Any space or suite which is physically vacant or “dark”, but for which the tenant is still contractually obligated to pay rent. Dark space typically results from a tenant ceasing operations at an unprofitable location, in hopes of saving cash on employee wages and other operating expenses. The ability of a tenant to allow its space to go “dark” is governed by any go dark provisions and/or continuous operations clauses in its leases. Dark space may be subject to recapture rights by the landlord.
A method of raising capital through borrowing. Although commonly associated with lending from a bank, debt financing includes selling debt instruments to individual and institutional investors, often seen in practice by corporations through the use of bonds. The cost of debt is the price of interest payments to either the lender or bondholder.
The cash that is required for a particular time period to cover the repayment of interest and principal on a debt.
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
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
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,
In a tax-deferred exchange, the deferred gain is the amount of gain that escapes current taxation and is deferred until a later date.
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
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
In real estate, delivered means the total square footage or number of properties in a particular asset class that have been completed (status changing from under construction to inventory) and received a certificate of occupancy during a given period of time. Once a certificate of occupancy has been given, the property will be deemed delivered, regardless if tenants have occupied the space or not.
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
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
The interest rate used to determine the present value of future cash flows in discounted cash flow analysis.
For example, an investor has estimated that a project they are investing in will generate a FCF of $50,000 over the next 5 years with a cost of capital of 9%. Taking into account the time value of money, the investor determines that the present value of the investment is approximately $195,000. If the initial cost of the project is $200,000, the NPV would be about -$5,000, showing a poor investment opportunity.
Low-income community census tracts are the basis for determining eligibility in Qualified Opportunity Zones.
Diversification is an investment strategy that seeks to mitigate downside by allocating proceeds across a variety of assets or products. The goal of diversification is to build a portfolio of investments across unrelated markets, so a downturn in one particular market may not drastically affect the returns of the portfolio as whole. Diversification looks to create a smoothing effect, allowing the negative performance of some investments be counteracted by the positive performance of an unrelated asset. Diversification is only a strategy, however, and does not guarantee returns and does not protect against losses.
An example of employing a diversification technique would be owning a portfolio of single family homes, corporate equities, and treasury bonds. Although some inherit systematic risk may still exist, an investor would not be fully exposed to the same non-systematic risk across the entire portfolio.
A lease agreement in which the tenant is responsible for their pro-rata share of both property taxes and premiums for insuring the building,
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
DST Interests represent equity ownership in a large property by multiple investors through an investment structure known as a
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
An investigation or audit of a potential investment to confirm all material facts regarding a transaction. For example, when analyzing a potential property
12/31/26. At this date, the deferred capital gain must be recognized. All or part of the deferred gain is includible in taxable income when the taxpayer sells the investment in the Qualified Opportunity Fund or on December 31, 2026, whichever occurs first.
A real estate appraisal method that values a property by taking net operating income and dividing it by a predetermined capitalization rate. The income valuation method is not suitable for valuing owner-occupied residential properties, as it relies on income produced as a function of the property’s overall value. The income capitalization formula is as follows: