|
Following
is a financial term glossary.
ABATEMENT -
Also known as free rent or early occupancy without rent
payments.
ABSORPTION RATE - The rate at which rentable space is
leased and occupied or housing units sold.
ADVANCES - Mortgage payments made by the loan servicer
when the borrower fails to make a payment.
AMORTIZATION - The repayment of loan principal through
equal payments of both principal and interest over a
designated period of time.
ANCHOR - The tenant that serves as the main attraction
to a commercial property. For example, the grocery store
in a shopping center.
ANNUAL PERCENTAGE RATE (APR) - The annual percentage
rate is a measure of the cost of credit on a yearly
basis. It is the effective interest rate of the credit.
The APR allows you to compare various kinds of mortgages
based on the yearly cost of each loan.
APPRAISAL - An analysis of real property completed by a
professionally trained and licensed appraiser to
determine the estimated value of the property that is
typically based on replacement cost, discounted cash
flow analysis and/or comparable sales price.
APPRECIATION - An increase in the value or price of an
asset.
ASI-IS CONDITION - The acceptance by a buyer or the
tenant of the existing condition of the premises at the
time a purchase or a lease is consummated and includes
any physical defects.
ASSIGNEE - The individual or entity to which the
obligations of a lease, mortgage or other contract have
been transferred
ASSIGNMENT - A transfer of an individual’s or an
entity’s entire stake in a property, lease, mortgage or
contract.
ATTORN - To agree to recognize a new owner of a property
and to pay them rent.
AVERAGE DOWNTIME - The amount of time projected between
the expiration of a lease and the commencement of a
replacement lease taking into account current or
projected market conditions.
AVERAGE OCCUPANCY - The occupancy rate averaged over a
given period of time.
BALLOON LOAN - A loan with a maturity that is shorter
than the amortization period
BANKRUPTCY - A legal procedure initiated either by the
debtor (voluntary) or by creditors (involuntary) when
the debtor is unable to make his or her payments. The
bankruptcy court will ultimately distribute the debtor's
property to creditors to fulfill repayment of debts.
BASE RENT - The minimum rent due the landlord and the
amount upon which rent escalations are calculated.
BASE YEAR - Usually the year in which a lease commences.
Operating expenses in the base year are used to
calculate operating expense escalations.
BASIS POINT - 1/100 of 1 percent.
BELOW GRADE - A structure or any portion of a structure
located underground or below the surface of the
surrounding ground.
BREAK-EVEN - The point at which gross income equals
normal operating expenses including debt service.
BROKER - A person or persons who acts as an intermediary
between two or more parties in connection with a
transaction
BUILDABLE ACRES - The area of land that is available to
be built on after subtracting for roads, sidewalks,
parking spaces, setbacks, anticipated open spaces and
areas unsuitable for construction.
BUILDING CODE – The set of regulations established by a
municipality to govern the standards of construction in
that municipality.
BUILD-TO-SUIT - A type of lease whereby the
owner/developer of a property builds a structure to a
tenant’s specifications in return for a long term lease.
CAPITAL GAIN - The gain resulting when the net proceeds
from the sale of an asset exceeds the book value of the
asset.
CAPITAL IMPROVEMENTS - Property improvements such as a
new roof, tenant improvements, or a parking lot. These
items are added to the basis of the property and then
can be depreciated over the holding period.
CAPITAL MARKETS - Public and private markets where
businesses or individuals can raise or borrow capital.
CAPITALIZATION RATE (Cap Rate) – The value of a property
expressed as a percentage. It is calculated by dividing
the net operating income by the sales price.
CARRYING COSTS – Inherent costs of property ownership
that must be absorbed by the owner.
CASH FLOW - The revenue remaining after all property
expenses are paid.
CASH FLOW MODEL - The financial model used to estimate
and project the cash flow from operations and the cash
proceeds from a sale.
CASH-ON-CASH RETURN - The yield on the cash investment
in a property expressed as a percentage calculated by
dividing the net cash flow after debt service by the
total cash investment.
CERTIFICATE OF OCCUPANCY - A document issued by a local
building department certifying that a building has been
satisfactorily inspected and is in a condition suitable
for occupancy.
CHAPTER 7 - That portion of the federal bankruptcy code
that deals with business liquidations.
CHAPTER 11 - That portion of the federal bankruptcy code
that deals with business reorganizations.
CLASS A - Properties that have the highest quality
construction, amenities and/or location and therefore
are most likely to generate the highest rents receive
this rating.
CLASS B - Good quality properties that lack the quality,
amenities and location that would permit owners to
charge top dollar for rents receive this rating.
CLASS C - Properties that offer few amenities and are
located in inferior locations but are otherwise in
physically acceptable condition and provide
cost-effective space to tenants receive this rating.
CMBS (commercial mortgage-backed securities) -
Securities backed by loans on commercial real estate.
COLLATERAL – Real estate asset(s) pledged to a lender to
secure repayment of a loan.
COMMON AREA - The areas of a property and its site that
are available for the non-exclusive use of all its
tenants such as lobbies, corridors, bathrooms and
elevators.
COMMON AREA MAINTANENCE - Rent charged to the tenant in
addition to the base rent to maintain the common areas.
COMPARABLES - Used to determine the fair market value of
a property based on other properties with similar
characteristics.
COMPOUND INTEREST - Interest calculated on the original
principal and accumulated interest.
CONCESSIONS - Cash or cash equivalents spent by an owner
to motivate a tenant to sign a lease. Concessions can
take the form of rental abatement, additional tenant
improvement allowance, and moving expenses among other
items.
CONDUIT LOAN- A loan that is originated to be pooled
with other similar type loans and then securitized.
CONSTRUCTION LOAN - Interim financing used to fund the
construction of a property. This loan will either be
paid of by a sale of the property or through a refinance
into a permanent loan.
CONTIGUOUS SPACE – Two or more suites or spaces within
the same building and on the same floor that can be
combined into one space and rented to a single tenant.
CONTRACT DOCUMENTS - The complete set of design plans
and specifications for the construction of a building.
CONTRACT RENT - The contractual rental amount expressed
in dollars as stated in a lease.
COUPON - The nominal interest rate charged to the
borrower on a promissory note or mortgage
COVENANT - Agreements inserted into deeds or other legal
instruments restricting or requiring performance of
certain acts and uses of a property and/or land.
CROSS-COLLATERALIZATION - The process of utilizing two
or more properties as security for one debt.
CURRENT OCCUPANCY - The current occupancy of a property
expressed as a percentage and calculated by dividing the
total amount of leased space in a property by the total
leaseable area.
DEBT SERVICE - The monetary requirements necessary to
meet all interest and principal payments during a given
period.
DEBT SERVICE COVERAGE RATION (DSCR) - The annual net
operating income from a property divided by annual cost
of debt service. A DSCR equal to 1.0 means the property
is generating exactly enough cash flow to cover debt
payments. A DSCR greater than 1.0 means the property is
generating more than enough cash flow to cover debt
payments.
DEED - A legal instrument used to transfer title to real
property.
DEED IN LIEU OF FORECLOSURE - A deed given by a property
owner or borrower to a lender to satisfy a mortgage debt
and avoid foreclosure.
DEED OF TRUST - A legal instrument used instead of a
mortgage in California. This document allows legal title
to a real property to be vested in trustees to secure
payment of a promissory note.
DEFAULT - Failure to meet the legal obligations in a
loan contract by not providing monthly mortgage payments
or violating other terms or covenants of the loan
contract.
DEFEASANCE – The substitution of collateral associated
with the early repayment of fixed-rate conduit/CMBS
loans. It can often act as a pre-payment penalty
depending on the interest rate of the loan and
prevailing interest rates.
DEFICIENCY JUDGEMENT - The remaining personal liability
of a borrower for the unpaid principal balance of
mortgage debt after a foreclosure has failed to yield
the full amount of the debt.
DEMISING WALL - A wall that separates one tenant's space
from another or from the building's common areas.
DEPRECIATION - A reduction in property value due to
normal wear and tear, age or other cause. In accounting,
depreciation is a periodic allowance made for this real
or implied loss.
DESIGN/BUILD - A method of construction in which a
single entity provides to the client all of the services
necessary to both design and construct all aspects of a
project.
DOLLAR STOP – The dollar amount of taxes and operating
expenses a tenant will pay on a prorated basis as
stipulated in the tenant’s lease.
DUE DILIGENCE - Actions carried out by a prospective
buyer of real property to confirm that the property is
as represented by the seller and is not subject to any
unknown or unreported issues.
DUE ON SALE CLAUSE - A clause in the loan documents that
calls a loan due if the property is sold before the
maturity date.
EARNEST MONEY - Money given by a buyer to a seller as
part of the purchase price to bind a transaction or
assure completion of a transaction.
EASEMENT - A right created by deed, grant, reservation,
agreement, or prescription to use someone else's
property.
ECONOMIC RENT - The market rental rate of a property.
EFFECTIVE GROSS INCOME (EGI) - The total income from a
property generated by rents and other sources such as
parking or laundry income.
EFFECTIVE GROSS RENT (EGR) - The net rent generated by a
property after adjusting for tenant improvements,
additional capital costs, lease commissions and other
sales expenses.
EFFECTIVE RENT - The actual net rental rate achieved by
an owner after deducting the value of concessions from
the base rental rate.
ENCROACHMENT - The building, placement or intrusion of a
structure on or over a property line, easement boundary
or building setback line without permission of the owner
of the encroached property.
ENCUMBRANCE – A claim, right, or interest in real
property that affects or limits title in said property
such as easements, leases, liens or mortgages.
ENVIRONMENTAL IMPACT STATEMENT (EIR) – Reports and/or
studies required by federal and state laws to accompany
proposals for major projects and programs that will
likely have an impact on the surrounding environment.
EQUITY - The difference between the fair market value
and current debt and liens on the property. The value an
owner has in real estate over and above the obligations
against the property.
ESCALATION CLAUSE - A clause in a lease that enables the
rent to be increased to reflect increased expenses, such
as property taxes and operating expenses, paid by the
owner.
ESTOPPEL CERTIFICATE - These certificates are used by a
potential purchaser and their lender and are signed by
tenants. By signing the estoppel certificates they are
certifying that terms of their leases are in fact
correct and can be relied upon by a third party.
EXCHANGE - Under Section 1031 of the Internal Revenue
Code, like-kind property used in a trade or business or
held as an investment can be exchanged tax-deferred if
traded for other like-kind property.
EXPENSE STOP - The maximum amount up to which the
property owner will pay certain operating expenses.
Amounts above the expense stop are the responsibility of
the tenant.
FACE RENTAL RATE - The asking rental rate advertised by
the property owner.
FAIR MARKET VALUE - The highest price that a buyer would
pay and the lowest price a seller would accept on a
property. Market value may be different from the price a
property could actually be sold for at a given time.
FEE SIMPLE INTEREST - absolute title to land, free of
any other claims against the title, which one can sell
or pass to another by will or inheritance.
FIRST MORTGAGE - The senior mortgage that has priority
over all junior encumbrances.
FIRST-GENERATION SPACE - Refers to newly constructed and
leaseable space that has never before been occupied by a
tenant.
FIXED RATE - An interest rate that remains constant over
the term of the loan
FLEX SPACE - A building with a layout that allows
tenants a flexible amount of office or showroom space in
combination with manufacturing, laboratory, warehouse,
or distribution space.
FLOOR AREA RATIO (FAR) - The amount of buildable square
footage allowed on a given property based on the square
footage of land of the property and the zoning code for
that property.
FORECLOSURE - The legal process by which a borrower in
default under a mortgage or deed of trust loses all
rights to, and interest in, the mortgaged property.
FORWARD COMMITMENTS - Describes a lender's obligation to
fund a mortgage upon the satisfaction of certain stated
conditions.
FULL RECOURSE - A loan on which a borrower and/or
guarantor is liable for full repayment of the loan in
the event of default.
FULL-SERVICE RENT - A rental rate that includes
operating expenses and real estate taxes for the base
year. The tenant is generally still responsible for any
increase in operating expenses over the base year
amount.
GENERAL CONTRACTOR - A party that performs or supervises
the construction or development of a property pursuant
to the terms of a primary contract with the property
owner.
GENERAL PARTNER - A member of a partnership who has
authority to bind the partnership and shares in the
profits and losses of the partnership
GOING-IN CAPITALIZATION RATE - The capitalization rate
computed by dividing the projected first year's net
operating income by the purchase price of the property.
GROSS BUILDING AREA - Total floor area of a building
including basements, mezzanines and penthouses and
un-rentable area.
GROSS LEASEABLE AREA - The total area designed for
tenant occupancy and use that produces rental income.
GROSS LEASE - A lease in which the tenant pays a stated
figure for rent. The property owner then pays all
operating and property expenses out of this rent figure.
GROSS OPERATING INCOME - The total income generated by
the operations of a property before payment of operating
expenses.
GROSS RENT MULTIPLIER (GRM) - A figure investors use to
determine market value or to compare relative prices of
properties. It is calculated by dividing the gross rents
generated by a property by its purchase price.
GROUND LEASE - A lease of the land only. Usually the
land is leased for a relatively long period of time to a
tenant that constructs a building on the property. A
land lease separates ownership of the land from
ownership of buildings and improvements constructed on
the land.
GUARANTOR - One who guarantees repayment of a loan.
GUARANTY - An agreement whereby the guarantor assures
repayment of a debt to a lender.
HARD COST - The costs of a project, such as building
materials, that become the property improvements.
HIGHEST AND BEST USE - The most probable use of land or
improved property that is legally possible, physically
possible and financially feasible from the market, and
which results in maximum profitability.
HOLDBACKS - A portion of a loan commitment that is not
funded until an additional requirement is met.
HOLD-OVER TENANT - A tenant retaining possession of the
leased premises after the expiration of a lease.
INCOME CAPITALIZATION VALUE - The estimate of value
derived for an income-producing property by dividing its
expected income by an estimated market capitalization
rate.
INCOME PROPERTY - Real estate that is owned or operated
to produce revenue.
INSTITUTIONAL-GRADE PROPERTY - Various types of real
estate properties generally owned or financed by
tax-exempt institutional investors.
INTEREST - The cost paid for the use of capital.
INTEREST-ONLY LOAN - A loan where the interest charge is
paid regularly over the term of the loan and the entire
original principal balance is paid at maturity.
INTERNAL RATE OF RETURN (IRR) - The discount rate that
makes the net present value of all cash flows from a
particular project equal to zero. Or more simply, the
rate of growth a project is expected to generate.
JOINT VENTURE - An investment entity formed by two or
more entities to acquire and/or develop real property.
LEASE - An oral or written agreement whereby the owner
of a property gives the right of possession to another
for a specified period of time and for a specified
consideration.
LEASE AGREEMENT - The formal legal document entered into
between a landlord and a tenant to reflect the lease
terms agreed upon between them.
LEASEHOLD INTEREST - The right of a lessee to hold or
use property for a fixed period of time at a given price
as stated in the lease.
LEGAL DESCRIPTION - A description of a specific parcel
of real property which allows an independent surveyor to
locate and identify it and most often uses the
government survey, metes and bounds or recorded plat
(lot and block number) method.
LETTER OF INTENT (LOI) - A preliminary agreement stating
the proposed terms to be incorporated into a final
purchase and sale contract.
LEVERAGE - The use of debt to complete an investment
transaction. The higher the proportion of debt used to
make the investment, the higher the leverage and the
lower the proportion of equity.
LIBOR (London InterBank Offered Rate) - The rate banks
charge each other for short-term Eurodollar loans. LIBOR
is often used as an index for commercial real estate
loans.
LIEN - A claim or encumbrance against property used to
secure a debt, a charge or the performance of some act.
LIKE-KIND PROPERTY - A term used in an IRS 1031
exchange. In terms of real estate exchange it describes
exchanging real property for real property.
LIMITED PARTNERSHIP - A partnership comprised of limited
partners who put up the cash with which to purchase an
investment property and one or more general partners who
manage and operate the investment property.
LIQUIDITY - The availability and ability of assets to be
readily converted into cash.
LISTING AGREEMENT - An agreement between a property
owner and a real estate broker giving the broker
authorization to attempt to sell or lease the property
under certain terms in return for a commission, set fee
or other form of compensation.
LOAD FACTOR - The ratio of rentable area to useable area
in a property. It is also known as the add-on factor.
LOAN BALANCE - The amount of money remaining to be paid
on an amortizing loan at a given time.
LOAN-TO-VALUE RATIO (LTV): The ratio of the value of the
loan principal balamce divided by the property's market
value.
LOCKOUT - The period during which a loan may not be
prepaid.
LOT - a parcel of land having fixed boundaries.
MAKER - One who creates or executes a promissory note
and promises to pay the note when it becomes due.
MARKET RENTAL RATES - The rental income that a property
most likely would command in the open market, indicated
by the current rents asked and paid for comparable
space.
MARKET STUDY - A forecast of future demand for a certain
type of real estate project that includes an estimate of
absorption, rental rates, and sale value.
MARKET VALUE - see Fair Market Value.
MARKETABLE TITLE - A title that is free and clear of
objectionable liens, clouds, or other title defects and
which enables an owner to sell his property freely to
others and which others will accept without objection.
MASTER LEASE - A primary lease that controls subsequent
leases.
MATURITY DATE - The date when the total principal
balance comes due.
MECHANIC’S LIEN - A lien on real estate, created by
operation of law, which secures the payment of debts due
to persons who perform labor or services or furnish
materials incident to the construction of buildings and
improvements on the real estate.
MEZZANINE FINANCING - A form of debt financing junior
and subordinated to traditional secured bank financing.
This type of financing takes greater risk than typical
senior debt and requires a higher rate of return.
MIXED-USE - a building or project, or space within a
building or project, providing for more than one use.
MORTGAGE - A legal document by which real property is
pledged as security for repayment of a loan until the
debt is repaid in full.
MORTGAGE CONSTANT - The total annual debt service on an
amortized mortgage, expressed as a percentage of the
initial principal amount of the loan.
NEIGHBORHOOD CENTER - A type of retail shopping center
designed to provide convenience shopping for the
day-to-day needs of consumers in the immediate
neighborhood.
NET LEASE - A lease in which the tenant pays rent and
all operating expenses such as real estate taxes,
insurance premiums, and maintenance costs.
NET OPERATING INCOME (NOI) - The income after deducting
from gross income the operating expenses, repairs and
maintenance and replacement of equipment.
NET SALES PROCEEDS - Proceeds from the sale of property
less brokerage commissions, closing costs and marketing
expenses.
NON-COMPETE CLAUSE - A clause included in a lease
specifying that the business of the tenant is exclusive
in the property and that no other tenant operating the
same or similar type of business can occupy space in the
property.
NON-PERFORMING LOAN - A loan that is unable to meet its
contractual principal and interest payments.
NON-RECOURSE DEBT - A debt on which only the specified
security may be foreclosed upon to satisfy the debt. The
borrowers of non-recourse debt bear no liability for
full repayment of the debt in the event of default.
OPEN SPACE - An area of land or water dedicated for
public or private use or enjoyment.
OPERATING EXPENSE ESCALATION - A clause inserted into a
lease to adjust rents by reference to external standards
such as published indexes, negotiated wage levels, or
expenses related to the ownership and operation of a
property.
OPERATING EXPENSES - The actual costs associated with
operating a property, including maintenance, repairs,
management, utilities, taxes and insurance.
OPERATING EXPENSE STOP - The amount at which the owner’s
contribution to operating expenses stops or the amount
above which the tenant is responsible for its pro rata
share of operating expenses.
ORIGINATOR - A company that sources and underwrites
commercial and/or multifamily loans.
OUT-PARCEL - Individual retail sites in a shopping
center.
PARKING RATIO - The number of parking spaces available
in a property per 1,000 square feet of building area.
PARTICIPATING DEBT - Debt which allows the lender to
collect interest payments and also to share in increases
in NOI or increases in the original value of the
property at the time of loan funding.
PERCENTAGE RENT - A common feature of shopping center
leases that calls for rent payable under a lease to
equal a percentage of gross sales or revenues received
by the tenant.
PERFORMANCE BOND - A type of surety bond that is posted
by a contractor to guarantee full performance of the
contract terms.
PERMANENT LOAN - A long-term mortgage on a property.
PLAT MAP - A map of a specific area, such as a
subdivision, that shows the boundaries of individual
lots together with streets and easements.
POWER CENTER - A type of retail center dominated by
several large anchors stores and typically consists of
several freestanding anchors and only a minimum amount
of small specialty tenants.
POWER OF SALE - A clause inserted in a mortgage or deed
of trust giving the mortgagee or trustee the right and
power upon default to sell the property at public
auction.
PRE-LEASE - Leasing space in a proposed building before
the start of construction or issuance of a certificate
of occupancy.
PRE-PAYMENT RIGHTS - Rights given to the borrower to
make partial or full payment of the total principal
balance prior to the maturity date without penalty.
PRINCIPAL PAYMENTS - Payments reducing the principal
balance of the loan.
PROPERTY TYPE - The four primary classifications of
commercial real estate property types are retail,
industrial, office, and multi-family residential.
PRO RATA - The proportionate share of expenses for the
maintenance and operation of the property
QUITCLAIM DEED - A deed containing no warranties or
covenants, which relinquishes any interest, title or
claim in property the grantor may have, if any.
RAW LAND - Unimproved land in its natural state.
RAW SPACE - Unimproved shell space in a building.
REAL PROPERTY - Land, buildings, and whatever is
attached or affixed to the land.
RECOURSE - The right of the holder of a note secured by
a mortgage or deed of trust to look personally to the
borrower or guarantor for payment in the event of
default.
REHAB - Extensive renovation of a property intended to
remedy its obsolescence.
REGIONAL CENTER - This type of retail center provides a
variety of general merchandise and services with its
main attractions being its anchor stores.
REIT (Real estate investment trust) - A business trust
or corporation that combines the capital of many
investors to acquire or provide financing for real
estate.
RENEWAL OPTION - A clause in a lease giving the tenant
the right to extend the term of a lease under certain
terms.
RENT - Consideration paid for the occupancy and use of
rental property, land, buildings, equipment, etc.
RENT COMMENCEMENT DATE - The date on which a tenant
begins paying rent.
RENT ESCALATORS - Items specified in a lease such as
base rent, operating expenses, and taxes that may
increase by predetermined amounts at stated intervals or
by a constant annual percentage.
RENTAL GROWTH RATE - The projected increase or decrease
in market rental rates over a certain period expressed
as a percentage.
RENT-UP PERIOD - The phase of a project when a property
is ready for occupancy and tenants are actively being
sought and the project is approaching its stabilized
occupancy.
REO (Real estate owned) - Real estate owned by a lender
as a result of default by borrowers and foreclosure by
the institution.
REPLACEMENT COST - The estimated current cost to
construct a building equivalent to a subject property
using modern materials and current building standards.
REPLACEMENT RESERVES - Funds set aside to be used to pay
for anticipated periodic replacement of systems,
equipment and components.
RESERVE ACCOUNT - An account held by the lender to fund
certain expenditures of a property. An examples of a
typical reserve account is one for replacement reserves.
RIGHT OF FIRST REFUSAL - A clause contained in leases
giving a tenant the first opportunity to lease
additional space in a property at the same price and on
the same terms and conditions as those contained in a
third-party offer that the owner has expressed a
willingness to accept.
ROLL-OVER RISK - The risk that a tenant will not renew
their lease.
SALE-LEASEBACK - An agreement where the owner-occupant
of a property sells the property to a new owner and
simultaneously leases the property back on a long term
basis as a tenant.
SALES COMPARISON VALUE - The value arrived at by
comparing the property being appraised to similar
properties that have sold recently.
SECOND-GENERATION SPACE - Previously occupied space that
becomes available for lease.
SECONDARY FINANCING - A loan on real property secured by
a lien junior to an existing first mortgage or trust
deed loan.
SECONDARY MARKET - A market where existing mortgage
loans are securitized and then bought and sold to
investors.
SECURITY DEPOSIT - A monetary deposit made by a tenant
with a property owner to secure performance of a lease.
It also can sometimes take the form of a letter of
credit.
SERVICER - A public or private entity that is
responsible for collecting, monitoring, and reporting
loan payments.
SETBACK - The distance from a curb, property line or
other reference point, within which building is
prohibited.
SITE DEVELOPMENT - The installation of all necessary
site improvements made to a site before a building or
project can be constructed on the site such as sewers
and roads.
SITE PLAN - A detailed plan that depicts the location of
improvements on a property.
SOFT COSTS - Expenses other than those costs directly
related to constructing the improvements incurred during
the development of a real estate project. They include
legal, architectural, engineering, financing and other
fees.
SPACE PLAN - A graphical depiction of a tenant's space
showing wall and door locations, room sizes and
furniture layouts.
SPECIAL ASSESSMENT - A fee imposed on property by the
local tax authorities to pay for public improvements
such as water, sewers, streets and improvement
districts.
SPECULATIVE SPACE - Tenant space within a property that
has not been leased before the start of construction of
a new building.
STABILIZED NET OPERATING INCOME - The net operating
income to be achieved upon full occupancy of a property.
STABILIZED OCCUPANCY - The range of long-term occupancy
that an income-producing real estate project is expected
to achieve expressed as a percentage.
STEP-UP LEASE - A lease specifying set increases in rent
at set intervals during the term of the lease.
STRAIGHT LEASE - A lease specifying a fixed amount of
rent that is to be paid periodically during the entire
term of the lease.
STRIP CENTER - Any shopping area comprised of a row of
stores but smaller than a neighborhood center.
SUBCONTRACTOR - A licensed contractor, usually involved
in a particular trade, working under and being paid by
the general contractor.
SUBLESSEE – The entity to which the rights of a lease
have been conveyed, while the original lessee retains
primary responsibility for the obligations of the lease.
SUBMARKET - An area within a larger geographic market
defined and identified on the basis of attributes that
distinguish it from other submarkets within the same
geographic market.
SUBORDINATION - The act of a party acknowledging by
written record that a debt owed to them is inferior to
the interest of another in the same property.
SURVEY - A map completed by a licensed surveyor which
shows the precise boundaries of a given property as well
as improvements, references to known landmarks, and the
property’s principle features.
TAX BASE - The assessed valuation of all real property
located within a taxing authority's jurisdiction. When
multiplied by the tax rate, it determines the amount of
tax due.
TAX LIEN - A general statutory lien imposed against real
property for failure to pay taxes. There are federal tax
liens and state tax liens.
TAX ROLL - A list or record containing the descriptions
of all land parcels located within the county, the names
of the owners or those receiving the tax bill, assessed
values and tax amounts.
TENANT – A person or entity to which a property owner
grants temporary and exclusive use of land or a
building, usually in exchange for rent.
TENANT AT WILL – A tenant who occupies at property under
a lease with an uncertain duration and either the tenant
or property owner has the right to terminate on proper
notice.
TENANT IMPROVEMENT (TI) - Improvements made to leased
space by or for a tenant.
TENANT IMPROVEMENT (TI) ALLOWANCE - The fixed amount of
money funded by the landlord toward tenant improvements.
The tenant pays any of the costs that exceed this
amount.
TENANT MIX - A phrase used to describe the quality and
nature of a property's tenants.
TERM - The length of a loan.
TITLE - A legal term for an owner's interest in a piece
of real property.
TITLE INSURANCE - An insurance policy issued by a title
company that insures a property owner and often their
lender against loss resulting from defects of title to a
specifically described parcel of real property.
TITLE SEARCH - An examination of all recorded documents
affecting a specific piece of property conducted by a
title company to determine the present condition of
title.
TOTAL COMMITMENT - The full loan amount that is
obligated to be funded if all stated conditions are met.
TOTAL PRINCIPAL BALANCE - The total amount of debt,
including the original loan amount adjusted for
additional funding, principal payments and other unpaid
items that are allowed to be added to the principal
balance by the note or by law.
TOTAL RETAIL AREA - Total floor area of a retail center
less common areas from which sales are generated.
TRADE FIXTURES - Personal property installed within a
leased premises which are unique to tenant's business,
and which may generally be removed by tenant at the end
of the term of the lease.
TRIPLE NET LEASE - A lease that requires the tenant to
pay their pro rata share of all expenses of the property
being leased in addition to rent.
TRUSTEE - The third party who holds legal title to
property for a special purpose without being the actual
owner. A trustee is one of the parties to every trust
deed.
UNDER CONTRACT - The period of time after which a buyer
and seller have executed a purchase and sale agreement
but before the close of escrow. During this time the
buyer is able to perform its due diligence and finalize
financing arrangements. Also during this time the seller
is precluded from entertaining offers from other buyers.
UNENCUMBERED - Property that is free of liens and other
encumbrances
UNIMPROVED LAND - Most often refers to land without
improvements or buildings but can also refer to land in
its natural state.
USABLE SQUARE FOOTAGE - The area contained within the
demising walls of the tenant space that actual,
functional space.
USE - The specific purpose for which a certain piece of
land or a building is intended to be used.
VACANCY FACTOR - An estimated amount of gross rental
income that will be lost due to vacancy expressed as a
percentage of the total rentable square footage of the
property.
VACANCY RATE - The total amount of vacant, available
space in a property divided by the total square footage
of space available in that property expressed as a
percentage.
VACANT SPACE - Available tenant space currently being
marketed for lease excluding space available for
sublease.
VALUE-ADDED - A phrase generally used to describe
investments in under-performing and/or under-managed
properties where there is a way to significantly
increase the value of the property by bringing their
performance and management up to current market
standards.
VARIABLE-RATE - A loan interest rate that varies over
the term of the loan.
VARIANCE - Permission to deviate from the set of rules a
municipality applies to land use.
WORKING DRAWINGS - The set of plans for a building or
project that indicate the precise manner in which a
project is to be built.
WORKOUT - The process by which a borrower attempts to
negotiate with a lender to restructure the borrower's
debt rather than go through foreclosure proceedings.
WRITE-DOWN - When the book value of an asset is adjusted
downward to better reflect current market value.
WRITE-OFF- When an asset has been determined to be
uncollectible and is therefore charged as a loss
YIELD - The effective return on an investment.
YIELD MAINTENANCE PREMIUM - A penalty paid by the
borrower designed to make investors whole in the event
of early payment of the loan principal.
ZONING - The creation of districts by local governments
in which specific types of property uses are authorized
(e.g., commercial, industrial, residential, high
density, mixed use).
ZONING ORDINANCE - The set of laws and regulations
controlling the use of land and construction of
improvements in a given area or zone.
If you
require additional information, or would like to speak
to one of our commercial financing specialists, please call
us at 888.488.3807 or
. |
