophisticated investor, is an investor with special status under financial regulations.

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Actual Receipt

Physical possession of, exchange proceeds or other property by an exchanger completing a tax-deferred like-kind exchange.

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Adjusted Basis

The original purchase price of an asset plus its acquisition costs plus any capital improvements less the cumulative depreciation deductions

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Alternative Investment

An investment in asset classes other than the three traditional asset types (stocks, bonds, and cash). Most alternative investments are held

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Amortization

Paying off debt over a period of time with a fixed repayment schedule in regular installments. Monthly mortgage payments are often comprised of

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Anchor Tenant

The tenant that acts as the primary draw to a commercial property. It is usually the largest tenant in a shopping center or retail development.

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Appraisal

An estimate of a property’s fair market value by an authorized person with applicable knowledge and expertise. Appraisals can be used for taxation

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Appreciated Property

A property that has increased in value over time. This increase can occur for a number of reasons including increased demand or weakening supply,

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Appreciation

Increase in the value of an asset over time, which can be affected by a number of factors such as increased demand, weakening supply,

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Bankruptcy Remote

Typically used when discussing a special purpose entity. A bankruptcy remote entity is a separate legal entity whose bankruptcy or insolvency

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Base Rent

The minimum monthly rent due pursuant to a lease. Base rent does not account for expense reimbursements or percentage rent, which 

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Basis

In the context of commercial real estate, an asset’s basis is the original purchase price or cost of investment property plus any out-of-pocket

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Beneficial Interest

Typically referred to in manners concerning trusts, a beneficial interest is the right to receive benefit from assets held by another party. 

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Beneficiary

Any person who is eligible to receive distributions from a trust, will, or life insurance policy.

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Bondable Lease

See Absolute Triple Net Lease.

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Boot

Although not specifically defined (or even mentioned) in IRC Section 1031, the term “boot” is commonly used and refers to the fair market value of cash,

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Bridge Loan

A short-term loan that is used until a person or company secures permanent, longer-term financing or fulfills an existing obligation. 

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Broker Dealer

A person or firm in the business of buying and selling securities, operating as both a broker and a dealer, depending on the transaction.

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Capital Asset

For corporations and business entities, assets that have a useful life longer than one year and are not held for sale in the ordinary course of business.

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Capital Expenditures (CapEx)

In the context of commercial real estate, funds used by a company to acquire or upgrade physical assets that cannot be expensed as

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Capital Gain

An increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the basis of the asset. Capital gains can also

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Capital Gains Tax

Tax payable on capital gains realized from the sale of a capital asset. Capital Gains Taxes are assessed by the federal government in the United States

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Capital Improvement

See Capital Expenditures (CapEx).

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Capital Reserves

In the context of commercial real estate, capital reserves are funds designated for long term capital investment projects or

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Capitalization Rate (Cap Rate)

The initial rate of return an investment property is expected to generate. The Capitalization Rate is determined by dividing the

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Cash Flow

Net amount of cash moving in and out of a business, usually measured during a specified, limited period of time.

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Cash Reserves

In the context of commercial real estate, cash and cash equivalents held in short term accounts used to cover things such as

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Cash-On-Cash Return

Ratio of annual before-tax cash flow from an investment to the total amount of cash invested, represented as a percentage.

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Closing Cost Expenses

See Closing Costs.

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Closing Costs

Expenses over and above the price of the property that buyers and sellers normally incur to complete a real estate transaction.

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Commercial Mortgage-Backed Securities (CMBS)

Securities collateralized by loans secured by commercial property. A CMBS loan is a first-mortgage secured by commercial real estate which is

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Commercial Real Estate

Real estate intended to generate income or profit for the owner of the property. Generally includes all categories of non-residential real estate

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Common Area

The areas of a building that are available for the nonexclusive use of all its tenants, such as lobbies, corridors, and parking lots.

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Common Area Maintenance (CAM) Charges

The contribution or fee paid collectively by individual tenants for the maintenance and upkeep of the non-exclusive areas of the premises. 

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Comparables (Comps)

In the context of real estate transactions, properties similar to the one being sold or appraised used to determine the fair market value of the property.

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Compound Interest

Simply put, compound interest is “interest-on-interest”, or the ability of a financial instrument to generate earnings on its earnings.

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Concurrent Exchange

Refers to a method of executing a tax deferred exchange (aka 1031 exchange or like-kind exchange) where the sale of the relinquished property

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Condemnation

The seizure of property by a public authority for a public purpose. Condemnation typically occurs when a taxpayer owns property in a place

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Conservation Easement

A landowner voluntarily agrees to sell or donate certain rights associated with his or her property – often the right to subdivide or develop – and

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Constructive Receipt

Direct access to tax-deferred like-kind exchange funds or other property by an exchanger completing a tax-deferred like-kind exchange.

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Contract for Deed

A contract between a seller and a buyer of real property in which the seller provides financing to the buyer to purchase the property.

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Contract Rent

This term is used synonymously with Stated Rent.
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Core Property

Core properties exhibit the lowest risk and lowest potential returns amongst the four major commercial real estate risk profiles, and represent

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Core-Plus Property

Core-plus properties are generally similar to core properties, but have a slightly higher degree of risk and potential for slightly higher returns than core properties.

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Credit Tenant

A tenant with the size and financial strength worthy enough of being rated as investment grade by one of the three major credit agencies: Fitch, Moody’s,

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Credit Tenant Lease

A method of financing real estate where the landlord borrows money to purchase the property and pledges the rent to be received from the tenant

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Debt Service

The cash that is required for a particular time period to cover the repayment of interest and principal on a debt. 

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Debt Service Coverage Ratio (DSCR)

In the context of commercial real estate, a measure of the cash flow available to pay current debt obligations. It is calculated as the annual

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Deed in Lieu of Foreclosure

A deed instrument in which the mortgagor (borrower) conveys all interest in a real property to the lender to satisfy a loan that is in default and avoid

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Deed of Trust

A deed of trust, like a mortgage, is a security instrument used to finance real estate. A deed of trust transfers legal title in real property to a trustee,

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Deferred Gain

In a tax-deferred exchange, the amount of gain that escapes current taxation and is deferred until a later date.

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Delaware Statutory Trust (DST)

A separate legal entity created as a trust under Delaware state laws. Despite the name, neither the property nor the investor need to be located

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Delaware Trustee

In a Delaware Statutory Trust (DST), the Delaware trustee maintains a physical address in the state of Delaware in order to prevent the DST from

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Delayed Exchange

Refers to a method of executing a tax deferred exchange (aka 1031 exchange or like-kind exchange) in which the exchanger or taxpayer sells

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Depreciation

In our context, depreciation refers to the allocation of an asset’s cost over the timeframe of its “useful life”, or duration for which it will be useful

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Depreciation Recapture

The USA Internal Revenue Service (IRS) procedure for collecting income tax on a gain realized by a taxpayer when the taxpayer disposes of an asset

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Discount Rate

The interest rate used to determine the present value of future cash flows in discounted cash flow analysis.

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Double Net Lease

A lease agreement in which the tenant is responsible for their pro-rata share of both property taxes and premiums for insuring the building,

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Down Payment

A payment used in the context of purchasing an expensive good or service, whereby the payment is the initial upfront portion of the total amount due

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DST Interests

DST Interests represent equity ownership in a large property by multiple investors through an investment structure known as a

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DST Sponsor

A DST Sponsor is a person or entity that creates a Delaware Statutory Trust (DST) to hold real property asset(s) and arranges for the issuance of

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Due Diligence 

An investigation or audit of a potential investment to confirm all material facts regarding a transaction. For example, when analyzing a potential property

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Effective Gross Income (EGI)

Income generated by a property including base rent and miscellaneous income, less vacancy and collection losses.

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Effective Rent

Net rental income received by landlord from a lease after deducting the value of concessions and costs incurred to secure the lease such as

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Environmental Site Assessment (ESA)

A report prepared for a real estate holding that identifies potential or existing environmental contaminations liabilities.

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Equity

The value of an asset less the value of all liabilities on that asset. For example, if an investor owned a property with a market value of

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Equity Interests

Ownership interest in a business entity, from the concept of equity as ownership. For example, if an investor owned a 10% interest in

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Equity Investments

One or more shares in the ownership of a business or corporation that are purchased by investors. In contrast to debt investments, equity investments

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Equity Load

A commission paid by an investor on his or her investment in a security (in this case a beneficial interest in DST or TIC). The sales charge is paid to

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Escrow Agent

An entity that has fiduciary responsibilities in the transfer of property from one party to another. The escrow agent acts as a custodian of

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Escrow Funds

Capital held by a neutral entity in an account for the benefit of the parties of a financial arrangement whereby the funds are distributed only after certain

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Exchange Accommodation Titleholder (EAT)

Used when completing a reverse exchange, an Exchange Accommodation Titleholder (EAT) is an unrelated party who holds legal title to either

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Exchange Accommodator Titleholder (EAT)

See Accommodator.

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Exchange Agreement

A written agreement between the exchanger and the Qualified Intermediary defining the transfer of the relinquished property, the ensuing purchase

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Exchange Period

Under IRC Section 1031, an exchanger or taxpayer executing a delayed exchange has 180 calendar days from the closing date of the sale

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Exchange Proceeds

Cash proceeds from a transfer of relinquished property held in a qualified escrow account set up by a qualified intermediary whereby the funds

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Exchanger

In a tax deferred exchange (aka 1031 exchange or like-kind exchange), the taxpayer or owner of the property or properties being exchanged

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Exclusive Right Listing

Formal agreement between a seller and a real estate agent, under which the real estate agent has the sole right to sell a specified property.

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Exclusive-Agency Listing

Agreement established between the seller and one real estate agent, where the seller reserves the right to sell the property on his or her own,

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Exit Cap Rate

See Terminal Cap Rate.

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Expected Return

The amount an investor would anticipate receiving on an investment that has various known or expected rates of return.

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Face Rent

This term is also known as Stated Rent.

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Fannie Mae

The Federal National Mortgage Association (abbreviated as FNMA and commonly referred to as “Fannie Mae”) is a publicly traded

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Federal Home Loan Mortgage Corporation (FHLMC)

See Freddie Mac.

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Federal National Mortgage Association (FNMA)

See Fannie Mae.

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Financial Leverage

The use of borrowed funds to acquire an investment. In the context of commercial real estate, this typically involves the use of a mortgage

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First Trust Deed

See Deed of Trust.

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First-Loss Position

An investment’s or security’s position that will suffer the first economic loss if the underlying assets lose value or are foreclosed upon.

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Fixture

Something that is permanently attached to real property.  Examples include items such as HVAC systems, ceiling lights, awnings, window shades,

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Foreclosure

Legal process by which the mortgage holder attempts to recover the balance of a loan from a borrower who has defaulted by forcing the sale

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Foreign Investment in Real Property Tax Act (FIRPTA)

A United States tax law that imposes a tax on foreign persons disposing of United States real property interests. To ensure tax collection from

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Form 8824

A form to be filled out with an exchanger’s tax return in order to report the completion of a 1031 like-kind exchange to the IRS.

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Freddie Mac

The Federal Home Loan Mortgage Corporation (FHLMC), more commonly known as “Freddie Mac” is a publicly traded

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Future Value (FV)

Future value is a time value of money (TVM) concept that represents the expected value, as of a defined date in the future, resulting from

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General Market Factors

General market factors refers to the overall conditions within a defined market that affect all properties within that market.

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Going-in Cap Rate

The cap rate based on the ratio of the first year of net operating income to the property purchase price. 

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Grant

To transfer an interest in real property by deed or other legal instrument.

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Grantee

One to whom the grant is made. The recipient who will be taking title, as named in the legal document used to transfer the real estate. 

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Grantor

The person or entity making the grant. For example, if Alice sells her property to Bob, then Alice would be the Grantor.

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Gross Absorption

Gross absorption measures total square feet absorbed or leased without regard for vacated space during the same period,

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Gross Lease

A lease in which the tenant pays a flat sum for rent out of which the landlord must pay all expenses such as taxes, insurance, maintenance, utilities, etc. 

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Gross Rent

Rent charged to occupy a premise without any additional rent for operating or other expenses.

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Gross Rent Multiplier (GRM)

An investment property valuation method which is the ratio of a property’s price to its gross revenue.

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Gross Square Footage

The total square footage of a building including all rentable spaces as well as all “non-rentable” space including common areas, 

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Ground Lease

A lease of the land only, on which the tenant usually owns a building or is required to build as specified in the lease.

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Hard Cost

Also called “brick and mortar expenses,” hard costs are any costs involved in the physical construction of a project. Included in hard costs are

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Hard Money Loan

A type of asset-based loan financing through which a borrower receives funds secured by real property. Hard money loans are typically issued by

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Health Ratio

A health ration, also known as an occupancy cost ratio, it the relationship between a retailer’s sales and total occupancy costs.

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Held for Investment

Properties held for investment purposes can be any property or asset that are acquired and held for income production (rental or leasing activities) or

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Holding Period

The real or expected period of time which an investment is attributable to a particular investor.

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Holding Title

Refers to the legal structure in which title to real property is owned. In the sale of real property, the title must be transferred from the seller to the buyer

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Identification Period

Under IRC Section 1031, an exchanger or taxpayer executing a delayed exchange has 45 calendar days from the closing date of the sale of their

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Independent Trustee

A trustee who is not related to the beneficiary of the trust and does not stand to inherit any property under the trust.

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Inflation

The rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling.

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Institutional-Grade Property

While not a precisely defined term, an institutional-grade, or institutional-quality property generally refers to a property of sufficient size and stature to

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Interest Rate Risk

The risk that an investment's value will change due to a change in the level of interest rates. These changes usually have an inverse effect on

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Interest-Only Loan

A loan in which, for a set period of time, the borrower pays only interest on the principal balance, with the principal balance remaining unchanged.

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Intermediary

An entity that acts as the middleman between two parties in a financial transaction.

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Internal Rate Of Return (IRR)

The discount rate at which the net present value of all cash flows (both positive and negative) from a project or investment equal zero.

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Investment Property

A broad term for a real estate property that has been purchased with the intention of earning a return on the investment, either through

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Joint Tenancy

Ownership of real estate by two or more individuals with the right of survivorship. A right of survivorship means that

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Lease

A legal document outlining the terms under which one party agrees to rent property from another party.

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Lease Co.

A legal entity established to operate as a master tenant under a Delaware Statutory Trust (DST) ownership structure.

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Lease Coverage Ratio

In the context of a Delaware Statutory Trust (DST), the lease coverage ratio is calculated by dividing the property’s NOI by the sum of the

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Lease Termination Fee

A payment made by the tenant or resident to the landlord in order to legally end a lease early and not be held liable for the remaining time.

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Leasehold Interest

Claim or right to enjoy the exclusive possession and use of an asset or property for a stated definite period, as created by a written lease.

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Leasing Commissions

Fees paid to real estate agents in connection with leasing space at a property.  Leasing commissions may be due to a “tenant rep” which is an

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Like-Kind Exchange

A method of deferring capital gains taxes on the sale or disposition of an asset held for business or investment purposes by exchanging the asset,

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Like-Kind Property

Upon the sale of an investment property, capital gains may be deferred by completing a 1031 exchange provided that the investor purchases

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Limited Liability Company (LLC)

A business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.

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Limited Partnership

Two or more investors who pool their money to develop or purchase income-producing properties. In a limited partnership, each limited partner's

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Line of Credit

A credit arrangement in which a financial institution agrees to lend money to a borrower up to a specified limit. The borrower can draw down on the

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Load Factor

The multiplier to a tenant's useable space that accounts for the tenant's proportionate share of the common area

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Load on Equity

See Equity Load.

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Loan-to-Cost Ratio (LTC)

The ratio of the loan balance to the total cost of the project the loan is financing, expressed by the formula loan balance divided by total cost.

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Loan-To-Value (LTV)

The ratio of a loan to the value of an asset as determined by the formula of loan balance divided by the market value of the asset securing the loan.

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Local Tenant

Also known as a “mom-and-pop", a local tenant is a small scale company with a narrow footprint typically limited to a single market.

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Market Adjustments

A change in market parameters or conditions brought about in response to one or more market signals (including price changes from shifts in

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Market Analysis

The process of studying certain characteristics and trends of a market to determine its strengths, weaknesses, opportunities and threats.

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Market Lease Rate

Current rental rate that a space would likely command in the open market, indicated by current rents paid for comparable space within a given market.

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Market Value

The most probable price that a property would command in a competitive and open market under fair sale conditions. Market value also refers to

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Master Lease

The primary lease that controls other sub-leases and may cover more property than all sub-leases combined.

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Master Tenant

Tenant which is party to direct lease with the property owner which subsequently sub-leases all or a portion of the property to other occupants.

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Mezzanine Financing

Financing that is junior in interest to the mortgage but senior in interest to equity. Mezzanine financing has a similar risk and return profile to

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Mixed-Use

Building or project that provides more than one use (e.g., a loft or apartment project with retail, an apartment building with office space,

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Modified Gross Lease

Rental agreement where the tenant pays base rent at the lease’s inception, but in subsequent years, also pays a proportional share, or

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Mortgage

A legal instrument that pledges the rights of ownership of an asset or property to a lender as security for a loan.

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Multi-Tenant Property

Property that has two or more tenants. Compared to single tenant properties, multi-tenant properties can be more management intensive and may have

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National Tenant

Refers to a tenant that has a national footprint with locations throughout the US. The term is most frequently used in the context of retail properties.

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Net Absorption

The amount of occupied space at the end of a period less the amount of space occupied at the beginning of the same period.

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Net Cash Flow

Net cash flow can be determined using the formula net operating income (NOI) less debt service payments, tenant improvements,

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Net Income

Total revenue minus total expenses. It represents the amount of money remaining after all operating expenses, interest, taxes and preferred stock

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Net Operating Income (NOI)

A calculation used to analyze real estate investments that generate income. Net operating income equals all revenue generated from the property less

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Net Present Value (NPV)

Net present value (NPV) represents the amount by which the expected cash flows of an investment exceeds the initial amount invested.

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Net Square Footage

The usable or “rentable” area of a specified space (e.g. a suite, floor, or an entire building). This measurement generally excludes non-rentable areas

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Non-Accredited Investor

An investor who does not meet the special requirements for an accredited investor under the Securities & Exchange Commission’s Rule 501 of

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Non-Recourse Loan

A loan that limits the lender’s remedies to foreclosure of the mortgage and acquisition of the collateral or property in the event of financial default

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Occupancy Costs

The total amount of property-related expenses paid by a tenant for use of a particular space. Occupancy costs include base rent as well as

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Operating Expenses

The actual costs associated with operating a property including maintenance, repairs, management, utilities, property taxes and insurance. 
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Operating Expenses, Fixed

The actual costs associated with operating a property that do not vary in the short term. These costs do not change with a property’s occupancy rate.

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Operating Expenses, Variable

The actual costs associated with operating a property that vary in relation to a property’s occupancy rate or volume of some activity.

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Opportunistic Property

Opportunistic properties exhibit the greatest risk but highest potential returns within the four major commercial real estate risk profiles

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Ordinary Income

The income earned from providing services or the sale of goods. Ordinary income is composed mainly of wages, salaries, commissions and

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Parking Ratio

Total rentable square footage of a property divided by the number of parking spaces; typically expressed as a ratio of spaces per 1,000 square

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Partial 1031 Exchange

To the extent less than 100% of the proceeds of a relinquished property are reinvested, the difference will result in mortgage boot and/or cash boot.

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Percentage Lease

A lease in which a tenant pays percentage rent in lieu of, or in addition to base rent. The amount is typically determined by a formula

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Percentage Rent

Rent due in lieu of, or in addition to base rent that is paid to landlords based on tenant sales. A percentage rent clause is nearly exclusive to

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Personal Property

A type of property which, in its most general definition, can include any asset other than real estate. The distinguishing factor between personal

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Positive Leverage

When a business or individual borrows funds and then invests the funds at an interest rate higher than the rate at which they were borrowed.

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Potential Rental Income

The total amount of rental income for a property if it were 100 percent leased at competitive market rates.

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Preferred Equity

Preferred Equity is an equity investment which is superior in interest to common equity but subordinate to debt. Preferred equity is secured by a

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Preferred Return

A priority return (often in the 5-10% range) that is paid to investors prior to any profit sharing or promote to the sponsor.

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Present Value (PV)

Expected value, as of the date of valuation, resulting from discounting future amounts.

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Private Placement

An offering of securities that is not registered with the Securities and Exchange Commission (SEC) and which are sold not through a

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Private Placement Memorandum (PPM)

An offering document for a private placement that contains relevant disclosures so that an investor may make an informed investment decision.

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Pro Forma

Forward-looking cash flow projection based on a set of assumptions. Pro forma financial statements depict future financial results if the underlying

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Promoted Equity (Carried Interest)

A share of the profits of an investment or investment fund that is paid to the investment manager as compensation. It is given in exchange for

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Property Condition Report

Provides an analysis of a building or facility to help establish a buyer's risk due to the physical condition of the facility. The analysis includes

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Property Identification Number

A number assigned to parcels of real property by the tax assessor of a particular jurisdiction for purposes of identification and record keeping.

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Property Type, Flex

Short for “flexible”, flex properties are typically considered a subsect of industrial properties that contain a higher percentage of

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Property Type, Hospitality

Consists of a wide range of product types including hotels, travel centers, water parks, amusement facilities, golf courses, cruise ships and restaurants.

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Property Type, Hotel

An establishment that provides lodging and sometimes meals, entertainment and various personal services for travelers and tourists.

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Property Type, Industrial

One of the four main asset classes of commercial property, which is typically used for the purpose of production, manufacturing, or distribution.

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Property Type, Multifamily

Typically considered apartment buildings that can accommodate more than one family. Condominiums can sometimes be covered in this property type

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Property Type, Office

Commercial property that is primarily used to maintain professional or business offices. Encompassing term that may include

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Property Type, Retail

Properties used to market and sell consumer goods and services. This category includes single tenant retail buildings, small neighborhood

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Property Type, Self Storage

Properties where storage space (such as containers, lockers, and/or outdoor space) is rented to tenants, usually on a short-term basis.

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Qualified Intermediary

An independent  person, company, or entity that enters into a written agreement with the exchanger to facilitate the transfer of proceeds from

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Quitclaim Deed

A legal document that may be used to sell or transfer interests in real property. A quitclaim deed transfers whatever interest the seller or

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Rate Of Return

The profit or loss on an investment over a specified period of time expressed as proportion of the investment amount.

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Real Estate

Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water.

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Real Estate Agent

A licensed intermediary between buyers and sellers of real estate, typically working for commission. Real estate agent is a broad term which includes

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Real Estate Broker

A licensed intermediary between buyers and sellers of real estate, typically working for commission. A real estate broker typically has completed

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Real Estate Debt

A debt instrument that the borrower is obliged to pay back with a predetermined set of payments. The debt instrument is secured by

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Real Estate Equity

The difference between the current fair market value of a property and the amount of debt owed against the property.

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Real Estate Investment

Real estate that generates income or is otherwise intended for investment purposes rather than as a primary residence or personal use.

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Real Estate Investment Trust (REIT)

A trust or company that owns, finances, or invests in real estate and/or real estate-related assets. REITs provide individuals the ability to invest in

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Real Estate Investor

An investor who evaluates the real estate market and purchases property with the intention of building wealth.

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Real Estate Syndication

A method of pooling capital from multiple investors for the common goal of acquiring real estate.

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Real Property

Land, and generally whatever is erected or affixed to the land, such as buildings, fences, and including light fixtures, plumbing.

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Realized Gain

The amount of gain that the investor made from the sale of an asset. It is calculated as the net sales price received (sales price of the asset less any

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Recognized Gain

The taxable portion of realized gains arising from the sale of an asset or assets. Recognized gains are typically less than realized gains due to

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Recourse Loan

A type of loan that allows the lender to recover against the personal assets of a party in the event of default by the borrower to the extent of the

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Regulation D Offering

A Securities and Exchange Commission (SEC) regulation governing private placement exemptions that allows companies to raise capital through

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Related Parties Transaction

A business deal or arrangement between two parties who are joined by a personal or other relationship prior to the deal.

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Release Provision

A provision or clause to release certain collateral from a loan or mortgage in exchange for the borrower’s payment of a defined amount.  

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Relinquished Property

In a tax deferred (aka 1031 exchange or like-kind) exchange, the property being sold or disposed of is referred to as the relinquished property.

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Rent Bumps

In the context of commercial real estate, rent bumps refer to periodic adjustments on the rental rates pursuant to a lease, typically stated as a

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Rentable Square Footage

Rentable Square Footage equals the usable square footage plus the tenant’s pro rata share of the building common areas, such as

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Replacement Property

In a tax deferred (aka 1031 exchange or like-kind) exchange, the property being purchased or acquired is referred to as the replacement property.

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Replacement Property Interests (RPI)

Replacement Property InterestsTM is the term Realized uses to describe equity ownership in large properties by multiple 1031 exchange investors through Delaware Statutory Trusts (DST) and Tenant-In-Common (TIC)

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Replacement Reserves

See Capital Reserves.

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Return On Investment (ROI)

ROI measures the amount of return on an investment relative to the investment’s cost. To calculate ROI, the benefit (or return) of an investment is

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Reverse Exchange

Refers to method of executing a tax-deferred exchange (aka 1031 exchange or like-kind exchange) in which the exchanger or taxpayer acquires the

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Risk Adjusted Returns

Measure of the return on an investment relative to the expected risk of that investment, over a specific period.

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Risk Premium

The minimum incremental yield by which the expected return on a risky asset must exceed the known return on a risk-free asset in order to

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Safe Harbor

Statutory or regulatory provision that provides protection from a penalty or liability. In the context of a 1031 exchange, safe harbor refers to any one of

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Sales Load

See Equity Load.

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Securitization

A financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or

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Seller Financing

A loan provided by the seller of a property or business to the purchaser of that property or business.

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Signatory Trustee

A signatory trustee is the individual who will be managing the Delaware Statutory Trust (DST). The Sponsor of the DST typically serves as

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Simultaneous Exchange

See Concurrent Exchange.

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Single Tenant Property

Property that is fully occupied by a single user. Single tenant properties often feature a triple-net (NNN) lease structure and generally have remaining lease terms of at least 10 years.

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Soft Costs

Fees that are not directly related to labor and direct constructions costs.  Soft costs include architectural, engineering, financing, and legal fees, and

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Special Purpose Entity (SPE)

A legal entity established by the sponsor or borrowing entity whose operations are limited to the acquisition and financing of specific assets.

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Sponsor

In the context of real estate partnerships, an individual or company in charge of finding, acquiring, and managing the real estate property on behalf of

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Stabilized Occupancy

The long-term average occupancy rate that an income-producing property is expected to achieve after exposure for leasing in the open market for

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Stated Rent

The rent amount paid by the occupant to the landlord as specified in the lease. Stated rent does not account for any concessions or landlord costs

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Step-Up In Basis

When a taxpayer bequeaths an asset to a beneficiary upon death, the beneficiary’s tax basis in the asset is “stepped up” to the fair market value of

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Submarket

A submarket is broadly defined as a distinct part of a larger market.  In the commercial real estate context, a market is typically a city or an MSA and

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Syndicated Investment

See Real Estate Syndication.

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Tax Basis

In the context of commercial real estate, an asset’s basis is the original purchase price or cost of an investment property plus any out-of-pocket

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Tax Deferred

Instance where investment earnings such as interest, dividends, or capital gains accumulate tax-free until the payment of taxes related to the

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Taxable Income

Taxable income is calculated as total revenue less total expenses and applicable deductions and exemptions that are allowed in that tax year.

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Tenant

A person or entity who rents real estate from another though a lease. A tenant also may be referred to as a lessee.

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Tenant Improvement Allowance

Leasing incentive offered by a landlord in order to entice tenants to lease space. The tenant improvement allowance is the dollar amount, typically

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Tenant Improvements (T.I.'S)

The customized alterations a building owner makes to rental space as part of a lease agreement, in order to configure the space for the needs of that

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Tenant-In-Common (TIC) Investments

Any syndicated investment created through a Tenant-In-Common (TIC) structure. Under a Tenant-In-Common structure, each investor

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Tenant-In-Common (TIC) Properties

Any property purchased by multiple investors via a Tenant-In-Common structure. See Tenant-In-Common Investments.

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Tenant-In-Common Sponsor

The individual or company that packages and markets Tenant-In-Common (TIC) properties. The sponsor is in charge of a variety of different

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Tenants-In-Common (TIC)

A type of shared ownership of property, where each owner owns a share of the property. Unlike in a joint tenancy, these shares can be of unequal size,

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Terminal Cap Rate

The estimated or actual cap rate of a property on date of disposition or sale. Also known as the Exit Cap Rate. The terminal cap rate, also known as

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Terminal Value

The value of an investment at the end of its holding period. In the context of commercial real estate, the terminal value of an investment property is

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Three Property Rule

Under IRC Section 1031, an exchanger or taxpayer executing a delayed exchange has 45 calendar days from the closing date of the sale of

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Time Value of Money (TVM)

The concept that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.

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Title Company

Company that examines and insures title claims for real estate purposes. The title company verifies legal title to a property through a review of

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Title Holding Trust

A fully revocable grantor trust designed and drafted specifically to acquire, hold, manage and ultimately dispose of real estate on a confidential or

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Total Return

The actual rate of return of an investment or a pool of investments over a given evaluation period which includes income and appreciation.

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Triple Net (NNN) Lease

A lease agreement that states the tenant is solely responsible for all of the costs relating to the property being leased in addition to the rent.

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Trust, Irrevocable

A trust that cannot be modified or terminated without the permission of the beneficiary. The grantor effectively gives up all of his or her rights to

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Trust, Land

A fully revocable grantor trust designed and drafted specifically to acquire, hold, manage and ultimately dispose of real estate on a confidential or

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Trust, Living

An arrangement created during a person’s life, in which the trustee holds legal title to assets for a beneficiary.

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Trust, Real Estate

Real property owned through a trust rather than by an individual. In this context, the exact legal form of ownership may take a variety of forms

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Underwriting

The process of evaluating the future performance of a property. Similar to an insurance underwriter, in the context of commercial real estate,

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UPREIT

An Umbrella Partnership Real Estate Investment Trust (UPREIT) is a partnership formed between the owner of appreciated real estate and a

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Useable Square Footage

The space that is actually occupied by a tenant, typically equal to the size of the tenant’s suite, without deductions for columns or other

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Vacancy Allowance

A line item on a real estate pro forma that accounts for expected vacancy of the property. The specific allowance is dependant on the property type and

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Vacancy Rate

The percentage of all available units or space in a rental property that are vacant compared to the total supply of units or space at a particular time.

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Value Add Property

Investment properties that need corrective action to fully realize their value. Value-add is a term given to describe one of the four major risk profiles of

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Warranty Deed

A document that may be used to legally transfer property. A warranty deed states that the owner can legally transfer the property and that no other

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Yield

The return on an investment or the amount of profit, stated as a percentage of the amount invested. Also known as the rate of return. Yields can be depicted in a variety of ways including levered and unlevered and before tax and after tax. 

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