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1031 EXCHANGE – IRS
rule that allows any property owner – investor or home owner – to
avoid capital gains taxes on the transaction by purchasing a
property of equal or greater value. Rules vary from year to year,
but generally the property has to be identified within 6 months
after closing on the old property.
This rule also applies to "like-kind" exchanges, and
include other property such as boats or jewelry. It does not apply
to securities, bonds, or stocks.
10 YEAR US TREASURY – An index rate; a
published interest rate (or interpolation of rates) usually corresponding
to the current yield of a US Treasury note or bond, Prime Rate,
LIBOR, etc. The Final Note Rate is typically equal to the sum of
the index rate plus the spread. Index rate yields are typically
published in daily papers by financial information services (e.g.
Wall Street Journal, Bloomberg).
401K AND 403B LOANS – This is a rollover
or transfer of any qualified retirement money from an IRA, a previous
employer's 401(k), a 403(b), or another retirement plan, in any
amount tax-free to your new self-employed 401(k) or your 403(b)
with a loan feature.
You are allowed to borrow up to a maximum of $50,000, but you can't
borrow more than 50%, of the account balance in your self-employed
401(k) or 403(b) account.
You may use this loan can be used for any purpose. When you follow
the IRS loan repayment guidelines your loan stays tax-free and
100% PRIVATE PAY – assisted living designation
where senior housing residents pay 100% of the rent versus
by welfare or government subsidies.
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AAA TENANT – This refers to tenant with
a top credit rating. This type of tenant is often critical to a
developer's ability to arrange both construction and permanent
mortgage financing for a major commercial project, such as a shopping
center or office building.
The more AAA Tenants you have, percentage-wise, the better your
commercial loan rate will be.
ACREAGE – a 2 dimensional
measure of land equaling 160 square rods, 10 square chains, 4,840
square yards, or 43,560 square feet.
ADJUSTABLE RATE MORTGAGE – a mortgage
with an interest rate that changes periodically, according to
an index that is selected when the mortgage is issued. The initial
interest rate is lower than that of fixed-rate mortgages, but
monthly payments can go up or down as the rate is adjusted.
ADJUSTMENT INTERVAL – the period of time
between changes in the interest rate for an adjustable-rate mortgage.
Typical adjustment intervals are 6 months and one year.
AMENITIES – in appraisal, the non-monetary
benefits derived from property ownership.
AMORTIZATION PERIOD – the period or length
of time over which the principal portion of a mortgage loan is
scheduled to be paid down through periodic payments.
ANCHORED – refers to a piece of commercial
real estate property, which will serve as the main tenant in
a shopping center.
ANCHORS – a long term, credit worthy tenant.
The presence of one or more "anchors" enhances the
value and the ability to obtain financing for a shopping center.
APPRAISAL – an estimate of the value of
a property, made by a qualified professional called an appraiser.
ASSISTED LIVING – type of senior housing
that is typified by independent living and limited assistance
to its renters.
ASSUMABILITY – a mortgage loan which can
be transferred to another person without a change in the terms
of the loan.
AVAILABLE SF – the square feet available
AVERAGE ANNUAL OCCUPANCY – percentage
of currently rented units in a building, city, neighborhood or
AVERAGE DAILY RATE – a hotel rate used
to evaluate the average daily rate of a hotel inclusive of vacancy
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BALLOON PAYMENT – one
large payment for the remaining principal balance of a mortgage,
due at a time specified in the contract.
BASIS POINT (BP) – 1/100th of 1% expressed
as a margin over an index rate.
BORROWING ENTITY TYPE – the legal form
under which property is owned.
BRIDGE/SHORT TERM LOAN – a short-term
or interim loan for borrowers who need more time to find permanent
financing or are repositioning a commercial property.
BUILDING PERMIT – a document, issued by
government regulatory authority that allows a builder to construct
or modify a structure.
BUILDING SF – the usable square footage
of the building.
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CAP – the maximum, which
an adjustable-rate mortgage may increase, regardless of index
changes. An interest rate cap limits the amount the interest
can change, while a payment cap limits the increase in monthly
payment to a specific dollar amount.
CAPITAL EXPENDITURES – line items on a
profit and loss statement that would not be expensed on an annual
basis. This category would include replacement of major building
systems, such as roofs, etc.
CAPITALIZATION RATE – the ratio of the
first year NOI to the asking price (NOI/Asking price). Not the
rate of return.
CARVE OUT – the definition used for the
inclusion of recourse in loan documents for fraud and misrepresentation.
CASH–OUT REFINANCING – when the
principal amount of a new mortgage involved in refinancing is
greater than the principal amount outstanding of the existing
mortgage being refinanced, and all or a portion of the equity
is converted to cash.
CENTRAL BUSINESS DISTRICT (CBD) – the
downtown section of a city, generally consisting of retail, office,
hotel, entertainment, and government land uses with some high-density
CLEARANCE – the distance between the building’s
floor and effective storage ceiling.
CLIMATE CONTROLLED – an industrial and
self-storage term that represents temperature controlled commercial
CLOSING – the meeting between the buyer,
seller and lender (or their agents) where the property and funds
legally change hands.
CLOSING COSTS – the costs and fees associated
with the official change in ownership of the property and
with obtaining the mortgage that is assessed at the closing.
CMBS (Commercial Mortgage Backed Security) – a
bond or other financial obligation secured by a pool of
COFI (Cost of Funds Index) – index used
to determine interest rate changes for adjustable rate mortgages.
It is based on the cost of funds of the 11th District of the
Federal Home Loan Bank.
COMMERCIAL LAND – development and transitional
land acquired for investment use: land for lots, site selection
and assemblage of parcels.
COMPARATIVE MARKET ANALYSIS – an estimate
of the value of a property based on an analysis of sales of properties
with similar characteristics.
CONDUIT – the financial intermediary that
sponsors the conduit between the lender(s) originating loans
and the ultimate investor. The conduit makes or purchases loans
from third party correspondents under standardized terms, underwriting
and documents and then, when sufficient volume has been obtained,
pools the loans for sale to investors in the CMBS market.
CONGREGATE CARE – a type of senior housing
that typified by a central eating facility, smaller rooms, and
a higher level of care for its tenants.
CONSTANT MATURITY TREASURE (CMT) – an
index based on the U.S. Treasury that is used in the pricing
of debt for banks.
CONSTRUCTION LOAN – a short term loan
to pay for the construction of commercial buildings. These loans
typically provide periodic disbursements to the builder as each
stage of the building is completed. When construction is completed
a take-out or permanent loan is used to pay off the construction
CONSTRUCTION TYPE – the type of construction
used for a commercial building, (i.e. concrete tilt-up, etc.).
CONTINGENCY – an element of an agreement
that must be satisfied before the total agreement can be consummated.
COUPON – the coupon on U.S. Government
securities expressed as an annual percentage of face value, is
the interest rate the U.S. Government promises to pay to the
holder on an ongoing basis until maturity.
CREDIT TENANT – a tenant, who has obtained
a debt rating by S&P or Moody’s of "BBB-" or
CREDIT TENANT NET LEASE – a lease with
a tenant that has a credit rating of BBB- or better.
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DEBT SERVICE – the periodic payments (principal
and interest) made on a loan, which is being amortized over a longer
term (usually 25-30 years).
DEBT SERVICE COVERAGE RATIO (or DEBT COVERAGE RATIO) – the
relationship between the annual net operating income (NOI) of
a property and the annual debt service (principal and interest)
of the mortgage loan on the property. Both Lenders and Investors
calculate this ratio to assist them in determining the likelihood
of the property generating enough income to pay the mortgage
payments. From the lender’s viewpoint, the higher the ratio,
the better. A DSCR of less than 1.0 means that there is
insufficient cash flow generated by the property to cover required
DEFEASANCE – a clause in a mortgage that
gives the borrower the right to prepay a commercial mortgage
by purchasing US Treasuries in an escrow account to pay off ongoing
DENSITY – the number of buildings or persons
occupying a certain area of land, generally an acre.
DEPRECIATION (ACCOUNTING) – allocating
the cost of an asset over its estimated useful life.
DEPRECIATION (APPRAISAL) – a
charge against the reproduction cost (new) of an asset for the
estimated wear and obsolescence. Depreciation may be physical,
functional or environmental.
DISCOUNT RATE – the rate of interest that
the Federal Reserve charges member banks for loans.
DISTRIBUTION WAREHOUSE – (also called
Light Industrial) Generally the least intense industrial use.
Office use is limited to management tasks for the distribution
or warehouse facility, or about 15 percent of total space.
DOCK HIGH – existence and/or number of
dock level doors.
DOUBLE–WIDE – a mobile home consisting
of two units which have been fastened together along their length.
DUE DILIGENCE – the legal definition:
a measure of prudence, activity or assiduity, as is properly
to be expected from, and ordinarily exercised by, a reasonable
and prudent person under the particular circumstances. In CMBS
due diligence is the foundation of the process because of the
reliance securities investors must place on the specific expertise
of the professionals involved in the transaction.
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EFFECTIVE GROSS INCOME – gross
income of a building if fully rented, less an allowance for estimated
ENGINEERING REPORT – report generated
by an architect or engineer describing the current physical condition
of the property and its major building systems, i.e., HVAC, parking
lot, roof, etc. The report also determines an amount for calculating
replacement reserves, if needed.
ENTITLEMENTS – a right to benefits specified
especially by law or contract.
ENVIRONMENTAL REPORT – report
generated by qualified environmental firms to determine potential environmental
hazards in a building’s region or within the building itself.
ENVIRONMENTAL RISK – risk of loss of collateral
value and of lender liability due to the presence of hazardous
materials, such as asbestos, PCB’s, radon or leaking underground
storage tanks (LUSTS) on a property.
EQUITY – the difference between the fair
market value and current indebtedness, also referred to as "owner’s
EQUITY LOAN – a loan for an equity position
which represents an ownership position in a property or a
loan for the participation in the profits of the commercial property
ESCROW – 1. A special account set up by
the lender in which money is held to pay for taxes and insurance.
2. A third party who carries out the instructions of both the
buyer and seller to handle the paperwork at the settlement.
EURODOLLAR – U.S. dollar denominated deposits
at commercial banks outside of the United States.
EXTENDED STAY – a hotel that caters to
a business traveler on an extended lodging period.
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FAIR MARKET VALUE – an
appraisal term for the price which a property would bring in
a competitive market, given a willing seller and willing buyer,
each having a reasonable knowledge of all pertinent facts, with
neither being under any compulsion to buy or sell.
FARM – land used for agricultural purposes
for crop and livestock farming.
FEDERAL FUNDS (FED FUNDS) – Fed Funds
is the interest rate charged by those banks with excess reserves
on hand (reserves over and above the minimum required by the
Federal Reserve) to those banks in need of overnight loans
to meet reserve requirements. Since it is set daily, the Federal
Funds rate is the most sensitive indicator of the direction of
FIT–OUT – tenant improvements within
a commercial property.
FIXED–RATE MORTGAGE – a
mortgage with an interest rate that remains constant for the
life of the loan.
FIXTURES – personal property which for
some reason, such as the manner of attachment, has become realty.
Such property is also referred to as chattel real.
FLEX SPACE – an industrial property, which
has both an office and an industrial component.
FLOOR–TO–AREA RATIO (FAR) – the
relationship between the total amount of floor space in a multi–story
building and the base of that building. FAR’s are dictated
by zoning laws, in effect, stipulate the maximum number of stories
a building may have.
FORECLOSURE – the process by which a lender
takes back a property on which the mortgage has defaulted.
A service may take over a property from a borrower on behalf
of a lender. A property usually goes into the process of foreclosure
if payments are more than 90 days past due.
FOUNDATION – the concrete slab beneath
the property, which holds the property in place.
FRANCHISE – a business arrangement undertaken
for the purpose of marketing a product or service. One party
(the franchiser) provides marketing and selling expertise for
a fee to another party (the franchisee) who in turn sells
the product or service in the marketplace.
FRANCHISE FEES – the fee is usually
an initial purchase requirement plus an ongoing percentage of
gross sales of the business.
FREESTANDING RETAIL – a building, which
contains only one retail business. Fast-food franchises and retail
stores are often freestanding buildings.
FREESTANDING – one commercial building
meant to be occupied by a single user.
FULL SERVICE – a hotel definition that
represents services provided to its guests outside of lodging
(i.e. room service, concierge services, and restaurant).
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GENERAL BUSINESS – includes
all of business assets and equipment, may include property or
GENERAL PARTNERSHIP – in a partnership,
a partner whose liability is not limited. All partners in an
ordinary partnership are general partners. A limited partnership
must have at least one general partner.
GOOD FAITH DEPOSIT – a deposit made by
a purchaser of real estate to evidence intent and honesty.
GOVERNMENT SUBSIDIZED – rents that are
partly paid by the government (e.g. Section 8 residential subsidies).
GRADE LEVEL DOOR – a door at the ground
level at the foundation.
GROUND LEVEL – existence and/or number
of ground level doors.
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HARD MONEY LOAN – is
a high-interest, short-term loan loan that is used until permanent
financing is put in place. Hard Money loans are commonly used
to solve immediate business concerns challenging working capital,
real estate transactions and improvements, and debt.
HIGH RISE OFFICE – a commonly used expression
referring to an office building, that is high enough to require
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INDEX – an economic
indicator, usually a published interest rate.
INDUSTRIAL – property used for industrial
purposes, such as factories.
INDUSTRIAL FOR LEASE – industrial space
INTEREST – the sum paid for borrowing
money, which pays the lender’s costs of doing business.
INTEREST RATE – the sum charged for borrowing
money, expressed as a percentage
INTEREST RATE CAP – limits the interest
rate or the interest rate adjustment to a specified maximum. This
protects the borrower from increasing interest rates.
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JOINT VENTURE – an agreement
by two or more individuals or entities to engage in a single
project or undertaking. Joint ventures are used in real estate
development as a means of raising capital and spreading risk.
For all practical purposes a joint venture is similar to a general
partnership. However, once the purpose of the joint venture has
been accomplished, the entity ceases to exist.
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There are no "K" listings in
the glossary at this time...
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LEASE ASSIGNMENT – an
agreement between the commercial property owner and the lender
that assigns lease payments directly to the lender.
LEASE TYPE – Gross, Triple Net (NNN),
Net Net (NN), Hybrid, etc.
LEASEHOLD IMPROVEMENTS – the cost of improvements
for a leased property, often paid by the tenant.
LEASING COMMISSIONS – an amount earned
by a real estate broker or leasing agent for his services.
LESSEE – tenant in a building.
LIBOR (London Interbank Offered Rate) – the
rate that the most creditworthy international banks dealing in
Eurodollars charge each other for large loans. Rates are quoted
in monthly increments out to 1 year.
LIMITED LIABILITY COMPANY (LLC) – the
restriction of one’s potential losses to the amount invested.
The absence of personal liability. Provided to stockholders in
a corporation and limited partners of a limited partnership.
LIMITED PARTNERSHIP – one in which there
is at least one partner who is passive and limits liability to
the amount invested, and at least one partner whose liability
extends beyond monetary investment.
LIMITED SERVICE – a hotel that offers
lodging services only.
LOAN PROCESSING FEE – the fee charged
by a lender, to prepare all the documents associated with your
LOAN–TO–VALUE RATIO (LTV) – the
ratio between the principal amount of the mortgage balance, at
origination or thereafter, to the current value of the underlying
real estate collateral. The ratio is commonly expressed to a
potential borrower as the percentage of value a lending institution
is willing to finance. The ratio is dynamic, and varies by lending
institution, property type, geographic location, property size,
LOCK–OUT PERIOD – a period of time
after loan origination during which a borrower cannot prepay
the mortgage loan.
LOT SIZE – total square footage of the
LOW–RISE OFFICE – a commonly used
expression referring to an office building that is too low to
require an elevator.
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MALL – (also called
Super Regional Center) an enclosed shopping center with three
or more major department stores, which draws from a large trade
area of 12 or more miles.
MANAGEMENT FEE – the agreed-upon compensation
paid to a property management company for managing a real
estate project. The fee is usually based on a percentage of effective
MANUFACTURING – (also called Heavy Industrial)
auto making, textiles, steel, chemicals, and food processing
are typical uses of such properties. Typically zero to five percent
MARGIN – the amount that is added to an
index rate to determine the total interest rate.
MARKETING EXPENSES – expenses accrued
to market commercial properties.
MAT – Monthly Average Treasury
MATURITY – 1. The termination period of
a note (e.g., a 25-year mortgage has maturity of 25 years.) 2.
In sales law, the date a note becomes due.
MAX CONTIGUOUS SF – the amount
of available connected square feet.
MAX LEASE RATE – the highest asking lease
MEDICAL OFFICE – an office space which
offers medical services.
MEZZANINE/SECOND LOAN – a loan secured
by a mortgage or trust deed, in which the lien is junior, or
secondary, to another mortgage or trust deed.
MID–RISE – a commonly used expression
referring to an office building, that is high enough to require
stairs, but too low to require an elevator.
MILITARY CLAUSE – a clause included
in a lease of residential property, which allows the tenant to
terminate the lease without penalty if and when the tenant is
transferred to another location.
MIN LEASE RATE – the lowest lease rate
MIN. DIVISIBLE SF – the smallest amount
of available square feet.
MIXED USE – a real estate development
that contains two or more different uses all intended to be harmonious
and complementary. An example would include a high-rise building
with retail shops on the first two floors, office space on floors
three through ten, apartments on the next ten floors, and a restaurant
on the top floor.
MOBILE HOME PARK – a parcel of land zoned
and developed for use by occupants of mobile homes.
MONEY MARKET – the market for short-term
MULTI–FAMILY PROPERTY CLASS A – properties
are above average in terms of design, construction and finish;
command the highest rental rates; have a superior location, in
terms of desirability and/or accessibility; generally are professionally
managed by national or large regional management companies.
MULTI–FAMILY PROPERTY CLASS B – properties
frequently do not possess design and finish reflective of current
standards and preferences; construction is adequate; command
average rental rates; generally are well maintained by national
or regional management companies; unit sizes are usually larger
than current standards.
MULTI–FAMILY PROPERTY CLASS C – properties
provide functional housing; exhibit some level of deferred maintenance;
command below average rental rates; usually located in less desirable
areas; generally managed by smaller, local property management
companies; tenants provide a less stable income stream to property
owners than Class A and B tenants.
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NEIGHBORHOOD CENTER – (including Community
Center) a shopping center anchored by a supermarket and/or
drugstore that provides convenience goods and services to a neighborhood.
It is usually between 30,000 – 100,000 square feet,
and draws from a one to three mile radius.
NET EFFECTIVE RENT – rental rate
adjusted for lease concessions.
NET OPERATING INCOME (NOI) – total income
less operating expenses, adjustments, etc., but before mortgage
payments, tenant improvements and leasing commissions.
NET–NET LEASE (NN) – usually requires
the tenant to pay for property taxes and insurance in addition to
NET-NET-NET LEASE (NNN) -
Also known as "triple-net
lease." A lease in which the tenant pays rent, all taxes,
insurance, and maintenance costs.
NON–RECOURSE – a mortgage or deed
of trust securing a note without recourse allows the lender to look
only to the security (property) for repayment in the event of
default, and not personally to the borrower. A loan not allowing
for a deficiency judgment. The lender’s only recourse in
the event of default is the security (property) and the borrower
is not personally liable.
NOTICE OF DEFAULT (NOD) – to initiate
a non-judicial foreclosure proceeding involving a public sale
of the real property securing the deed of trust. The trustee
under the deed of trust records a Notice of Default and Election
to Sell ("NOD") the real property collateral in the
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OFFICE – a structure
used primarily for the carrying on of business.
OPERATING EXPENSE – periodic expenses
necessary to the operation and maintenance of an enterprise (e.g.,
taxes, salaries, insurance, maintenance). Often used as a basis
for rent increases.
ORIGINATION – securing a completed mortgage
application from a commercial or residential borrower.
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PERCENTAGE LEASE – commonly used for large
retail stores. Rent payments include a minimum or "base
rent" plus a percentage of the gross sales "overage." Percentages
generally vary from 1% to 6% of the gross sales depending on the
type of store and sales volume.
PHASE I – an assessment and report prepared
by a professional environmental consultant who reviews the
property – both land and improvements – to ascertain
the presence or potential presence of environmental hazards at
the property, such as underground water contamination, PCB’s,
abandoned disposal of paints and other chemicals, asbestos
and a wide range of other potentially damaging materials. This
Environmental Site Assessment (ESA) provides a review and makes
a recommendation as to whether further investigation is
warranted (a Phase II Environmental Site Assessment). This latter
report would confirm or disavow the presence of an environmental
hazard and, should one be found, will recommend additional
review and/or mitigation efforts that should be undertaken.
POINTS (LOAN DISCOUNT POINTS) – each point
is equal to 1% of the total amount of a mortgage.
POTENTIAL GROSS RENT – gross income of
a building if fully rented.
PRE–LEASED % – to obtain lease commitments
in a building or complex prior to its being available for
PREPAYMENT PENALTY – fees paid by borrowers
for the privilege of retiring a loan early.
PRIME RATE – the rate at which banks lend
to their most creditworthy customers.
PRINCIPAL – 1. The amount of debt, not
including interest, left on a loan. 2. The face amount of the mortgage.
PRO FORMA – (from Latin pro forma, "according
to form"). Financial statements showing what is expected
PROPERTY ADMINISTRATOR – person in broker's
employ who is responsible for updating and renewing a property
listing, if it is different from the contact name.
PROPERTY GRADE – a stratification of property
type that is indicative of the property’s ability to
command rental rates.
PROPERTY SUBTYPE – a property description
that provides additional information to the lender.
PROPERTY TAX – taxes based on the market value of a
property. Property taxes vary from state to state.
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R & D – these facilities are generally
used in high technology markets and are broadly defined to include
wide variations in markets across the country. R & D properties
could have lab facilities, offices, warehouse facilities, or services
such as carpentry or machine repair. Typically, each property allows
a variable combination of office and other uses. The percentage
of office space ranges from 20 to 100 percent, depending on the
market and individual needs of the user.
RAIL SERVED – whether the building is
served by railroad.
RANCH – land devoted to raising livestock
under range conditions with forage grass as main source of feed.
RATE INDEX – an index used to adjust the
interest rate of an adjustable mortgage loan (e.g., the change
in U.S. Treasury securities (T-Bills) with 1-year maturity.
The weekly average yield on said securities, adjusted to a constant
maturity of 1 year, which is the result of weekly sales, may
be obtained weekly from the Federal Reserve Statistical Release
H.15 (519). This change in interest rates is the "index" for
the change in a specific Adjustable Mortgage Loan).
RECOURSE – personal liability.
RECREATIONAL LAND – land devoted to commercial
outdoor sporting activity and relaxation.
REFINANCE – to replace an old loan(s)
with a new loan(s).
REGIONAL CENTER – a shopping center with
one or two department stores and a variety of smaller stores.
It is larger than 300,000 square feet and draws from an eight-mile
radius or more.
REHAB LOAN - a short-term loan secured
by real estate and traditionally used until the rehabilitation
of property is complete and permanent financing is put in place. Rehab Loan
is tailored to the rehabilitation of properties in need of repair.
Rehab loan programs allow investors and owners to purchase or
refinance real estate properties and include the closing costs,
cost of repairs and improvements in one convenient mortgage.
RENT ROLL – a list of
tenants leasing a property, which details terms of lease, area
leased, and the amount of rent being paid.
RENT STEP–UP – a lease agreement
in which the rent increases every period for a fixed amount of
time or for the life of the lease.
RENTABLE SQUARE FEET (same as Net Leasable Area) – in
a building or project, floor space that may be rented to tenants.
The area upon which rental payments are based. Generally excludes
common areas and space devoted to the heating, cooling, and other
equipment of a building.
REPLACEMENT RESERVES – an amount set aside
from net operating income to pay for the eventual wearing
out of short-lived assets. Monthly deposits that a lender may
require a borrower to a reserve in an account, along with
principal and interest payments for future capital improvements
of major building systems; i.e., HVAC, parking lot, carpets,
RESERVE FUNDS – in CMBS, portion of the
bond proceeds that are retained to cover losses on the mortgage
pool. A form of credit enhancement (also referred to as "reserve
RETAIL – a property type, which sells
goods to consumers.
RV (REVERSIONARY VALUE) – the value of
property at the expiration of a certain time period. In transportation,
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SALES BROKER – commercial
real estate broker that represents client in the sale or purchase
of commercial real estate property.
SECOND MORTGAGE – a mortgage
that is second in priority because of the time of recording the
mortgage or of the subordination of the mortgage.
SECONDARY MORTGAGE MARKET – the buying
and selling of first mortgages or trust deeds by banks, insurance
companies, government agencies, and other mortgages. This enables
lenders to keep an adequate supply of money for new loans. The
mortgages may be sold at full value ("par") or above,
but are usually sold at a discount. Not to be confused with
a "second mortgage."
SELF–STORAGE – (also called Mini-Storage)
provides personal storage for lease by consumers.
SELF–AMORTIZING MORTGAGE – one that
will retire itself through regular principal and interest payments. Contrast
with balloon mortgage or interest-only loan.
SENIOR HOUSING – (includes Assisted Listing,
Congregate Care, Senior Apartments and Skilled Nursing Centers)
multi-residential property specifically designed for care of
senior citizens and/or physically disabled persons.
SHADOW ANCHORED – a unanchored shopping
center located near an anchored shopping center.
SINGLE WIDE – a mobile home consisting
of one unit.
SITE WORK – the location or place of a
plot of ground set aside for a particular type of land use.
SKILLED NURSING – a type of senior housing
which offers on-site medical care.
SOLE PROPRIETORSHIP – ownership of a business,
with no formal entity as a vehicle or structure.
SPREAD – number of basis points over a
base rate index.
SPRINKLER – existence of fire suppression
systems in the building.
STABILIZED OPERATING PROPERTY – the income
generated on an annual basis from the commercial property is
stable, consistent and reliable.
STRIP CENTER – a string of stores in a
commercial area, totaling less than 30,000 square feet, without
central leasing, management, or theme.
STRUCTURAL/ENGINEERING REPORT – a property
Condition Report that outlines the current structural stability
or instability of a property. The report will outline immediate
costs needed to repair the property, as well as a maintenance
program to maintain the property at its current status.
SUBURBAN – describes a town or unincorporated
developed area in a close proximity to a city. Suburbs, largely
residential, are often dependent on the city for employment and
support services; generally characterized by low-density development
relative to the city.
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TAX & INSURANCE IMPOUND – monthly
deposits that a lender may require to be included with principal
and interest payments for the payment of taxes and insurance.
TENANT – one who is given possession of
real estate for a fixed period or at will.
TENANT IMPROVEMENTS (TI) – the expense
to physically improve the property to attract new tenants to
new or vacated space which may include new improvements or remodeling.
May be paid by tenant, landlord, or both. Typically, tenants
are provided with a market rate TI allowance ($/sq. ft.) that
the owner will contribute towards improvements. The tenant
must pay for amounts above the TI allowance desired by the tenant.
TERM – the length of a mortgage.
THIRD PARTY COSTS – costs resulting from
third party reports, whether it be appraisal reports,
environmental reports or structural engineering reports.
TIMBERLAND – land used for production of
forest stands for commercial use.
TITLE – the actual legal document conferring ownership
of a piece of real estate.
TITLE INSURANCE – an insurance policy that insures you
against errors in the title search – essentially guaranteeing your, and
your lender’s, financial interest in the property.
TOTAL ANNUAL OPERATING INCOME – total yearly income
less operating expenses, adjustments, etc., but before mortgage payments,
tenant improvements and leasing commissions.
TOTAL ANNUAL ROOM INCOME – a hotel definition that represent
the gross annual receipts from room revenue.
TRAFFIC COUNT – the amount of incoming and outgoing
traffic a retailer or self-storage building
generates over a fixed period of time.
TRIPLE–NET LEASE (NNN) – a lease that requires
the tenant to pay for property taxes, insurance and maintenance in addition
to the rent (also referred to as "Net Net Net Lease").
TRIPLE–WIDE – a mobile home consisting of three
units which have been fastened together along their length.
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U.S. TREASURY BILL – Treasury Bills, or
T-Bills, are short term securities with maturities of up to one year.
They are issued by the U.S. Government at a discount from face
value. The price is quoted in yield, not dollars. At maturity,
T-Bills are redeemed for full face value. T-bills are issued in
three month, six month and 1 year maturities and are backed by
the full faith and credit of the U.S. Government.
U.S. TREASURY BOND – Treasury Bonds are
long-term securities with maturities greater than 10 years. Treasury
bonds are coupon bearing securities that pay interest on a semiannual
basis. Treasury bonds are backed by the full faith and credit
of the U.S. Government.
U.S. TREASURY NOTE – Treasury Notes are
intermediate term securities issued with 2, 3, 5, and 10 year maturities.
Treasury notes are coupon bearing securities that pay interest
on a semiannual basis. Treasury notes are backed by the
full faith and credit of the U.S. Government.
UNANCHORED – a tenant in a shopping center,
which doesn't have an anchored tenant.
UNDERWRITING – the process of deciding
whether to make a loan based on property cash flow, credit, and/or
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VACANCY PERCENT – the
percentage of all units or space that is unoccupied or not rented.
pro–forma income statement a projected vacancy rate
is used to estimate the vacancy allowance, which is deducted from potential
gross income to derive effective gross income.
VACANCY – unoccupied units as a percentage
of the total number.
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WITHOUT RECOURSE – the refusal to assume
any responsibility to subsequent holders for the payment of a debt
instrument that gets transferred by endorsement.
WORKING CAPITAL – money
that is available for use in investments and properties for repairs,
maintenance, fees, etc.
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YIELD – the rate of return on a security,
taking into consideration annual interest payments, purchase price,
redemption value, and the time remaining until maturity.
YIELD MAINTENANCE – a prepayment premium
that allows investors to attain the same yield as if the borrower
made all scheduled mortgage payments until maturity. Yield maintenance
premiums are designed to make investors indifferent to prepayments
and to make refinancing unattractive and uneconomical to borrowers.
YIELD TO AVERAGE LIFE – yield calculation
used, in lieu of "Yield to Maturity" or "Yield to
Call," where books are retired systematically during the life
of the issue, as in the case of a "Sinking Fund," with
contractual requirements. Because the issuer will buy its own bonds
on the open market to satisfy its sinking fund requirements
if the bonds are trading below Par, there is, to that extent, automatic
price support for such bonds; they therefore tend to trade
on a yield-to-average-life basis.
YIELD TO MATURITY (YTM) – concepts used
to determine the rate of return an investor will receive if a long-term,
interest-bearing investment, such as a bond, is held to its maturity
date. It takes into account purchase price, redemption value,
time to maturity, coupon yield and the time between interest payments.
Recognizing time value of money, it is the discount rate at which
the present value of all future payments would equal the present
price of the bond (also referred to as "internal rate of return").
It is implicitly assumed that coupons are reinvested at the YTM
rate. YTM can be approximated using a bond value table (also referred
to as a "bond yield table") or can be determined using
a programmable calculator equipped for bond mathematics calculations.
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ZONING – government
directive that covers an area and says what the real estate can
be used for.
For example, it could be zoned single-family
residential, multi-family residential, office, industry, manufacturing,
R&D, mixed use,