Commercial RE Terms

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Author:
ryangessel
ID:
56224
Filename:
Commercial RE Terms
Updated:
2012-08-03 15:08:26
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Commercial Real Estate
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Description:
Commercial Real Estate Terminology
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  1. Abatment
    A reduction or decrease; usually applies to the forgiveness of rent or a decrease of assessed valuation of ad valorem taxes after the assessment and levy.
  2. Above Building Standard
    Specialized design and engineering services and all construction necessary to personalize tenant space.
  3. Absorbed Space
    Net change in leased space between two dates.
  4. Absorbtion
    The rate at which land or buildings will be sold or leased in the marketplace during a predetermined period of time, usually a month or a year. Also called "market absorbtion".
  5. Absorbtion Period
    The number of months required to convert vacant space into leased space assuming no new delivered space. Computed by dividing the average monthly absorbed space during a recent period into the current vacant space.
  6. Accumulated Cost Recovery
    Total cost recovery deductions taken throughout the holding period of a property.
  7. Active Income
    Income from salary, wages, tips, commissions, and activities in which the taxpayer materially participates.
  8. Add-On Factor
    The ratio of rentable to useable square feet. Also known as the load factor, the loss factor, and the rentable-to-useable ratio. Formula: Add-On Factor = Rentable Square Feet divided by Useable Square Feet
  9. Ad Valorem
    (according to value) Used in reference to general property tax, which is usually based on the official valuation of property.
  10. Add Value
    Fourth stage of four-stage transaction management process pertaining to a transactionmanager’s planning, effort, and continual contact with key decision-makers, investors, andusers, as well as contact with ancillary professionals. This ongoing process allows forfeedback, establishes a network for problem solving, provides a means to offer additionalservices to the client, and enhances the transaction manager’s preparedness for the nextassignment.
  11. Adequate Rate Covenant
    An agreement often required in revenue bond-financed projects; guarantees the operator will charge adequate rates to produce revenue necessary to cover principal and interest payments.
  12. Adjusted Basis
    The original cost basis of a property plus capital improvements, less total accumulated cost recovery deductions, and partial sales taken during the holding period.
  13. ADS
    Annual Debt Service - The total amount of principal and interest to be paid each year to satisfy the obligations of aloan contract.
  14. Agglomeration Economies
    Cost reductions or savings that come about from efficiency gains associated with theconcentration or clustering of firms/producers or economic activities and the formation of alocalized production network.
  15. Amortization
    The repayment of loan principal through equal payments over a designated period of time consisting of both principal and interest.
  16. Alienation Clause
    A type of acceleration clause where a debt becomes due in its entirety upon the transfer of ownership of a secured property.
  17. Allowance Over Building Shell
    One of three arrangements often used for financing tenant improvements. Often used in a yet-to-be-built building, this arrangement caps the landlord's expenditure at a fixed dollar amount over the negotiated price of the base building shell. This arrangement is most successful when both parties agree on a detailed definition of what construction is included and at what price. Tenants may ask for a contingency in the event that the actual build-out costs are less than the allowance, requiring the landlord to return the savings in the form of rent abatement or other concession.
  18. AM
    (Accredited Member) A designation offered by the American Society of Appraisers.
  19. APR
    Annual Percentage Rate - The APR reflects the cost of a loan on a yearly basis. It is usually higher than the note rate because it includes interest, origination fees, discount points, and other credit costs paid to the lender.
  20. Annuity
    Regular fixed payments or receipts over a designated period of time.
  21. Anticipatory Breach
    Occurs when one party to a contract, prior to time of performance, informs the other of intent not to perform. Example: The buyer informs the seller before the closing date of intent not to buy.
  22. Appraisal
    The estimation and opinion of value placed upon a piece of land based upon a factual analysis by a qualified professional; the process of estimation and the report itself.
  23. Appreciation
    An increase in the value of a property caused by an improvement of the elimination of negative factors.
  24. Appreciation Potential
    The possibility or probability that a real estate investment will increase in value during the holding period.
  25. ASA
    Accredited Senior Appraiser - A designation offered by the American Society of Appraisers.
  26. Assessed Value
    The value of real property established by the tax assessor for the purpose of levying real estate taxes.
  27. As Is
    Premises accepted by a buyer or tenant in the condition existing at the time of sale or lease, including all physical defects.
  28. Assessment
    • Estimate of property value for the purpose of imposing taxes.
    • Fee imposed on property, usually to pay for public improvements such as streets and sewers.
  29. Asset-Based Lender
    A lender who loans money based primarily on the values of an asset-accounts receivable, inventory, a piece of equipment, real estate - rather than on the financial strength of the business, which is the primary criterion for banks.
  30. Assignment
    A transfer between parties of title to any property, real or personal, or of any rights or estates in the property. Common assignments include leases, mortgages and deeds of trust.
  31. Attachment
    Legal procedure to aid in the collection of a debt. Usually the court issues a writ to seize the property of a debtor and holds it pending the outcome of a lawsuit, keeping the property available for sale to pay any money judgment entered in such lawsuit.
  32. Attorn
    To turn over or transfer to another money or goods. To agree to recognize a new owner of a property and to pay him rent.
  33. Average Annual Effective Rate
    The average annual effective rent divided by the square footage.
  34. Average Annual Effective Rent
    The tenant’s total effective rent divided by the lease term.
  35. Averaging Method
    A simple technique used to forecast next period's/year's vacancy rate by averaging previous years' vacancy rates; especially effective where vacancy rates have remained relatively flat or show little variability over time.
  36. Balloon Payment
    A large payment due on a loan. Generally a balloon payment is required when regular monthly or quarterly payments have not covered both the increase due and the principal of the loan.
  37. Bankrupt
    The condition when one is found to be unable to repay one's debts by a court having the proper jurisdiction. The bankruptcy may be one of two types: one that is petitioned by the debtor (voluntary) or one that is petitioned by the creditors (involuntary).
  38. Class A+
    Landmark quality, highrise building with prime central business district locatation (the best of the Class A buildings).
  39. Class A
    Generally 100,000 sf or larger (five or more floors), concrete and steel construction, built since 1980, business/support amenities, strong identifiable location/access.
  40. Class B
    Renovated and in good locations. Newer building are smaller in size, wood frame construction, and/or in non-prime location.
  41. Class C
    Older, unrenovated of any size in average to fair condition.
  42. Net Lease
    (NNN Lease)
    Today this generally indicates a lease in which the stated rent excludes the insurance, utilities, operating expenses and real estate taxes for the building. The tenant is then responsible for the payment of these costs either directly or as additional rent. Opposite of Gross or Fully Serviced Lease.

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