Glossary of Terms

Lease

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

Read More

Lease Co.

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

Read More

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

Read More

Lease Termination Fee

Lease termination fee is 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.

Read More

Leasehold Improvement

A leasehold improvement is any change made to a leased property to meet the needs of the tenant. These improvements include changes to interior walls and ceilings, electrical and plumbing, and flooring, and can either be taken on by the landlord to increase the competitiveness of the space, or by the tenant themselves. In the event that the tenant undertakes the improvements, ownership of the improvements will typically revert back to the landlord once the lease has terminated, unless the tenant can remove the improvements without damaging the property.
Read More

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.

Read More

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

Read More

Letter of Credit

A letter of credit is a letter from a bank or other financial institution which guarantees an investor’s payments to a third party. If the investor does not make its payments pursuant to its agreement with the third party, the party issuing the letter of credit will be required to make the payment of fund any shortfall.

For example, imagine Company ABC is interested in purchasing 1,000 widgets from Supplier XYZ for $1 million. Given Company ABC’s weak credit rating, Supplier XYZ is worried that Company ABC will not be able to pay in full within 60 days. In order to ensure Supplier XYZ that it will make good on it payment, Company ABC gets a letter of credit from the bank stating that it will pay any outstanding liability within the set time period, with the bank acting as insurance in the event that it can’t meet its financial obligations.

Read More

Lien

A lien is a right to possess property belonging to another person, given that an underlying obligation is not met. In finance, a lien often serves as a guarantee that a borrower will fulfill his or her responsibility of repaying a loan. 

Read More

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,

Read More

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

Read More

Limited Liability Company (LLC)

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

Read More

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

Read More

Line of Credit

Line of credit is 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

Read More

Liquidity

Liquidity describes the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's price. Market liquidity refers to the extent to which a market allows assets to be bought and sold at stable prices. Cash is the most liquid asset, while real estate, fine art and collectibles are all relatively illiquid.

Read More

List Price

In real estate, list price is the initial sale price of the property that is suggested to the market. Evaluated by a real estate agent or other real estate professional, a list price is typically determined based off a comparative market analysis. This includes taking the sale price of comparable properties in the surrounding area, and making adjustments for any differing attributes. On larger scale investment properties, one may be able to utilize the appraised value of the property to determine an acceptable list price.
Read More

Load Factor

The multiplier to a tenant's useable space that accounts for the tenant's proportionate share of the common area (restrooms, elevator lobby, mechanical rooms, etc.)

Read More

Load on Equity

See Equity Load.

Read More

Loan

A loan is an agreement between and lender and a borrower in which a lender agrees to provide funding, property or material goods to a borrower in exchange for repayment of principal and interest at a later date.

Read More

Loan-to-Cost Ratio (LTC)

The loan to cost ratio is 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.

Read More

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.

Read More

Local Tenant

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

Read More

Lock-out Period

A predetermined period of time following loan origination in which the loan cannot be prepaid, as set forth in the loan documents.  The lock-out period can vary greatly from no lockout period at all to nearly the entire loan term.  From a lender’s perspective, a lock-out clause is a form of call protection as it prevents prepayment. There is considerable time and effort involved to underwrite and originate a loan, thus the lender wants to ensure a certain level of minimal return on the loan.
Read More

Low Income Housing Tax Credits

Created in 1986 and made permanent in 1993, is an indirect federal subsidy used to finance the construction and rehabilitation of low-income affordable rental housing.
Read More

Low-Income Community Census Tracts

A low-income community census tract has an individual poverty rate of at least 20% and median family income up to 80% percent of the area median [Section 45D(e)].

Read More