Glossary

Dark Space

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.

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Debt

Debt is an amount of money owed by a borrower to a lender. It is used by individuals and corporations to make large purchases that they otherwise would be incapable of making given current cash holdings. A debt agreement provides terms that include the amount borrowed and the date at which principal and interest need to be repaid.

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Debt Financing

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.

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Debt Service

Debt service is 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

Deed in lieu of foreclosure is 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 deferred gain is the amount of gain that escapes current taxation and is deferred until a later date.

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Deficit Spending

Deficit spending is a term that describes the conditions under which a government’s expenditures exceed its revenues in a particular fiscal period. Deficit spending increases a government’s debt balance, and is typically financed by the issuance of government bonds. Many economists believe deficit spending to be a fiscal policy tool that can stimulate economic growth.

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Deflation

Deflation is a term used to describe a scenario in which the price for goods and services declines, or when the inflation rate falls below 0 percent.

Experts believe deflation can be caused by a number of factors, but the two predominant causes of deflation are a decline in aggregate demand and increased productivity. Declining aggregate demand will drive the price for goods and services lower as suppliers seek to offer their goods or services at a price that will incentivize consumers to buy. Increasing productivity can also cause deflation. Companies that become more efficient by minimizing production costs have the option to pass on savings to consumers with lower prices than competitors who may not yet have been able to drive the cost of production down.

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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

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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Delivered

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.

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Demand

Demand is an economic principle that describer’s a consumer’s inclination to consume a particular good or service at a particular price. In theory, a price of a good is determined by the intersection of the supply and demand curves by gauging the consumer market’s appetite to consume a good or service at a price offered by suppliers.

There are two types of demand: elastic and inelastic. A good or service with elastic demand experiences a sharp decrease in quantity demanded when the price of that good rises. A good or service with inelastic demand does not experience a sharp decrease in quantity demanded when the price of that good rises. Examples of elastic goods are toys or candy, while water and medicine are examples of inelastic goods.

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Demand Curve

The demand curve is plotted on a graph with the y-axis representing price and the x-axis representing quantity. The curve goes from the top left to the bottom right. The demand curve does not move when only price and quantity are changing. For example, when prices rise, quantity drops, resulting in less demand. Additionally, the demand curve remains static. As prices decrease, quantity increases, resulting in more demand. The demand curve also remains static in this case.

Factors that can move the demand curve include changes in wages, an increase in the population, or a change in consumer preferences. If wages drop, consumers cannot purchase as much. In this case, the demand curve shifts to the left. The same happens if consumer preferences change, and there is less demand for a specific product. The curve will shift right with a population increase or an increase in wages.

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Demand Schedule

A demand schedule allows for efficient price discovery of a product or service. It plots a curve with the Y-axis representing price and the X-axis representing quantity. A table can also be used to display this data.

To understand how this works, let’s say ABC sells widgetX for $5 and widgetY for $6.50. The company is currently generating a profit. With strong demand, ABC decides to increase its prices from $5 to $7 and $6.50 to $10. It finds that customers buy far fewer products at those prices, which decreases the company’s profits. Prices need to come down, so ABC changes them from $7 to $6 and $10 to $8. With the adjusted prices, demand comes back, and so do profits. At this point, supply and demand are equal. This is called the equilibrium price. Now ABC has data that represents what happens at different price points.

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Depreciation

Depreciation, in our context, 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

Depreciation recapture is 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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Descriptive Statistics

Descriptive statistics are used to describe a data set, whether that be the full data set or a sample. There are two categories of descriptive statistics — measures of central tendency and measures of variability or spread. Measures of central tendency look at the center of a data set while measures of variability look at how the data is dispersed.

Measures of central tendency include mean, median, and mode, which measures the most common patterns within the data. Measures of variability include standard deviation, variance, range, quartiles, absolute deviation, the minimum and maximum variables, and the kurtosis and skewness. Measures of variability help in determining the shape of the distribution.
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Direct Marketing

Direct marketing consists of advertising directly to the individual. Rather than going through traditional, broad marketing channels such as TV, the Internet, or radio, direct marketers send ads to consumers using mail, email, or texts. The ad message is often customized for the consumer, including mentioning them by name. Direct marketers are able to do this by purchasing a list of potential customers or doing lots of research to find customers. To entice the consumer, direct marketers may include a discount coupon. The ad message will also contain some call to action in an attempt to close the sale. Direct marketers are able to gauge the effectiveness of campaigns since they know who each mailer was sent to and if there was a response or not.

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Direct Tax

Direct taxes are often income taxes, which are paid annually. Direct taxes are paid by both businesses and individuals. Payments go directly to a government entity, such as the IRS, Treasury, state agency, or local municipality.

To understand direct taxes, let’s look at their mirror opposites - indirect taxes. An indirect tax is paid by consumers on goods and services. For example, taxes are paid on groceries but instead of paying a government entity, the consumer pays those taxes to the grocery store. The grocery store must then submit those taxes to the proper government entity. Additionally, a grocery store tax is a flat tax, whereas income taxes are a progressive tax.

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Disability Insurance

Disability insurance provides income to workers who become disabled and are not able to perform their work duties. The insurance is often a percentage of a worker’s income rather than the full amount. Some companies may offer disability insurance to their employees at a significant discount. Disability insurance can also be purchased by individuals, usually at a higher cost.

There are two types of disability insurance — short-term and long-term. Short-term insurance is for coverage between three to six months. Long-term insurance is for coverage greater than six months. The exact coverage period and cost will vary by the insurance company.

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Discount Rate

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

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Discounted Cash Flow (DCF)

A valuation method used to estimate the feasibility and attractiveness of an investment opportunity. DCF analysis utilizes future free cash flow (FCF) and discount rate estimates to determine a net present value (NPV) of the investment. If the present value of the cash flows is higher than the initial cost of the investment, the DCF analysis will show a favorable investment, or positive net present value (NPV). If the initial cost is higher, however, the NPV will be negative, showing an unfavorable investment.

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.

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Disposable Income

Disposable income is the amount of personal income an individual has after taxes. Economists often use disposable income to figure out consumer spending and saving rates. For example, someone with a $100,000 income in the 24% tax bracket has disposable income of $100,000 - $24,000 = $76,000.

Disposable income is often confused with discretionary income. Discretionary income is calculated based on disposable income. Discretionary income is net of living expenses. Using the above example, $76,000 minus $25,000 in living expenses leaves $51,000 in discretionary income. The government uses a slightly different formula to calculate disposable income for wage garnishment purposes. It subtracts health insurance premiums and involuntary retirement plan contributions from gross income.

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Distressed Areas

Low-income community census tracts are the basis for determining eligibility in Qualified Opportunity Zones.

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Diversification

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.

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Dividend

A dividend represents the distribution of a reward, usually in the form of cash, to a firm’s shareholders paid in exchange for the shareholder’s investment in the company’s equity. A dividend is managed by a company’s board of directors and typically paid from a company’s net profits regularly on a monthly, quarterly or annual basis.

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Double Net Lease

Double net lease is 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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Dow Jones

The Dow Jones Industrial Average (DJIA) is a stock index composed of the 30 largest blue chip companies that trade on the NYSE and NASDAQ exchanges. The DOW, as it is sometimes referred to, is the second oldest stock index, behind the Dow Jones Transportation Average. It was created in 1896 by Charles Dow and his partner Charles Schwab. It is meant to represent the broader stock market. When market commentators say the market is up, they are generally referring to the DOW.

If an investor wants to invest in the DOW, he can buy shares of ETFs or mutual funds that track the index. Investors can also buy individual stocks within the DOW, such as Walt Disney Company, Exxon Mobil Corporation, and Microsoft Corporation.

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Down Payment

Down payment is 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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Downtime

Also expressed as average space downtime, downtime is the general term used to describe the typical amount of time expected between the expiration of a lease and the commencement of a replacement lease for a particular property. Downtime pertaining to real estate is usually expressed in weeks or months.
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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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Dumping

Dumping occurs when an exporting nation lowers the price of its product below that of competitors in the importing nation. The goal of dumping is for the exporting nation to gain a competitive foothold in the importing nation. Because the importing nation’s customers can buy the imported product cheaper than other domestic products, the exporting nation creates a competitive advantage.

Dumping is legal under the World Trade Organization unless the importing nation can show that the lower-priced product is hurting domestic producers. Dumping is a type of price discrimination, which is seller (i.e., exporting nation) driven.

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Duration

Duration is a measure of the sensitivity of a fixed income security’s price to changes in interest rates.

There are generally two methods of calculating a bond or debt instrument’s duration. The first method of duration calculation is called Macaulay duration, which accounts for the present value of future bond payments and value at maturity. It is the standard by which markets calculate bond pricing. The second method of duration calculation allows an investor to know how much a bond’s price will fluctuate if the yield to maturity rises or falls by one percent.

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Economically Distressed Community

See Distressed Areas
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Phantom Gain Date

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.

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The Dow Jones Industrial Average (DJIA)

The Dow Jones Industrial Average (DJIA) is an index that tracks 30 publicly-owned companies that trade on the NYSE and NASDAQ. The Dow Jones Industrial Average is one of the oldest indices in the world and is generally accepted as a gauge for the momentum or lack thereof in financial markets. Named after Charles Dow, the DJIA is designed to function as a proxy for the US economy and includes firms such as ExxonMobil, Goldman Sachs and General Electric.

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Valuation, Income Approach (Direct Capitalization)

Valuation, income approach (direct capitalization) is 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:

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What is a 1031 Exchange?

Download the Realized Ebook - What Is A 1031 Exchange?

Are DST Investments Right For Me?

Are DST Investments Right For Me?