Glossary of Terms

Balloon Payment

A balloon payment is a large payment due at the end of a loan’s life. This type of payment usually occurs over the life of a short-term loan, which has only been amortized partially over the course of the loan’s term. The balloon payment is the final repayment of the loan’s remaining balance.

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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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Basis Point

The basis point is a common unit of measurement used in the field of finance. One basis point is equal to 1/100th of 1% (0.01%). Basis points are used primarily for noting changes in interest rates, yields, and equity indexes, and are used by analysts to minimize confusion when discussing percent changes in financial instruments. 

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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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Beta

A measure of systematic risk given to a security or portfolio, beta measures the volatility of a given financial instrument in comparison to the market as a whole. Often used in financial analysis, beta helps determine an asset’s expected return based off the capital asset pricing model.

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Blanket Mortgage

A blanket mortgage is a type of mortgage that finances more than one piece of real estate. Similar to a conventional mortgage, the real estate acts as collateral under the loan, and depending on the terms, the individual pieces of real estate may be sold without retiring the entire mortgage.

In practice, blanket mortgages allow the mortgagee to aggregate its debt obligations under a single loan to a single lender. Due to the size and scope of the loan, the borrower may have the ability to negotiate better terms and achieve a lower interest rates. In addition, a borrower may be able to save on application and closing costs associated with taking on multiple mortgages.

The disadvantages of a blanket mortgage include the capability of the lender to foreclose on all of the properties serving collateral in the scenario that the borrower defaults. In addition, blanket mortgages are typically unable to cover properties across numerous states, as each state has unique guidelines regarding how blanket mortgages are issued.

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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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Build-to-Suit (BTS)

Built-to-suit is a way of leasing commercial property whereas the developer/owner has constructed a building to the specifications of a particular tenant or type of tenant. This type of property is popular among tenants because of its ability to offer efficient layouts, reduce operating costs associated with the property, or create a building design that may be more favorable in the public eye.

Build-to-suit properties are common in retail and industrial property types, but may exist in any type of real estate such as office space. Given that a building is designed specifically for the tenant, leases are typically longer-term, and tenants may be less inclined to vacate the property.

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Qualified Opportunity Zone Business

A trade or business (i) in which substantially all of the tangible property owned or leased by the entity is Opportunity Zone Business Property, and (ii) which (a) derives at least 50% of its gross income from the active conduct of a trade or business,

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Qualified Opportunity Zone Business Property

Tangible property used in a trade or business of a Qualified Opportunity Fund if such property (i) was acquired by purchase after December 31, 2017, (ii) the original use of such property in the Qualified Opportunity Zone commences with the Qualified Opportunity Fund or the Qualified Opportunity Fund substantially improves the property, and (iii) substantially all of the use of such property was in a Qualified Opportunity Zone during substantially all of the Qualified Opportunity Fund holding period for the property.

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