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
The original purchase price of an asset plus its acquisition costs plus any capital improvements less the cumulative depreciation deductions
An investment in asset classes other than the three traditional asset types (stocks, bonds, and cash). Most alternative investments are held
Paying off debt over a period of time with a fixed repayment schedule in regular installments. Monthly mortgage payments are often comprised of
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. A common example is a grocery store.
An estimate of a property’s fair market value by an authorized person with applicable knowledge and expertise. Appraisals can be used for taxation
A property that has increased in value over time. This increase can occur for a number of reasons including increased demand or weakening supply,
Appreciation is the increase in the value of an asset over time, which can be affected by a number of factors such as increased demand, weakening supply, or changes in inflation.
An asset is a resource owned by an individual, corporation or country that controls the item with the expectation that it will produce a benefit or cash flow in the future. Assets are typically reported on a firm’s balance sheet and are bought or created to increase a firm’s value or enhance a firm’s operations.
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.
Bankruptcy remote is typically used when discussing a special purpose entity. A bankruptcy remote entity is a separate legal entity whose bankruptcy or insolvency
Base rent is the minimum monthly rent due pursuant to a lease. Base rent does not account for expense reimbursements or percentage rent, which
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
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.
A short-term loan that is used until a person or company secures permanent, longer-term financing or fulfills an existing obligation.
“Capital” and “money” are commonly interchanged, but the two terms are distinct. Capital is deployed to crate growth and expand a company’s capacity to provide its service or develop its product, while money is a means purchasing and developing a company’s specific source of capital.
Capital assets, for corporations and business entities, are assets that have a useful life longer than one year and are not held for sale in the ordinary course of business.
Capital Expenditures are, in the context of commercial real estate, funds used by a company to acquire or upgrade physical assets that cannot be expensed as
In the context of commercial real estate, capital reserves are funds designated for long term capital investment projects or
Capital stack is a term used to describe the composition of total capital invested in a project. Listed from most risky to least risky, capital stacks in real estate are usually comprised of common equity, preferred equity, mezzanine debt, and senior debt. Usually, the riskier positions in the capital stack tend to earn higher expected returns due to the increased risk taken on.
Capitalization rate is the initial rate of return an investment property is expected to generate. The Capitalization Rate is determined by dividing the
Carry costs are any expenses the owner must pay on investment property over the course of owning it. These costs usually include utilities, debt service payments, taxes and insurance, among other items.
Cash flow is the net amount of cash moving in and out of a business, usually measured during a specified, limited period of time.
In the context of commercial real estate, cash and cash equivalents held in short term accounts used to cover things such as
Ratio of annual before-tax cash flow from an investment to the total amount of cash invested, represented as a percentage.
Expenses over and above the price of the property that buyers and sellers normally incur to complete a real estate transaction.
Commercial Mortgage-Backed Securities are securities collateralized by loans secured by commercial property. A CMBS loan is a first-mortgage secured by commercial real estate which is
Commercial real estate is real estate intended to generate income or profit for the owner of the property. Generally includes all categories of non-residential real estate
The areas of a building that are available for the nonexclusive use of all its tenants, such as lobbies, corridors, and parking lots.
The contribution or fee paid collectively by individual tenants for the maintenance and upkeep of the non-exclusive areas of the premises.
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.
Simply put, compound interest is “interest-on-interest”, or the ability of a financial instrument to generate earnings on its earnings.
The seizure of property by a public authority for a public purpose. Condemnation typically occurs when a taxpayer owns property in a place
A landowner voluntarily agrees to sell or donate certain rights associated with his or her property – often the right to subdivide or develop – and
A contract between a seller and a buyer of real property in which the seller provides financing to the buyer to purchase the property.
Core properties exhibit the lowest risk and lowest potential returns amongst the four major commercial real estate risk profiles, and represent
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.
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,
Credit tenant lease is 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 as security.
Crowdfunding is a form of financing that utilizes small amounts of capital from a large number of people to fund a new venture or project. Originally brought forward as a way for organizations and entrepreneurs to secure general funding and donations from the public, regulatory changes passed in the JOBS Act have allowed for equity crowdfunding to emerge so that investors could gain a return on their crowdfunding investment.
Debt service is 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 Delaware Statutory Trust (DST), the Delaware trustee maintains a physical address in the state of Delaware in order to prevent the DST from
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
Discount rate is the interest rate used to determine the present value of future cash flows in discounted cash flow analysis.
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,
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
An investigation or audit of a potential investment to confirm all material facts regarding a transaction. For example, when analyzing a potential property
Effective Gross Income (EGI) is income generated by a property including base rent and miscellaneous income, less vacancy and collection losses.
Net rental income received by landlord from a lease after deducting the value of concessions and costs incurred to secure the lease such as
The right to exit a property or the act of going out of or leaving a place. From a real estate standpoint, egress and ingress may be important components of site feasibility. Properties typically have entry and exit points along public streets, however that is not always the case. In situations of a landlocked or difficult to access property, access easements may be necessary in order to provide reasonable access to and from the property. Note that easements rights to enter and exit a property may be separate from legal ownership of the property itself.
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
Equity Interests are ownership interest in a business entity, from the concept of equity as ownership.
One or more shares in the ownership of a business or corporation that are purchased by investors. In contrast to debt investments, equity investments
Escrow agent is an entity that has fiduciary responsibilities in the transfer of property from one party to another. The escrow agent acts as a custodian of
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
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.
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,
Expected return is the amount an investor would anticipate receiving on an investment that has various known or expected rates of return.
The Federal National Mortgage Association (abbreviated as FNMA and commonly referred to as “Fannie Mae”) is a publicly traded
Finance is a term that describes the study and system of money, investments and various other financial instruments. Generally, finance is broken into three categories: public finance, corporate finance and personal finance.
The use of borrowed funds to acquire an investment. In the context of commercial real estate, this typically involves the use of a mortgage
First loss position is an investment’s or security’s position that will suffer the first economic loss if the underlying assets lose value or are foreclosed upon.
A fixture is something that is permanently attached to real property. Examples include items such as HVAC systems, ceiling lights, awnings, window shades,
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
Foreign Investment in Real Property Tax Act (FIRPTA) is a United States tax law that imposes a tax on foreign persons disposing of United States real property interests. To ensure tax collection from
One of the several tax forms distributed by IRS, Form 1099 is used in the United States to report various types of income other than wages, salaries, and tips. The form is primarily used to report payments to independent contractors, income from rental properties, and income from interest and dividends.
The Federal Home Loan Mortgage Corporation (FHLMC), more commonly known as “Freddie Mac” is a publicly traded
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
Gross domestic product (GDP) is a broad measure of a nation’s productivity. GDP is defined as the monetary value of all finished goods and services a nation produces within its borders in a specific time period.
General market factors refers to the overall conditions within a defined market that affect all properties within that market.
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.
A grantor is the person or entity making the grant. For example, if Alice sells her property to Bob, then Alice would be the Grantor.
Gross absorption measures total square feet absorbed or leased without regard for vacated space during the same period,
A gross lease is 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.
Gross rent is rent charged to occupy a premise without any additional rent for operating or other expenses.
An investment property valuation method which is the ratio of a property’s price to its gross revenue.
Gross square footage is the total square footage of a building including all rentable spaces as well as all “non-rentable” space including common areas,
A lease of the land only, on which the tenant usually owns a building or is required to build as specified in the lease.
Also called “brick and mortar expenses,” hard costs are any costs involved in the physical construction of a project. Included in hard costs are
A type of asset-based loan financing through which a borrower receives funds secured by real property. Hard money loans are typically issued by
A health ration, also known as an occupancy cost ratio, it the relationship between a retailer’s sales and total occupancy costs.
Membership fees that must be paid by an owner of property within a homeowner association’s jurisdiction. HOA fees are collected to pay for maintenance and improvements of properties owned by the association, including common areas or necessary features such as roofing or elevators. HOA fees are very common in condominium developments, but can exist in neighborhoods of single family homes.
The real or expected period of time which an investment is attributable to a particular investor.
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
Homeowners Association is an organization within a living community that creates and enforces a set of rules for the properties within its jurisdiction. Residents that own property within an HOA’s area of authority automatically become members and are subject to HOA fees. Property types that are often apart of associations include subdivisions, planned communities, or condominiums.
A real estate development site that exists within a mostly built out market. Usually located within an urban area, infill locations look to fill the few vacant lots that exist between other developments in the area. Infill locations are characterized by having a high level of demand, due to increased property values in desirable locations, with high barriers to entry.
The rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling.
While not a precisely defined term, an institutional-grade, or institutional-quality property generally refers to a property of sufficient size and stature to
The maximum dollar amount an insurance policy will cover in the event that an insured asset is deemed lost. In real estate, this can include the improvements on the land, as well as the physical property that existed on the property, such as machinery and other equipment. Insurable value is can be a function of the full replacement cost of the property, reproduction cost, or depreciated value. Insurable value is typically less than the market value, as it excludes the value of land.
Insurance is a form of a contract or policy in which an individual or corporate entity exchanges payments for financial protection or reimbursement against losses from the insurer.
The interest rate is the percent of principal charged by a lender for the use of its money. Interest rates are typically expressed on an annual basis, or annual percentage rate (APR). To the borrower, the interest rate is the cost of debt, and to the lender, the interest rate will be the rate of return. Interest rates are reflective of how much risk the lender thinks it is assuming by lending to a particular borrower. Higher interest rates are typically given to entities more susceptible to default, or a lower credit rating.
In addition to credit rating, interest rates are determined by other extraneous factors. This includes the supply and demand for credit, inflation, and monetary policy set by the U.S. Federal Reserve. In situations where a loan is backed by collateral, a borrower may be able to obtain a lower rate than if the property was not secured.
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
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.
An entity that acts as the middleman between two parties in a financial transaction.
Investment portfolios are built based upon one’s financial goals and risk tolerance. Catering towards diversification and the management of unsystematic risk in a single investment, building a portfolio of investments across various asset classes may help an investor achieve a desired level of risk-adjusted return.
A broad term for a real estate property that has been purchased with the intention of earning a return on the investment, either through
Ownership of real estate by two or more individuals with the right of survivorship. A right of survivorship means that
A legal document outlining the terms under which one party agrees to rent property from another party.
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.
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
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.
A business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.
Two or more investors who pool their money to develop or purchase income-producing properties. In a limited partnership, each limited partner's
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
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.
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.)
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.
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.
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.
A market adjustment is a change in market parameters or conditions brought about in response to one or more market signals (including price changes from shifts in
The process of studying certain characteristics and trends of a market to determine its strengths, weaknesses, opportunities and threats.
Master lease rate is the 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.
The most probable price that a property would command in a competitive and open market under fair sale conditions. Market value also refers to
Building or project that provides more than one use (e.g., a loft or apartment project with retail, an apartment building with office space,
A modified gross lease is a rental agreement where the tenant pays base rent at the lease’s inception, but in subsequent years, also pays a proportional share, or
A legal instrument that pledges the rights of ownership of an asset or property to a lender as security for a loan.
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.
The amount of occupied space at the end of a period less the amount of space occupied at the beginning of the same period.
Total revenue minus total expenses. It represents the amount of money remaining after all operating expenses, interest, taxes and preferred stock
Net operating income is a calculation used to analyze real estate investments that generate income. Net operating income equals all revenue generated from the property less
Net present value (NPV) represents the amount by which the expected cash flows of an investment exceeds the initial amount invested.
Net square footage is 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
Non-Traded REITs are a type of security that invests in real estate properties and mortgages, but is not listed on an exchange and is not publicly traded. Like any REIT, non-traded REITs distribute at least 90 percent of the company’s taxable income to shareholders in the form of dividends, however, non-traded REITs are very illiquid and usually constitute a minimum holding period per investment. Non-traded REITs are difficult to value as well, lacking an organized exchange for valuing purposes.
Occupancy costs are 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
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.
The actual costs associated with operating a property that vary in relation to a property’s occupancy rate or volume of some activity.
Opportunistic properties exhibit the greatest risk but highest potential returns within the four major commercial real estate risk profiles
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
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
A type of property which, in its most general definition, can include any asset other than real estate. The distinguishing factor between personal
Positive leverage is 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.
Potential rental income is the total amount of rental income for a property if it were 100 percent leased at competitive market rates.
Preferred Equity is an equity investment which is superior in interest to common equity but subordinate to debt. Preferred equity is secured by a
Expected value, as of the date of valuation, resulting from discounting future amounts.
Private equity real estate funds are an asset class consisting of equity and debt investments in property. These types of funds usually involve active management from private equity entities, and follow low-risk to high-risk strategies.
An offering of securities that is not registered with the Securities and Exchange Commission (SEC) and which are sold not through a
Private placement memorandum is an offering document for a private placement that contains relevant disclosures so that an investor may make an informed investment decision.
Pro Forma is a forward-looking cash flow projection based on a set of assumptions. Pro forma financial statements depict future financial results if the underlying assumptions hold true.
Promoted equity (carried interest) is 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 creating value or bearing a disproportionate share of downside risk.
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 architectural, structural, mechanical and electrical systems and elements.
Property identification number is a number assigned to parcels of real property by the tax assessor of a particular jurisdiction for purposes of identification and record keeping.
Short for “flexible”, flex properties are typically considered a subsect of industrial properties that contain a higher percentage of
Consists of a wide range of product types including hotels, travel centers, water parks, amusement facilities, golf courses, cruise ships and restaurants.
One of the four main asset classes of commercial property, which is typically used for the purpose of production, manufacturing, or distribution.
Multifamily property types are typically considered apartment buildings that can accommodate more than one family. Condominiums can sometimes be covered in this property type as well.
Commercial property that is primarily used to maintain professional or business offices. Encompassing term that may include
Retail property types are properties used to market and sell consumer goods and services. This category includes single tenant retail buildings, small neighborhood
Self-storage are properties where storage space (such as containers, lockers, and/or outdoor space) is rented to tenants, usually on a short-term basis.
Senior living property is housing that is catered to seniors, typically over the age of 55. Contrary to standard multifamily properties, senior living communities usually include specialized amenities or services. Senior living covers a wide range of property types that include active-adult communities, assisted living, and memory care facilities.
Under Section 2(a)(51) of the Investment Company Act, a "qualified purchaser" means:
A quitclaim deed is a legal document that may be used to sell or transfer interests in real property. A quitclaim deed transfers whatever interest the seller or transferor actually holds in a property with no representations or warranties made to clear (unencumbered) title or the exact rights held by the grantor (seller).
The profit or loss on an investment over a specified period of time expressed as proportion of the investment amount.
Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water.
A licensed intermediary between buyers and sellers of real estate, typically working for commission. Real estate agent is a broad term which includes
A licensed intermediary between buyers and sellers of real estate, typically working for commission. A real estate broker typically has completed
Real estate debt is a debt instrument that the borrower is obliged to pay back with a predetermined set of payments. The debt instrument is secured by
Real estate equity is the difference between the current fair market value of a property and the amount of debt owed against the property.
Real estate that generates income or is otherwise intended for investment purposes rather than as a primary residence or personal use.
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
An investor who evaluates the real estate market and purchases property with the intention of building wealth.
Real estate syndication is a method of pooling capital from multiple investors for the common goal of acquiring real estate.
Land, and generally whatever is erected or affixed to the land, such as buildings, fences, and including light fixtures, plumbing.
A recession is a macroeconomic term that represents a significant and extended period of declining or stagnant economic performance in a region or country in the world. Investors, businesses, public entities and governments all track various indicators that can predict or signal the onset of a recession.
A term used to describe real estate assets that are tied to lifestyle trends, as opposed to economic cycles. These assets are less subject to downturns, and are subject to forces of the underlying market demographic. Recession-resistant real estate typically falls under three main asset classes: student housing, self-storage, and senior living.
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
A provision or clause to release certain collateral from a loan or mortgage in exchange for the borrower’s payment of a defined amount.
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
Rentable Square Footage equals the usable square footage plus the tenant’s pro rata share of the building common areas, such as
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)
Return on investment 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
Measure of the return on an investment relative to the expected risk of that investment, over a specific period.
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
A financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or
Seller financing is a loan provided by the seller of a property or business to the purchaser of that property or business.
Debt that takes priority over other unsecured, “junior” debt. Senior debt sits at the bottom of the capital stack, and offers the lowest risk with the lowest return.
Single tenant property is 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.
Soft costs are fees that are not directly related to labor and direct constructions costs. Soft costs include architectural, engineering, financing, and legal fees, and
Special purpose entity is a legal entity established by the sponsor or borrowing entity whose operations are limited to the acquisition and financing of specific assets.
In the context of real estate partnerships, a sponsor is an individual or company in charge of finding, acquiring, and managing the real estate property on behalf of
Stabilized occupancy is the long-term average occupancy rate that an income-producing property is expected to achieve after exposure for leasing in the open market for
A stock is a security that represents a shareholder’s proportionate ownership in the assets and earnings of the issuing corporation. Stocks are primarily bought and sold on exchanges. In exchange for cash, stockholders obtain a piece of a corporation and a claim to that firm’s assets and earnings.
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
Taxable income is calculated as total revenue less total expenses and applicable deductions and exemptions that are allowed in that tax year.
A person or entity who rents real estate from another though a lease. A tenant also may be referred to as a lessee.
Tenant improvement allowance is a leasing incentive offered by a landlord in order to entice tenants to lease space. The tenant improvement allowance is the dollar amount, typically
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
Tenants-In-Common is 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,
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.
Company that examines and insures title claims for real estate purposes. The title company verifies legal title to a property through a review of
Title holding trust is a fully revocable grantor trust designed and drafted specifically to acquire, hold, manage and ultimately dispose of real estate on a confidential or private basis to better protect an investor’s assets.
Insurance that protects the holder from financial loss resulting from defects in title to real estate. The most prominent form of title insurance is lender’s title insurance, which usually must be obtained to secure a mortgage, however owner’s title insurance does exist as well. Whereas lender’s insurance is usually paid for by the buyer, owner’s title insurance is paid for by seller.The purpose of title insurance is to protect both real estate owners and lenders against potential damage or loss due to defects in title. These defects include claims of ownership by another party, fraud of title documents, unidentified
Traded REITs are a type of security that invests in real estate properties and mortgages, and trades like stock on major exchanges. Like any REIT, traded REITs must pay out at least 90 percent of the company’s taxable income each year in the form of shareholder dividends. Unlike non-traded REITs, however, traded REITs are very liquid and relatively easy to value, a tribute to it’s existence on a major exchange.
A slice of the capital stack that reflects an investor’s credit or equity ownership position in a company or project. Different tranches have different cash flows and risks involved, as well as different claims to cash distributions.
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.
A fully revocable grantor trust designed and drafted specifically to acquire, hold, manage and ultimately dispose of real estate on a confidential or
An arrangement created during a person’s life, in which the trustee holds legal title to assets for a beneficiary.
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
Underwriting is the process of evaluating the future performance of a property. Similar to an insurance underwriter, in the context of commercial real estate,
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
Vacancy allowance is 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
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.
A real estate valuation method that bases a property’s market value off the cost it would take to build an equivalent structure. The cost approach takes into account the cost of land plus the cost of construction, less depreciation. Similar to its counterparts, the cost approach may have other forces that prove it inaccurate. For example, if vacant land is not available to compare against, the professional valuing the property will have to derive an estimate, making the end value less accurate.
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:
A real estate appraisal method that estimates a property’s value by comparing it against other properties with similar attributes that have been sold recently. This approach considers all of the individual features of a property, adjusting the value to reflect a sum of all the property’s features. A sales comparison approach may be used to evaluate both commercial and residential 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
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