Glossary of Terms

Property Type, Senior Living

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.

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Qualified Opportunity Zone Stock

Stock of any domestic corporation (i) acquired by the Opportunity Fund after December 31, 2017, at original issuance solely in exchange for cash, and (ii) which, at the time such stock is issued and during substantially all of the Opportunity Fund’s holding period, is a Qualified Opportunity Zone Business (“QOZB”).

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Safe Harbor

Safe harbor is a statutory or regulatory provision that provides protection from a penalty or liability. In the context of a 1031 exchange, safe harbor refers to any one of

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Sale-Leaseback

A sale-leaseback is an agreement where the seller of real estate leases back the same property from the buyer the seller sold it to. Once a seller has given title to the buyer, the seller immediately enters into a lease agreement with the new owner, making rent payments to occupy the property. Sale-leaseback provisions are often used in situations where a company needs to access capital tied up in an asset such as real estate, but still needs to use the property in order to operate.

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Sales Load

See Equity Load.

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Salvage Value

Salvage value is the approximate value of an asset at the end of its useful life. Using both purchase price and a given accounting method, such as straight-line or double declining balance, one can calculate the amount of annual depreciation being attributed to an asset based on its salvage value. Salvage value is an estimate, while depreciation is a calculation based off this amount.

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Same Taxpayer Provision

A requirement in a 1031-exchange transaction, the same taxpayer provision states that the taxpayer who owned the relinquished property must be the same taxpayer who takes ownership of the replacement property. This ensures that the taxpayer’s basis is carried over into the new property, and that there is a continuity of deferral.

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Schedule K-1

A Schedule K-1 is a type of tax document used to report partnership incomes, losses, and dividends. Each individual partner is obligated to complete one of these forms, whenever necessary, and must include it with their respective personal tax returns.

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Seasoned DST Interest

Previously owned equity interests in a 1031 exchange-qualified Delaware Statutory Trust (DST) whose properties have at least twelve (12) months 

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Second Mortgage

A second mortgage is a subordinate mortgage taken on by a borrower while a first mortgage is still in place. In situations where a homeowner has built up equity in his or her property by paying down a first lien mortgage, or property appreciation as occurred, one may want to borrow against this new equity to fund projects or other expenditures. Due to the fact the second mortgages only receive payment when the first mortgage has been paid off, they typically hold higher interest rates.

There are two main types of second mortgages that exist: a home equity loan and a line of credit. A home equity loan is where a borrower receives a upfront lump sum from the lender, and makes interest and principal over the mortgages term, similar to a conventional loan. A line of credit is where the lender allots a predetermined amount of money for the borrower to draw from, with the borrower able to borrow and repay the line of credit as often as they wish. Note that in a line of credit type loan, the borrower is not required to take any funds from the borrower.

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Secondary Market

The secondary market is where existing securities are bought and sold. Once a security has been purchased by an investor in the primary market, whether it be a public or private market, all further transactions are done on the secondary market. Securities are then exchanged between interested buyers and sellers, with exchanges facilitating the trade. For example, the New York Stock Exchange is considered a secondary market for public equities. Note, that private securities may not have an active secondary market to conduct secondary trades.
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Securitization

Securitization is a financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or

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Seller Financing

Seller financing is a loan provided by the seller of a property or business to the purchaser of that property or business.

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Senior Debt

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.

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Signatory Trustee

A signatory trustee is the individual who will be managing the Delaware Statutory Trust (DST). The Sponsor of the DST typically serves as the Signatory Trustee.

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Simultaneous Exchange

See Concurrent Exchange.

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Single Tenant Property

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.

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Social Security

Social Security is a term used to represent the United States government’s Old-Age, Survivors and Disability Insurance (OASDI) program. It is an insurance program structured such that workers pay into the program via a payroll withholding on their wages. These withholdings go into two Social Security trust funds that are used to provide benefits to individuals who currently qualify.

Individuals over the age of 62 who have paid into the system for 10 years or more qualify for Social Security retirement benefits.

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Soft Costs

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

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Special Purpose Entity (SPE)

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.

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Sponsor

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

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Stabilized Occupancy

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

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Stated Rent

Stated rent is the rent amount paid by the occupant to the landlord as specified in the lease. Stated rent does not account for any concessions or landlord costs

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Step-Up In Basis

When a taxpayer bequeaths an asset to a beneficiary upon death, the beneficiary’s tax basis in the asset is “stepped up” to the fair market value of

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Stock

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.

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Submarket

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

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Substantial Improvement

Qualified Opportunity Zone Business Property (“QOZBP”) is substantially improved for this purpose if during any 30-month period following acquisition of such property there are additions to basis that equal the adjusted basis as of the beginning of such 30-month period.

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Suspended Loss

A capital loss that cannot be realized in a given tax year due to passive activity limitations. The losses are suspended until they can be netted against passive income in a future tax year. These suspended losses are a result of passive activities, and can only be carried forward. Suspended losses that are a result of the disposition of a passive interest are subject to an annual capital loss limit.

For example, if a taxpayer incurs a $10,000 suspended loss from a passive activity and participates in the activity in the following year and earns $20,000, then the suspended loss may be applied against $10,000 of the earned income, leaving the taxpayer with $10,000 of declarable income for the year.

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Syndicated Investment

See Real Estate Syndication.

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Systematic Risk

The uncertainty caused by macroeconomic factors that affect all risky assets. Also known as “market risk”, systematic risk underlies the performance of most asset classes that trade publicly or privately. One can not diversify against systematic risk, as it includes events such as inflation, changes in interest rates, recessionary periods, and even war. These type of forces tend to affect the market as a whole, and typical portfolio diversification strategies may not be as effective.

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Valuation, Sales Comparison

Sales comparison valuation is 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.

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