Glossary of Commercial Real Estate Terms


  • Abatement
    Often referred to as free rent or early occupancy and may occur outside or in addition to the primary term of the lease.
  • Above building standard
    Upgraded finishes and specialized designs necessary to accommodate a tenant’s requirements.
  • Absorption rate
    The rate at which rentable space is filled. Gross absorption is a measure of the total square feet leased over a specified period with no consideration given to space vacated in the same geographic area during the same time period. Net absorption is equal to the amount occupied at the end of a period minus the amount occupied at the beginning of a period and takes into consideration space vacated during the period.
  • Ad valorem
    Meaning “according to value,” this is a tax imposed on the value of a property that is typically based on the local government’s valuation of the property.
  • Adjusted funds from operations (AFFO)
    A measure of REIT performance or ability to pay dividends used by many analysts with concerns about the quality of earnings as measured by funds from operations (FFO). The most common adjustment to FFO is an estimate of certain recurring capital expenditures needed to keep the property portfolio competitive in its marketplace.
  • Administrative fee
    Usually stated as a percentage of assets under management or as a fixed annual dollar amount.
  • Advances
    Payments made by the servicer when the borrower fails to make a payment.
  • Adviser
    A broker, consultant or investment banker who represents an investor in a transaction. Advisers may be paid a retainer and/or a performance fee upon the close of a financing or sales transaction.
  • Aggregation risk
    The risk associated with warehousing mortgages during the pooling process for future securitization.
  • Alpha
    Alpha is a risk-adjusted statistical measure of performance. Alpha takes the volatility (price risk) of a managed portfolio of equities or alternative assets and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the return of the benchmark index is a fund’s alpha. Alpha can be thought of as the abnormal rate of return on a security or portfolio in excess of what would be predicted by an equilibrium model like the capital asset pricing model (CAPM). It typically is thought of as a measure of the “value-added” (or subtracted) by the portfolio manager in selecting the individual components of and engineering the interplay between components when constructing the portfolio. A positive alpha of 1.0 means the fund has outperformed its benchmark index by 1%. Correspondingly, a similar negative alpha would indicate an underperformance of 1%.  If a CAPM analysis estimates that a portfolio should earn 12% based on the risk of the portfolio, for example, but the portfolio actually earns 14%, the portfolio’s alpha would be 2%. This 2% is the excess return over what would have been predicted using the same original inputs by the CAPM model.
  • Alternative or specialty investments
    Property types that are not considered conventional institutional-grade real estate investments. Examples include congregate-care facilities, self-storage facilities, mobile homes, timber, agriculture and parking lots.
  • Amortization
    The liquidation of financial debt through regular periodic installment payments. For tax purposes, the periodic deduction of capitalized expenses such as organization costs.
  • Anchor
    The tenant that serves as the predominant draw to a commercial property, usually the largest tenant in a shopping center.
  • Annual percentage rate (APR)
    The actual cost of borrowing money. It may be higher than the note rate because it represents full disclosure of the interest rate, loan origination fees, loan discount points and other credit costs paid to the lender.
  • Appraisal
    An estimate of a property’s fair market value 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.
  • Appreciation return
    The portion of the total return generated by the change in the value of the real estate assets during the current quarter, as measured by both appraisals and sales of assets.
  • Arbitrage
    Buying securities in one market and then selling them immediately in another market to make a profit on the price discrepancy.
  • As-is condition
    The acceptance by the tenant of the existing condition of the premises at the time a lease is consummated, including any physical defects.
  • Assessment
    A fee imposed on property, usually to pay for public improvements such as water, sewers, streets, improvement districts, etc.
  • Asset management
    The various disciplines involved with managing real property assets from the time of investment through the time of disposition, including acquisition, management, leasing, operational/financial reporting, appraisals, audits, market review, and asset disposition plans.
  • Asset management fee
    A fee charged to investors based on the amount invested into real estate assets for the fund or account.
  • Asset turnover
    Calculated as total revenues for the trailing 12 months divided by the average total assets.
  • Assets under management
    The current market value of real estate assets for which a manager has investment and asset management responsibilities.
  • Assignee name
    The individual or entity to which the obligations of a lease, mortgage or other contract have been transferred.
  • Assignment
    A transfer of the lessee’s entire stake in the property. It is distinguishable from a sublease where the sublessee acquires something less than the lessee’s entire interest.
  • Attorn
    To agree to recognize a new owner of a property and to pay him/her rent.
  • Average common equity
    Calculated by adding the common equity for the five most recent quarters and dividing by five.
  • Average downtime
    Expressed in months, the amount of time expected between the expiration of a lease and the commencement of a replacement lease under current market conditions.
  • Average free rent
    Expressed in months, the rent abatement concession expected to be granted to a tenant as part of a lease incentive under current market conditions.
  • Average occupancy
    The average occupancy rate of each of the preceding 12 months.
  • Average total assets
    Calculated by adding the total assets of a company for the five most recent quarters and dividing by five.


  • Balloon risk
    The risk that a borrower will not be able to make a balloon (lump sum) payment at maturity due to a lack of funding.
  • Balloon, or bullet, loan
    A loan with a maturity that is shorter than the amortization period.
  • Bankrupt
    The state of an entity that is unable to repay its debts as they become due.
  • Bankruptcy
    Proceedings under federal statutes to relieve a debtor who is unable or unwilling to pay its debts. After addressing certain priorities and exemptions, the bankrupt entity’s property and other assets are distributed by the court to creditors as full satisfaction for the debt.
  • Base principal balance
    The original mortgage amount adjusted for subsequent fundings and principal payments without regard to accrued interest or other unpaid debt.
  • Base rent
    A set amount used as a minimum rent with provisions for increasing the rent over the term of the lease.
  • Base year
    Actual taxes and operating expenses for a specified year, most often the year in which a lease commences.
  • Basis point
    1/100 of 1 percent.
  • Below-grade
    Any structure or portion of a structure located underground or below the surface grade of the surrounding land.
  • Beneficiary
    An employee covered by an employee benefit plan.
  • Beta
    Also referred to as “the Beta coefficient,” Beta is a statistical term used by money managers operating in the tradable equities securities market. Essentially, Beta is a measure of the volatility, or systematic risk, of a particular security or a portfolio in comparison to the market as a whole. Beta typically is used as a component of the capital asset pricing model (CAPM), which calculates the expected return of an asset based on its beta and expected market returns. Beta is calculated using regression analysis in an attempt to quantify the tendency of a security’s returns to respond to swings in the market. A beta of 1 indicates that the security’s price will move in lockstep with the market. A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security’s price will be more volatile than the market. For example, if a stock’s beta is 1.2, it’s theoretically 20% more volatile than the market. Utility stocks typically have a beta of less than 1. Conversely, the majority of high-tech, typically Nasdaq-based stocks have a beta of greater than 1. Stocks with a beta of greater than 1 are believed to offer the possibility of a higher rate of return, but also require the investor to assume higher risk.
  • Bid
    An offer, stated as a price or spread, to buy whole loans or securities.
  • Blind pool
    A commingled fund accepting investor capital without prior specification of property assets.
  • Book value
    Also referred to as common shareholder’s equity, this is the total shareholder’s equity as of the most recent quarterly balance sheet minus preferred stock and redeemable preferred stock.
  • Broker
    A person who acts as an intermediary between two or more parties in connection with a transaction.
  • Build-out
    Space improvements put in place per the tenant’s specifications. Takes into consideration the amount of tenant finish allowance provided for in the lease agreement.
  • Build-to-suit
    A method of leasing property whereby the developer/landlord builds to a tenant’s specifications.
  • Buildable acres
    The area of land that is available to be built on after subtracting for roads, setbacks, anticipated open spaces and areas unsuitable for construction.
  • Building code
    The various laws set forth by the ruling municipality as to the end use of a certain piece of property. They dictate the criteria for design, materials, and types of improvements allowed.
  • Building standard plus an allowance
    The landlord lists, in detail, the building standard materials and costs necessary to make the premises suitable for occupancy. A negotiated allowance is then provided for the tenant to customize or upgrade materials.


  • Call date
    Periodic or continuous rights given to the lender to cause payment of the total principal balance prior to the maturity date.
  • Capital appreciation
    The change in the market value of a property or portfolio adjusted for capital improvements and partial sales.
  • Capital Asset Pricing Model (CAPM)
    Used to help price risky securities (i.e., any securities other than risk-free, or Treasury securities), the Capital Asset Pricing Model is a statistical model that describes the relationship between risk and expected return.
  • Capital expenditures
    Investment of cash or the creation of a liability to acquire or improve an asset, as distinguished from cash outflows for expense items that are considered part of normal operations.
  • Capital gain
    The amount by which the net proceeds from the sale of a capital item exceeds the book value of the asset.
  • Capital improvements
    Expenditures that arrest the deterioration of the property or add new improvements and appreciably prolong its life.
  • Capital markets
    Public and private markets where businesses or individuals can raise or borrow capital.
  • Capitalization
    The total dollar value of various securities issued by a company.
  • Capitalization rate
    The rate at which net operating income is discounted to determine the value of a property. It is the net operating income divided by the sales price or value of a property expressed as a percentage.
  • Carrying charges
    Costs incidental to property ownership that must be absorbed by the landlord during the initial lease-up of a building and thereafter during periods of vacancy.
  • Cash flow
    The revenue remaining after all cash expenses are paid.
  • Cash-on-cash yield
    The relationship, expressed as a percentage, between the net cash flow of a property and the average amount of invested capital during an operating year.
  • Certificate of occupancy
    A document presented by a local government agency or building department certifying that a building and/or the leased area has been satisfactorily inspected and is in a condition suitable for occupancy.
  • Chapter 11
    That portion of the federal bankruptcy code that deals with business reorganizations.
  • Chapter 7
    That portion of the federal bankruptcy code that deals with business liquidations.
  • Circulation factor
    Interior space required for internal office circulation not accounted for in the net square footage.
  • Class “A”
    A real estate rating generally assigned to properties that will generate the highest rents per square foot due to their high quality and/or superior location.
  • Class “B”
    Good assets that most tenants would find desirable but lack attributes that would permit owners to charge top dollar.
  • Class “C”
    Buildings that offer few amenities but are otherwise in physically acceptable condition and provide cost-effective space to tenants who are not particularly image-conscious.
  • Clear-span facility
    A building, most often a warehouse or parking garage, with vertical columns on the outside edges of the structure and a clear span between columns.
  • Closed-end fund
    A commingled fund that has a targeted range of investor capital and finite life.
  • Closing
    A period of time, usually less than seven days, after a registration statement is effective and the offering commences, giving the underwriters time to receive payment for the securities.
  • CMBS (commercial mortgage-backed securities)
    Securities backed by loans on commercial real estate.
  • CMO (collateralized mortgage obligation)
    Debt obligations are collateralized by and have payments linked to a pool of mortgages.
  • Co-investment
    Co-investment occurs when two or more pension funds or groups of funds share ownership of a real estate investment. In co-investment vehicles, relative ownership is always based on the amount of capital contributed. It also refers to an arrangement in which an investment manager or adviser co-invests its own capital alongside the investor.
  • Co-investment program
    An investment partnership or insurance company separate account that enables two or more pension funds to co-invest their capital in a single property or portfolio of properties. The primary appeal for investors is to achieve greater diversification or invest in larger properties typically outside the reach of small- to mid-sized tax-exempt funds, with a greater measure of control than is afforded in typical commingled fund offerings.
  • Collateral
    Asset(s) pledged to a lender to secure repayment of a loan in case of default.
  • Commercial real estate
    Buildings or land intended to generate a profit for investors, either from rental income or capital gain. Types of commercial real estate include office buildings, retail properties, industrial properties, apartments, and hotels, as well as specialty niche property categories such as healthcare, student housing, senior housing, self-storage, data centers, and farmland.
  • Commingled fund
    A pooled fund vehicle that enables qualified employee benefit plans to commingle their capital for the purpose of achieving professional management, greater diversification or investment positions in larger properties.
  • Commodity Pool Operator (CPO)
    A CPO is an individual or organization which operates a commodity pool and solicits funds for that commodity pool. A commodity pool is an enterprise in which funds contributed by a number of persons are combined for the purpose of trading futures contracts, options on futures, or retail off-exchange or to invest in another commodity pool.
  • Common area
    For lease purposes, the areas of a building and its site that are available for the non-exclusive use of all its tenants, e.g., lobbies, corridors, etc.
  • Common area maintenance
    Rent charged to the tenant in addition to the base rent to maintain the common areas. Examples include snow removal, outdoor lighting, parking lot sweeping, insurance, property taxes, etc.
  • Comparables
    Used to determine the fair market lease rate or asking price, based on other properties with similar characteristics.
  • Concessions
    Cash or cash equivalents expended by the landlord in the form of rental abatement, additional tenant finish allowance, moving expenses or other monies expended to influence or persuade a tenant to sign a lease.
  • Condemnation
    The process of taking private property, without the consent of the owner, by a governmental agency for public use through the power of an eminent domain.
  • Conduit
    An alliance between mortgage originators and an unaffiliated organization that acts as a funding source by regularly purchasing loans, usually with a goal of pooling and securitizing them.
  • Construction loan
    Interim financing during the developmental phase of a property.
  • Construction management
    The act of ensuring the various stages of the construction process is completed in a timely and seamless fashion.
  • Consultant
    Any company or individual that provides the following services to institutional investors: definition of real estate investment policy; adviser/manager recommendations; analysis of existing real estate portfolios; monitoring of and reporting on property asset, commingled fund, and portfolio performance; and review of specified property and portfolio investment opportunities. Consultants are distinguished from investment advisers or investment managers in that a consultant does not source or execute transactions and does not directly manage assets.
  • Consumer price index (CPI)
    Measures inflation in relation to the change in the price of goods and services purchased by a specified population during a base period of time. The CPI is commonly used to increase the base rent periodically as a means of protecting the landlord’s rental stream against inflation or to provide a cushion for operating expense increases for a landlord unwilling to undertake the record-keeping necessary for operating expense escalations.
  • Contiguous space
    Multiple suites/spaces within the same building and on the same floor that can be combined and rented to a single tenant, or a block of space located on multiple adjoining floors in a building.
  • Contract documents
    The complete set of design plans and specifications for the construction of a building.
  • Contract rent
    The rental obligation, expressed in dollars, as specified in a lease. Also known as face rent.
  • Convertible debt
    A mortgage position that gives the lender the option to convert to a partial or full ownership position in a property within a specified time period.
  • Convertible preferred stock
    Preferred stock that is convertible to common stock under certain formulas and conditions specified by the issuer of the stock.
  • Conveyance
    Most commonly refers to the transfer of title to property between parties by deed. The term may also include most of the instruments with which an interest in real estate is created, mortgaged or assigned.
  • Core
    Typically includes the four major property types — specifically office, retail, industrial and multifamily. Core assets are high-quality, multi-tenanted properties typically located in major metropolitan areas and built within the past five years or recently renovated. They are substantially leased (90 percent or better) with higher-credit tenants and well-structured, long-term leases with the majority fairly early in the term of the lease. Core investments are unleveraged or very low leveraged and generate good, stable income that, together with potential appreciation, is expected to generate total returns in the 8 percent to 10 percent range. (Note: In today’s low-yield environment, many investors are willing to accept core property returns below 8 percent.)
  • Core properties
    The major property types – specifically office, retail, industrial and multifamily. Core assets tend to be built within the past five years or recently renovated. They are substantially leased (90 percent or better) with higher-credit tenants and well-structured long-term leases with the majority fairly early in the term of the lease. Core assets generate a good, stable income that, together with potential appreciation, is expected to generate total returns in the 10 percent to 12 percent range.
  • Core-plus
    These investments possess similar attributes to core properties — providing moderate risk and moderate returns — but these assets offer an opportunity for modest value enhancement, typically through improved tenancy/occupancy or minor property improvements. This strategy might employ leverage in the range of 30 to 50 percent with return expectations of 9 percent to 12 percent.
  • Cost-approach improvement value
    The current cost to construct a reproduction of, or replacement for, the existing structure less an estimate for accrued depreciation.
  • Cost-approach land value
    The estimated value of the fee simple interest in the land as if vacant and available for development to its highest and best use.
  • Cost-of-sale percentage
    An estimate of the costs to sell an investment representing brokerage commissions, closing costs, fees, and other necessary disposition expenses.
  • Coupon
    The nominal interest rate charged to the borrower on a promissory note or mortgage.
  • Covenant
    A written agreement inserted into deeds or other legal instruments stipulating performance or non-performance of certain acts, or use or non-use of a property and/or land.
  • Credit enhancement
    The credit support needed in addition to the mortgage collateral to achieve a desired credit rating on mortgage-backed securities. The forms of credit enhancement most often employed are subordination, over-collateralization, reserve funds, corporate guarantees and letters of credit.
  • Cross-collateralization
    A grouping of mortgages or properties that serves to jointly secure one debt obligation.
  • Cross-defaulting
    Allows the trustee to call all loans in a group into default when any single loan is in default.
  • Cumulative discount rate
    Expressed as a percentage of base rent, it is the interest rate used in finding present values that take into account all landlord lease concessions.
  • Current occupancy
    The currently leased portion of a building or property expressed as a percentage of its total area or units.
  • Current yield
    For CMBS, the coupon divided by the price.


  • Deal structure
    With regard to the financing of an acquisition, deals can be unleveraged, leveraged, traditional debt, participating debt, participating/convertible debt or joint ventures.
  • Debt service
    The outlay necessary to meet all interest and principal payments during a given period.
  • Debt service coverage ratio (DSCR)
    The annual net operating income from a property divided by annual cost of debt service. A DSCR below 1 means the property is generating insufficient cash flow to cover debt payments.
  • Dedicate
    To appropriate private property to public ownership for a public use.
  • Deed
    A legal instrument transferring title to real property from the seller to the buyer upon the sale of such property.
  • Deed in lieu of foreclosure
    A deed given by an owner/borrower to a lender to satisfy a mortgage debt and avoid foreclosure.
  • Deed of trust
    An instrument used in place of a mortgage by which real property is transferred to a trustee to secure repayment of a debt.
  • Default
    The general failure to perform a legal or contractual duty or to discharge an obligation when due.
  • Deferred maintenance account
    An account a borrower is required to fund that provides for maintenance of a property.
  • Deficiency judgment
    The imposition of personal liability on a borrower for the unpaid balance of mortgage debt after a foreclosure has failed to yield the full amount of the debt.
  • Defined-benefit plan
    An employee’s benefits are defined, either as a fixed amount or a percentage of the beneficiary’s salary at the time of retirement. Pension plans, Health and Welfare plans, and some Keogh plans are established as defined benefit plans.
  • Defined-contribution plan
    An employee’s benefits at retirement are determined by the amount contributed by the employer and/or the employee during his or her employment tenure, and by the actual investment earnings on those contributions over the life of the fund. Examples include 401(k), thrift plans and profit-sharing plans.
  • Demising wall
    The partition wall that separates one tenant’s space from another or from the building’s common areas.
  • Depreciation
    A decrease or loss in property value due to wear, age or other cause. In accounting, depreciation is a periodic allowance made for this real or implied loss.
  • Derivative securities
    Securities that are created artificially, i.e., derived from other financial instruments. In the context of CMBS, the most common derivative security is the interest-only strip.
  • Design/build
    A system in which a single entity is responsible for both the design and construction.
  • Discount rate yield rate used to convert future payments or receipts into present value.
  • Discretion
    The level of authority granted to an adviser or manager over the investment and management of a client’s capital. A fully discretionary account type is defined as one in which the adviser or manager has the total ability to invest and manage a client’s capital without prior approval of the client.
  • Distraint
    The act of seizing personal property of a tenant in default based on the right and interest a landlord has in the property.
  • Diversification
    The process of consummating individual investments in a manner that insulates a portfolio against the risk of reduced yield or capital loss, accomplished by allocating individual investments among a variety of asset types, each with different characteristics.
  • Dividend
    Cash or stock distribution paid to holders of common stock. REITs must pay at least 90 percent of their taxable income in the form of dividends.
  • Dividend yield
    The annual dividend rate for security expressed as a percent of its market price (annual dividend/price = yield).
  • Dividend-ex date
    The first date on which a person purchasing the stock is no longer eligible to receive the most recently announced dividend.
  • Dollar stop
    An agreed dollar amount of taxes and operating expenses each tenant will pay on a prorated basis.
    An organizational structure that makes it possible for REITs to buy properties using partnership units. The effect is the same as a UPREIT, however, the DOWNREIT is subordinate to the REIT itself, hence the name.
  • Drag-Along Rights
    The right that enables a majority shareholder to force a minority shareholder to join in the sale of a company. The majority owner doing the dragging must give the minority shareholder the same price, terms and conditions as any other seller. (See also Tag-Along Rights)
  • Due diligence
    Activities carried out by a prospective purchaser or mortgager of real property to confirm that the property is as represented by the seller and is not subject to environmental or other problems. In the case of an IPO registration statement, due diligence is a reasonable investigation by the parties involved to confirm that all the statements within the document are true and that no material facts are omitted.
  • Due on sale
    A covenant that makes a mortgage due if the property is sold before the maturity date.


  • Earnest money
    The monetary advance of part of the purchase price to indicate the intention and ability of the buyer to carry out the contract.
  • Easement
    A right created by grant, reservation, agreement, prescription or necessary implication to use someone else’s property.
  • Economic feasibility
    The feasibility of a building or project in terms of costs and revenue, with excess revenue establishing the degree of viability.
  • Economic rent
    The market rental value of a property at a given point in time.
  • Effective date
    The date on which a registration statement becomes effective and the sale of securities can commence.
  • Effective gross income (EGI)
    The total income from a property generated by rents and other sources, less a vacancy factor estimated to be appropriate for the property. EGI is expressed as collected income before expenses and debt service.
  • Effective gross rent (EGR)
    The net rent generated, after adjusting for tenant improvements and other capital costs, lease commissions and other sales expenses.
  • Effective rent
    The actual rental rate to be achieved by the landlord after deducting the value of concessions from the base rental rate paid by a tenant usually expressed as an average rate over the term of the lease.
  • Electronic Authentication
    Any of several methods used to provide proof that a particular document received electronically is genuine has arrived unaltered and came from the source indicated.
  • Eminent domain
    A power to acquire by condemnation private property for public use in return for just compensation.
  • Encroachment
    The intrusion of a structure that extends, without permission, over a property line, easement boundary or building setback line.
  • Encumbrance
    A right to, or interest in, real property held by someone other than the owner that does not prevent the transfer of fee title.
  • Endowment
    A fund that is made up of gifts and bequests, which are subject to a requirement that the principal be maintained intact and invested to create a source of income for an organization. Institutions of higher education, for example, have endowments to fund research, scholarships and other activities.
  • Entity Investing
    An investment in an entity, such as a company or partnership, that controls an investment rather than directly in the underlying assets. An investment entity is an entity that does both of the following: Pools funds from an investor or investors and provides the investors with professional investment management services; and commits to its investors that its business purpose and only substantive activities are investing the funds for returns from capital appreciation, investment income, or both. An investment entity and its affiliates do not obtain or have the objective of obtaining returns or benefits from their investments that are either of the following: Other than capital appreciation and investment income; and not available to other noninvestors or are not normally attributable to ownership interests.
  • Environmental impact statement
    Documents 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 residual value of a property beyond mortgage or liability.
  • ERISA (Employee Retirement Income Security Act)
    Legislation passed in 1974 and administered by the Department of Labor that controls the investment activities primarily of corporate and union pension plans. More public pension funds are adopting ERISA-like standards.
  • Escalation clause
    A clause in a lease that provides for the rent to be increased to reflect changes in expenses paid by the landlord such as real estate taxes and operating costs.
  • Escrow agreement
    A written agreement made between an escrow agent and the parties to a contract setting forth the basic obligations of the parties, describing the money (or other things of value) to be deposited in escrow and instructing the escrow agent concerning the disposition of the monies deposited.
  • Estoppel certificate
    A signed statement certifying that certain statements of fact are correct as of the date of the statement and can be relied upon by a third party, including a prospective lender or purchaser.
  • Exclusive agency listing
    A written agreement between a real estate broker and a property owner in which the owner promises to pay a fee or commission to the broker if specified real property is leased during the listing period.
  • Exit strategy
    Strategy available to investors when they desire to liquidate all or part of their investment.


  • Face rental rate
    The asking rental rate published by the landlord.
  • Facility space
    The floor area in hospitality properties dedicated to operating departments such as restaurants, health clubs, and gift shops that service multiple guests or the general public on an interactive basis not directly related to room occupancy.
  • FAD (funds available for distribution)
    Funds from operations fewer deductions for cash expenditures for leasing commissions and tenant improvement costs.
  • FAD multiple
    The share price of a REIT divided by its funds available for distribution.
  • Fair market value
    The sale price at which property would change hands between a willing buyer and willing seller, neither being under any compulsion to buy or sell and both having a reasonable knowledge of the relevant facts.
  • Fannie Mae (FNMA)
    The Federal National Mortgage Association – A quasi-governmental corporation authorized to sell debentures in order to supplement private mortgage funds by buying and selling FHA (Federal Housing Administration) and VA (Veterans Affairs) loans at market prices.
  • Fee simple interest
    When an owner owns all the rights in a real estate parcel.
  • FFO (funds from operations)
    A ratio intended to highlight the amount of cash generated by a company’s real estate portfolio relative to its total operating cash flow. FFO is equal to net income, excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and amortization.
  • FFO multiple
    The share price of a REIT divided by its funds from operations.
  • Fiduciary
    The Employee Retirement Income Security Act (ERISA) defines a fiduciary as any person who exercises any discretionary authority or control over a plan’s asset management, administration or disposition, or renders investment advice for a fee or other compensation with respect to a plan’s assets. Fiduciaries may include staff, trustees, investment board members, administrators, consultants, actuaries and investment managers. ERISA permits civil action to be brought by a beneficiary against any fiduciary that has breached its fiduciary duty. Fiduciaries can be held personally liable for any losses to a plan resulting from such breach.
  • Finance charge
    The amount paid for the privilege of deferring payment of goods or services purchased, including any charges payable by the purchaser as a condition of the loan.
  • First mortgage
    The senior mortgage that, by reason of its position, has priority over all junior encumbrances. The holder has a priority right to payment in the event of default.
  • First refusal right, or right of first refusal
    A lease clause giving a tenant the first opportunity to buy a property or 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.
  • First-generation space
    Generally refers to a new space that is currently available for lease and has never before been occupied by a tenant.
  • First-loss position
    The position in a security that will suffer the first economic loss if the underlying assets lose value or are foreclosed on. The first-loss position carries a higher risk and a higher yield.
  • Fixed costs
    Costs that do not fluctuate in proportion to the level of sales or production.
  • Fixed-rate
    An interest rate that remains constant over the term of the loan.
  • Flat fee
    A fee paid to an adviser or manager for managing a portfolio of real estate assets, typically stated as a flat percentage of gross asset value, net asset value or invested capital.
  • Flex space
    A building that provides a configuration allowing occupants a flexible amount of office or showroom space in combination with manufacturing, laboratory, warehouse, distribution, etc.
  • Float
    The number of freely traded shares in the hands of the public.
  • Floor area ratio (FAR
    The ratio of the gross square footage of a building to the square footage of the land on which it is situated.
  • Force majeure
    A force that cannot be controlled by the parties to a contract and prevents them from complying with the provisions of the contract. This includes acts of God such as a flood or a hurricane, or acts of man such as a strike, fire or war.
  • Foreclosure
    The process by which the trustee or servicer takes over a property from a borrower on behalf of the lender.
  • Forward commitments
    Contractual obligations to perform certain financing activities upon the satisfaction of any stated conditions. Usually used to describe a lender’s obligation to fund a mortgage.
  • Foundation
    A foundation is a nonprofit organization that raises money and invests it to generate income to fund its charitable efforts or donate funds to support other charitable causes. Foundations are often created by a large single primary donation from an individual or business. Examples include Bill and Melinda Gates Foundation, The Carnegie Foundation and The Ford Foundation.
  • Four quadrants of the real estate capital markets
    Private equity – Direct real estate investments acquired private public equity – REITs and other publicly traded real estate operating companies private debt – Whole loan mortgage public debt – Commercial mortgage-backed securities and other securitized forms of whole loan mortgage interests
  • Freddie Mac (FHLMC)
    Federal Home Loan Mortgage Corp. – a corporation established by the Federal Home Loan Bank to issue mortgage-backed securities.
  • Full recourse
    A loan on which an endorser or guarantor is liable in the event of default by the borrower.
  • Full-service rent
    An all-inclusive rental rate that includes operating expenses and real estate taxes for the first year. The tenant is generally still responsible for any increase in operating expenses over the base year amount.
  • Fully diluted shares
    The number of shares of common stock that would be outstanding if all convertible securities were converted to common shares.
  • Future proposed space
    Space in a proposed commercial development that is not yet under construction or where no construction start date has been set. It also may refer to the future phases of a multi-phase project not yet built.


  • General contractor
    The prime contractor who contracts for the construction of an entire building or project, rather than just a portion of the work. The general contractor hires subcontractors, coordinates all work and is responsible for payment to subcontractors.
  • General partner
    A member of a partnership who has the authority to bind the partnership and shares in the profits and losses of the partnership.
  • Glide Path
    The formula in the design of a target-date fund that defines the asset allocation mix for the fund, based on the number of years to the target date. The glide path defines an asset allocation that becomes more conservative (more fixed-income assets and fewer equities, for example) the closer a fund gets to its target date.
  • Going-in capitalization rate
    The capitalization rate computed by dividing the projected first year’s net operating income by the value of the property.
  • Graduated lease
    A lease, generally long-term in nature, in which rent varies depending upon future contingencies.
  • Grant
    To bestow or transfer any interest in real property by deed or other instruments.
  • Grantee
    One to whom a grant is made.
  • Grantor
    The person making the grant.
  • Gross building area
    The sum of areas at each floor level, including basements, mezzanines, and penthouses included within the principal outside faces of the exterior walls and neglecting architectural setbacks or projections.
  • Gross investment in real estate (historic cost)
    The total amount of equity and debt investments in real estate investments, including the gross purchase price, all acquisition fees and costs, plus subsequent capital improvements, less proceeds from sales and partial sales.
  • Gross leasable area
    The portion of total floor area designed for tenants’ occupancy and exclusive use, including storage areas. It is the total area that produces rental income.
  • Gross lease
    A lease in which the tenant pays a flat sum for rent out of which the landlord must pay all expenses such as taxes, insurance, maintenance, utilities, etc.
  • Gross real estate asset value
    The market value of the total real estate investments under management in a fund or individual accounts. It typically includes the total value of all equity positions, debt positions, and joint venture ownership positions, including the amount of any mortgages or notes payable related to those assets.
  • Gross real estate investment value
    The market value of real estate investments held in a portfolio without regard to debt, equal to the total of real estate investments as shown on a statement of assets and liabilities on a market-value basis.
  • Gross returns
    Returns generated from the operation of real estate without dilution for adviser or manager fees.
  • Ground rent
    Rent paid to the owner for use of land, normally on which to build a building. Generally, the arrangement is that of a long-term lease (e.g. 99 years) with the lessor retaining title to the land.
  • Guarantor
    One who makes a guaranty.
  • Guaranty
    An agreement whereby the guarantor assures the satisfaction of the debt of another or performs the obligation of another if and when the debtor fails to do so.


  • Hard cost
    The cost of actually constructing property improvements.
  • High-rise
    In the central business district, this could mean a building higher than 25 stories above ground level, but in suburban markets, it generally refers to buildings higher than seven or eight stories.
  • Highest and best use
    The reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, financially feasible and that results in the highest value
  • Hold-over tenant
    A tenant retaining possession of the leased premises after the expiration of a lease.
  • Holdbacks
    A portion of a loan commitment that is not funded until an additional requirement is met, such as completion of construction.
  • Holding period
    The length of time an investor expects to own a property from purchase to sale.
  • HVAC
    The acronym for heating, ventilating and air conditioning.
  • Hybrid debt
    A mortgage position with equity-like participation features in both cash flow and the appreciation of the property at the time of sale or refinance.


  • Implied cap rate
    Net operating income divided by the sum of a REIT’s equity market capitalization and its total outstanding debt.
  • Improvements
    In the context of leasing, the term typically refers to the improvements made to or inside a building but may include any permanent structure or other development, such as a street, sidewalk, utilities, etc.
  • Incentive fee
    Applies to fee structures where the amount of the fee that is charged is determined by the performance of the real estate assets under management.
  • Income capitalization value
    The indication of value derived for an income-producing property by converting its anticipated benefits into property value through direct capitalization of expected income or by discounting the annual cash flows for the holding period at a specified yield rate.
  • Income property
    Real estate that is owned or operated to produce revenue.
  • Income return
    The percentage of the total return that is generated by the income from operations of a property, fund or account.
  • Indirect costs
    Development costs other than direct material and labor costs that are directly related to the construction of improvements, including administrative and office expenses, commissions, architectural, engineering and financing costs.
  • Individual account management
    Accounts established for individual plan sponsors or other investors for investment in real estate, where a firm acts as an adviser in acquiring and/or managing a direct real estate portfolio.
  • Inflation
    The annual rate at which consumer prices increase.
  • Inflation hedgeAn investment that tends to increase in value at a rate greater than inflation and helps contribute to the preservation of the purchasing power of a portfolio.
  • Initial public offering (IPO)
    The first time a private company offers securities for sale to the public.
  • Institutional-grade property
    Various types of real estate properties generally owned or financed by institutional investors. Core investments typically include office, retail, industrial and apartments. Specialty investments include hotels, healthcare facilities, senior housing, student housing, self-storage facilities, and mixed-use properties (i.e., a property containing at least two property types).
  • Insurance company separate account
    A real estate investment vehicle that may only be offered by life insurance companies. This ownership arrangement enables an ERISA-governed fund to avoid the creation of unrelated taxable income for certain types of property investments and investment structures.
  • Interest
    The price paid for the use of capital.
  • Interest-only strip
    Derivative security consisting of all or part of the interest portion of the underlying loan or security.
  • Internal rate of return (IRR)
    A discounted cash-flow analysis calculation used to determine the potential total return of a real estate asset during an anticipated holding period.
  • Inventory
    All space within a certain proscribed market without regard to its availability or condition.
  • Investment bank
    Investment banks do not accept deposits; they are intermediaries only. Investment banks sell products or assist companies with raising capital, typically by underwriting and/or acting as the firm’s agent in the issuance of securities. They also act as a “market maker” by facilitating the trading of securities.
  • Investment committee
    The governing body overseeing corporate pension investments. Also, the subcommittee of a board of trustees charged with developing an investment policy for board approval.
  • Investment manager
    Any company or individual that assumes discretion over a specified amount of real estate capital, invests that capital in assets via a separate account, co-investment program or commingled fund, and provides asset management.
  • Investment policy
    A document that formalizes an institution’s guidelines for investment and asset management. An investment policy typically will contain goals and objectives; core and specialty investment criteria and methodology; and guidelines for asset management, investment advisory contracting, fees and utilization of consultants and other outside professionals.
  • Investment strategy
    The investment parameters used by the manager in structuring the portfolio and selecting the real estate assets for a fund or account. This includes a description of the types, locations, and sizes of properties to be considered, the ownership positions that will be used, and the stages of the investment lifecycle.
  • Investment structures
    Unleveraged acquisitions, leveraged acquisitions, traditional debt, participating debt, convertible debt, triple-net leases and joint ventures.
  • Investment-grade CMBS
    Commercial mortgage-backed securities with ratings of “AAA,” “AA,” “A” or “BBB”.
  • Investor status
    In reporting to clients and consultants, all investors are divided into two categories: taxable and tax-exempt. The tax-exempt category includes all qualified pension and retirement accounts. The taxable category includes all other accounts under management, including off-shore capital.


  • Joint venture
    An investment entity formed by one or more entities to acquire or develop and manage real property and/or other assets.
  • Just compensation
    Compensation is fair to both the owner and the public when a property is taken for public use through condemnation (eminent domain).



  • Landlord’s warrant
    A warrant from a landlord to levy upon a tenant’s personal property (e.g., furniture, etc.) and to sell this property at a public sale to compel payment of the rent or the observance of some other stipulation in the lease.
  • Lead manager
    The investment banking firm that handles the principal responsibilities for coordinating the new issuance of securities.
  • Lease
    An agreement whereby the owner of real 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 terms of the negotiations between them.
  • Lease commencement date
    The date usually constitutes the commencement of the term of the lease, whether or not the tenant has actually taken possession, so long as beneficial occupancy is possible.
  • Lease expiration exposure schedule
    A listing of the total square footage of all current leases that expire in each of the next five years, without regard to renewal options.
  • Leasehold interest
    The right to hold or use the property for a fixed period of time at a given price, without transfer of ownership.
  • Legal description
    A geographical description identifying a parcel by government survey, metes and bounds, or lot numbers of a recorded plat including a description of any portion that is subject to an easement or reservation.
  • Legal owner”
    The legal owner has title to the property, although the title may actually carry no rights to the property other
    then as a lien.
  • Letter of credit
    A commitment by a bank or other person that the issuer will honor drafts or other demands for payment upon full compliance with the conditions specified in the letter of credit. Letters of credit are often used in place of cashdeposited with the landlord in satisfying the security deposit provisions of a lease.
  • Letter of intent
  • A preliminary agreement stating the proposed terms for a final contract.
  • Leverage
    The use of credit to finance a portion of the costs of purchasing or developing a real estate investment. Positive leverage occurs when the interest rate is lower than the capitalization rate or projected internal rate of return. Negative leverage occurs when the current return on equity is diminished by the employment of debt.
  • LIBOR (London InterBank Offered Rate)
    The interest rate offered on Eurodollar deposits traded between banks, also called swaps.
  • Lien
    A claim or encumbrance against property used to secure a debt, a charge or the performance of some act.
  • Lien waiver
    Waiver of a mechanic’s lien rights that is often required before the general contractor can receive a draw under the payment provisions of a construction contract. It may also be required before the owner can receive a draw on a construction loan.
  • Lifecycle
    The various developmental stages of a property: pre-development, development, leasing, operating and redevelopment (or rehab).
  • Like-kind property
    A term used in an exchange of property held for productive use in a trade or business or for investment. Unless cash is received, the tax consequences of the exchange are postponed pursuant to Section 1031 of the Internal Revenue Code.
  • Limited partnership
    A type of partnership comprised of one or more general partners who manage the business and are personally liable for partnership debts, and one or more limited partners who contribute capital and share in profits but who take no part in running the business and incur no liability above the amount contributed.
  • Liquidity
    The ease with which assets can be bought or sold without affecting the price.
  • Listing agreemen
    An agreement between the owner of a property and a real estate broker giving the broker authorization to attempt to sell or lease the property at a certain price and terms in return for a commission, set fee or other form of compensation.
  • Loan-to-value ratio (LTV)
    The ratio of the value of the loan principal divided by the property’s appraised value.
  • Lock-box structure
    A structure whereby the rental or debt-service payments are sent directly from the tenant or mortgagor to the trustee.
  • Lockout
    The period during which a loan may not be prepaid.
  • Long-term lease
    In most markets, this refers to a lease whose term is at least three years from initial signing to the date of expiration or renewal.
  • Loss severity
    The percentage of principal lost when a loan is foreclosed.
  • Lot
    Generally one of several contiguous parcels of land making up a fractional part or subdivision of a block, the boundaries of which are shown on recorded maps and plats.
  • Low-rise
    A building with fewer than four stories above ground level.
  • Lump-sum contract
    A type of construction contract requiring the general contractor to complete a building or project for a fixed cost normally established by competitive bidding. The contractor absorbs any loss or retains any profit.


  • Magic page
    Included in the offering prospectus, the magic page is a projected growth story, describing how a new REIT will accomplish its future expectations for funds from operations or funds available for distribution.
  • Maker
    One who creates or executes a promissory note and promises to pay the note when it becomes due.
  • Mandate
    A mandate is an authorization or directive to carry out a policy or course of action. For example, an investment manager could receive a mandate from an investor to use an allocation of funds for a specific purpose or strategy.
  • Mark to market
    The process of increasing or decreasing the original investment cost or value of a property asset or portfolio to a level estimated to be the current market value.
  • Market capitalization
    One measure of the value of a company; it is calculated by multiplying the current share price by the current number of shares outstanding.
  • 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 the square footage that can be absorbed and the rents that can be charged.
  • Market value
    The highest price a property would command in a competitive and open market under all conditions requisite to a fair sale.
  • Marketable title
    A title free from encumbrances that could be readily marketed to a willing purchaser.
  • Master lease
    A primary lease that controls subsequent leases and may cover more property than subsequent leases.
  • Master Limited Partnership – MLP
    A type of limited partnership that is publicly traded. There are two types of partners in this type of partnership: The limited partner is the person or group that provides the capital to the MLP and receives periodic income distributions from the MLP’s cash flow, whereas the general partner is the party responsible for managing the MLP’s affairs and receives compensation that is linked to the performance of the venture.One of the most crucial criteria that must be met in order for a partnership to be legally classified as an MLP is that the partnership must derive most (~90%) of its cash flows from real estate, natural resources and commodities.The advantage of an MLP is that it combines the tax benefits of a limited partnership (the partnership does not paytaxes from the profit – the money is only taxed when unitholders receive distributions) with the liquidity of a publicly traded company.
  • Master servicer
    An institution that acts on behalf of a trustee for the benefit of security holders in collecting funds from a borrower, advancing funds in the event of delinquencies and, in the event of default, taking a property through foreclosure.
  • Maturity date
    The date when the total principal balance comes due.
  • Mechanic’s lien
    A claim created for the purpose of securing priority of payment of the price and value of work performed and materials furnished in constructing, repairing or improving a building or other structure.
  • Meeting space
    In hotels, space made available to the public to rent for meeting, conference or banquet uses.
  • Metes and bounds
    The boundary lines of land described by listing the compass directions and distances of the boundaries. Originally, metes referred to distance and bounds referred to direction.
  • Mezzanine financing
    Mezzanine financing is somewhere between equity and debt. It is that piece of the capital structure that has senior debt above it and equity below it. There is both equity and debt mezzanine financing, and it can be done at the asset or company level, or it could be unrated tranches of CMBS. Returns are generally in the mid- to high-teens.
  • Mid-rise
    A building with four to eight stories above ground level. In a central business district this might extend to buildings up to 25 stories.
  • Mixed-use
    A building or project that provides more than one use, such as office/retail or retail/residential.
  • Modern portfolio theory (MPT)
    An approach to quantifying risk and return in a portfolio of assets. Developed in 1959 by Harry Markowitz, MPT is the foundation for present-day principles of investment diversification. It emphasizes the portfolio rather than individual assets, and how assets perform in relation to each other based on the assumption that investors can benefit from diversification when asset class returns do not move in lock step with one another. Overall investment strategy that seeks to construct an optimal portfolio by considering the relationship between risk and return, especially as measured by alpha, beta and R-squared. This theory recommends that the risk of a particular stock should not be looked at on a standalone basis, but rather in relation to how that particular stock’s price varies in relation to the variation in price of the market portfolio. The theory goes on to state that given an investor’s preferred level of risk, a particular portfolio can be constructed that maximizes expected return for that level of risk. also called modern investment theory.
  • 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 broker
    A firm or person that serves as an intermediary, helping to facilitate a mortgage transaction between a lender (source of capital) and a borrower.
  • Mortgage constan
    The ratio of an amortizing mortgage payment to the outstanding mortgage balance.


  • NAREIT (National Association of Real Estate Investment Trusts)
    The national, not-for-profit trade organization that represents the real estate investment trust industry.
  • NCREIF (National Council of Real Estate Investment Fiduciaries)
    An association of real estate professionals who serve on working committees, sponsor research articles, seminars and symposiums, and produce the NCREIF Property Index.
  • NCREIF Property Index (NPI)
    The index reports quarterly and annual returns consisting of income and appreciation components. The index is based on data collected from the voting members of NCREIF. Specific property-type subindices include apartment, office, retail, industrial and hotel; regional subindices include West, East, South, and Midwest.
  • Negative amortization
    The accrual feature found in numerous participating debt structures that allows an investor to pay, for an initial period of time, an interest rate below the contract rate stated in loan documents.
  • Net asset value (NAV)
    The value of an individual asset or portfolio of real estate properties net of leveraging or joint venture interests.
  • Net asset value per share
    The current value of a REIT’s assets divided by shares outstanding.
  • Net assets
    Total assets less total liabilities on a market-value basis.
  • Net cash flow
    Generally determined by net income plus depreciation less principal payments on long-term mortgages.
  • Net investment in real estate
    Gross investment in real estate less the outstanding debt balance.
  • Net investment income
    The income or loss of a portfolio or entity resulting after deducting all expenses, including portfolio and asset management fees, but before realized and unrealized gains and losses on investments.
  • Net operating income (NOI)
    A before-tax computation of gross revenue less operating expenses and an allowance for an anticipated vacancy. It is a key indicator of financial strength.
  • Net present value (NPV)
    Net present value usually is employed to evaluate the relative merits of two or more investment alternatives. It is calculated as the sum of the total present value of incremental future cash flows plus the present value of estimated proceeds from the sale. Whenever the net present value is greater than zero, an investment opportunity generally is considered to have merit.
  • Net purchase price
    Gross purchase price less associated debt financing.
  • Net real estate investment value
    The market value of all real estate less property-level debt.
  • Net returns
    Returns to investors net of fees to advisers or managers.
  • Net sales proceeds
    Proceeds from the sale of an asset or part of an asset less brokerage commissions, closing costs, and market expenses.
  • Net square footage
    The space required for a function or staff position.
  • Nominal yield
    The yield to investors before adjustments for fees, inflation or risk.
  • Non-compete clause
    A clause that can be inserted into 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 building. This clause benefits service-oriented businesses desiring exclusive access to the building’s population.
  • Non-discretionary funds
    Funds allocated to an investment manager requiring the investor’s approval on each transaction.
  • Non-investment-grade CMBS
    Securities rated “BB” or “B,” also referred to as high-yield CMBS.
  • Non-performing loan
    A loan that is unable to meet its contractual principal and interest payments.
  • Non-recourse debt
    A loan that, in the event of a default by the borrower, limits the lender’s remedies to a foreclosure of the mortgage, realization on its assignment of leases and rents, and acquisition of the real estate.


  • Offer
    Term used to describe a stated price or spread to sell whole loans or securities.
  • Open space
    An area of land or water dedicated for public or private use or enjoyment.
  • Open-end fund
    A commingled fund that does not have a finite life continually accepts new investor capital and makes new property investments.
  • Operating cost escalation
    Although there are many variations of escalation clauses, all are intended 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 building.
  • Operating expense
    The actual costs associated with operating a property, including maintenance, repairs, management, utilities, taxes, and insurance.
  • Opportunistic
    A phrase generally used by advisers and managers to describe investments in underperforming and/or undermanaged assets that hold the expectation of near-term increases in cash flow and value. Total return objectives for opportunistic strategies tend to be 20 percent or higher. Opportunistic investments typically involve a high degree of leverage – typically 60 percent to 100 percent on an asset basis and 60 percent to 80 percent on a portfolio basis.
  • Opportunistic
    A phrase generally used by advisers and managers to describe investments in underperforming and/or undermanaged assets that hold the expectation of near-term increases in cash flow and value through “turnaround” strategies. These investments typically imply the assumption of more risk in exchange for a higher return. Total return objectives for opportunistic strategies tend to be 18 percent or higher. Opportunistic investments often include development-oriented or repositioning/redevelopment strategies and typically involve a high degree of leverage — 60 percent to 100 percent on an asset basis and 60 percent to 80 percent on a portfolio basis.
  • Originator
    A company that sources and underwrites commercial and/or multifamily mortgage loans.
  • Out-parcel
    Individual retail sites in a shopping center.
  • Overallotment
    A practice through which underwriters offer and sell more shares than they have agreed to buy from the issuer.


  • Parking ratio
    Dividing the total rentable square footage of a building by the building’s total number of parking spaces provides the amount of rentable square feet per each individual parking space.
  • Partial sales
    The sale of an interest in real estate that is less than the whole property. This may include a sale of easement rights, a parcel of land or retail pad, or a single building of a multi-building investment.
  • Partial taking
    The taking of part of an owner’s property under the laws of eminent domain.
  • Participating debt
    In addition to collecting a contract interest rate, participating debt allows the lender to have participatory equity rights through a share of increases in income and/or increases in residual value over the loan balance or original value at the time of loan funding.
  • Party in interest
    Under ERISA’s 2002 Modernization Act: Parties in interest include employers, unions and, in certain circumstances, fiduciaries. It excludes service providers and their affiliates. Fiduciaries would only be parties in interest where they act on behalf of a plan sponsor in entering into a transaction. An affiliate of a party in interest does not include remote affiliates of employers, unions and fiduciaries (e.g., 10 percent owners), as well as employees of such remote affiliates.
  • Pass-through certificate
    Payments of principal and interest from the underlying pool of mortgages are passed through to the holders of the certificates.
  • Payout ratio
    The percentage of the primary earnings per share, excluding extraordinary items, paid to common stockholders in the form of cash dividends during the trailing 12 months.
  • Pension fund
    A fund established by an employer to facilitate and organize the investment of employees’ retirement funds contributed by the employer and employees. The pension fund is a common asset pool meant to generate stable growth over the long term and provide pensions for employees when they commence retirement
  • Pension liability
    The total amount of capital required to fund vested pension fund benefits.
  • Percentage rent
    Rent payable under a lease that is equal to a percentage of gross sales or gross revenues received by the tenant. It is commonly used in retail center leases.
  • Performance
    The quarterly changes in fund or account values attributable to investment income realized or unrealized appreciation, and the total gross return to the investors both before and after investment management fees. Formulas for calculating performance information are varied, making comparisons difficult.
  • Performance bond
    A surety bond posted by a contractor guaranteeing the full performance of a contract with the proceeds to be used to complete the contract or compensate for the owner’s loss in the event of nonperformance.
  • Performance measurement
    The process of measuring an investor’s real estate performance in terms of individual assets, advisers/managers and portfolios. The scope of performance measurement reports varies among managers, consultants, and plan sponsors.
  • Performance-based fees
    Fees paid to advisers or managers based on returns to investors, often packaged with a modest acquisition and asset-management fee structure.
  • Permanent loan
    The long-term mortgage on a property.
  • Placement agent
    A firm that acts as an intermediary between a fund manager seeking to raise capital and various investors who may be interested in investing in such a fund. Examples of such firms include Park Hill Real Estate, Probitas Partners, Park Madison Partners, and Greenhill & Co.
  • Plan assets
    The assets of a pension plan.
  • Plan sponsor
    The entity that establishes, contributes to and is responsible for the administration of an employee benefit plan, often used interchangeably to describe staff who administer the plan and trustees or investment board members who govern it.
  • Plat
    Map of a specific area, such as a subdivision, that shows the boundaries of individual lots together with streets and easements.
  • Portfolio management
    The portfolio management process involves formulating, modifying and implementing a real estate investment strategy in light of an investor’s broader overall investment objectives. It also can be defined as the management of several properties owned by a single entity.
  • Portfolio turnover
    The average time from the funding of investment until it is repaid or sold.
  • Power of sale
    A clause inserted in a mortgage or deed of trust giving the mortgagee (or trustee) the right and power, upon default in the payment of the debt secured, to advertise and sell the property at public auction.
  • Preferred shares
    Stocks that have a prior claim on distributions (and/or assets in the event of dissolution) up to a definite amount before the common shareholders are entitled to anything. As a form of ownership, preferred shareholders fall behind all creditors in dissolutions.
  • Preleased
    Space in a proposed building that has been leased before the start of construction or in advance of the issuance of a certificate of occupancy.
  • Prepayment rights
    Rights are given to the borrower to make partial or full payment of the total principal balance prior to the maturity date without penalty.
  • Price to earnings ratio
    This ratio is calculated by dividing the current share price by the sum of the primary earnings per share from continuing operations, before extraordinary items and accounting changes, over the past four quarters.
  • Primary issuance
    The initial financing of an issuer.
  • Prime space
    Typically refers to first-generation space that is available for lease.
  • Prime tenant
    The major tenant in a building, or the major or anchor tenant in a shopping center.
  • Principal payments
    The return of invested capital to the lender.
  • Private Debt Real Estate
    One of the four quadrants of the real estate capital markets. Also known as “mortgages” or “whole loan mortgages,” but also can refer to participating mortgages, loan participations, and loan syndications. Typically refers to commercial loans, but also can refer to direct lending to single-family homeowners. Also can refer to privately syndicated mortgage or other real estate-backed debt securities issued by either private or public real estate operating companies. Also see private equity real estate, public equity real estate, and public debt real estate.
  • Private Equity Real Estate
    One of the four quadrants of the real estate capital markets. Also known as “equity real estate” or “direct real estate.”  Typically refers to commercial real estate investments, but also could include such private equity market investments as equity investments in homebuilding projects or properties, or in single-family rental home investment programs, as well as private equity investments in real estate operating companies. Private equity investments can be structured in a variety of formats, from direct ownership to joint ventures to limited partnerships, private real estate investment trusts (REITs), group trusts, collective investment trusts, C-corps., limited liability companies and a variety of other legal structures. Also see private debt real estate, public equity real estate, and public debt real estate.
  • Private Equity Real Estate Fund (Private Equity Fund)
    A pooled fund vehicle targeting institutional investors, individual investors, or both, typically structured as a private real estate investment trust (REIT), or other forms of real estate operating company, or through some form of commingling arrangement, that invests in direct equity real estate holdings on behalf of its interest holders. The managers of these funds are called “private equity real estate managers,” or simply “real estate investment managers.”  Private equity funds can be structured either as open-end funds or as closed-end funds.
  • Private Equity Real Estate Manager (Private Equity Manager)
    A manager of direct investments in real estate, either for the benefit of the private equity manager’s own account, for the benefit of the manager’s third-party investment management investor clients, or both. Often refers to managers of Opportunity Funds – funds that typically invest in higher risk, higher return strategies with target returns in the 18% to 20% or higher range, but actually includes all types of managers who invest capital, either for their own accounts of the accounts of other, indirect equity real estate investments. Also see Private Equity Real Estate and Private Equity Funds.
  • Private placement sale of a security in a manner that is exempt from the registration rules and requirements of the Securities and Exchange Commission. An example would be a REIT directly placing an issue of stock with a pension fund.
  • Private REIT An infinite- or finite-life real estate investment company structured as a real estate investment trust. Shares are placed and held privately rather than sold and traded publicly.
  • Pro rataIn the case of a tenant, the proportionate share of expenses for the maintenance and operation of the property.
  • Production acresThe area of land that can be used in agriculture or timber operations to produce income, not including areas used for crop or machinery storage, or other support areas.
  • Prohibited transaction
    ERISA defines the following transactions as prohibited between a pension plan and a party in interest: the sale, exchange or leasing of any property; a loan or other extension of credit; and the furnishing of goods or services. Other prohibited transactions include the transfer of plan assets to a party in interest or use of plan assets by a party in interest and the acquisition of employer real property in excess of limits set by ERISA.
  • Prudent man rule
    The standard to which a fiduciary is held accountable under ERISA. “Act with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man, acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of a like character and with like aims.”
  • Public Debt Real Estate
    One of the four quadrants of the real estate capital markets. Typically refers to Commercial Mortgage-Backed Securities (CMBS) and Residential Mortgage-Backed Securities (RMS), but also can include public bond issues from the public and private companies and agencies. Also see private equity real estate, public equity real estate, and private debt real estate.
  • Public Equity Real Estate
    One of the four quadrants of the real estate capital markets. Typically refers to investments in the securities of publicly traded real estate investment trusts (REITs) and other non-REIT publicly traded real estate operating companies.  Also see private equity real estate and private debt real estate.
  • Public-Private Partnership (P3)
    According to the National Council for Public-Private Partnerships, a Public-Private Partnership (P3) is a contractual agreement between a public agency and a private sector entity. Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public. Each party shares in the risks and rewards potential in the delivery of the service and/or facility.
  • Punch list
    An itemized list documenting incomplete or unsatisfactory items after the contractor has notified the owner that the tenant space is substantially complete.


  • Qualified plan
    Any employee benefit plan that is qualified by the IRS as a tax-exempt plan. Among other requirements, the plan’s assets must be placed in trust for the sole benefit of the employees covered by the plan.
  • Quitclaim deed
    A deed operating as a release that is intended to pass any title, interest or claim that the grantor may have in the property, but not guaranteeing such title is valid.


  • Rating
    Grade, assigned by a rating agency, designating the credit quality or creditworthiness of the underlying assets.
  • Rating agencies
    Independent firms engaged to rate the creditworthiness of securities for the benefit of investors. The major rating agencies are Fitch Ratings, Standard & Poor’s and Moody’s Investors Service.
  • Raw land
    Unimproved land that remains in its natural state.
  • Raw space
    Unimproved shell space in a building.
  • Real Assets
    Real assets are often defined as physical or tangible assets that have intrinsic value and tend to provide a “real return”, often linked to inflation. This definition encompasses a wide range of investments, including real estate, infrastructure, timberlands, agrilands, commodities, precious metals, and natural resources. Real assets also appeal to investors because of their low correlation to traditional stocks and bonds.
  • Real estate fundamentals
    The factors driving the value of the real property (i.e., the supply, demand and pricing for land and/or developed space in a given geographic or economic region or market).
  • Real property
    Land, and generally whatever is erected or affixed to the land that would be personal property if not attached.
  • The real rate of return
    Yield to investors net of an inflationary factor. The formula for calculating the real rate of return is [(1 + nominal yield) / (1 + inflation rate)] – 1.
  • Recapture
    When the IRS recovers the tax benefit of a deduction or a credit previously taken by a taxpayer, which is often a factor in foreclosure because there is a forgiveness of debt. As used in leases, it is a clause giving the lessor a percentage of profits above a fixed amount of rent; or in a percentage lease, a clause granting the landlord the right to terminate the lease if the tenant fails to realize minimum sales.
  • Recourse
    The right of a lender, in the event of default by the borrower, to recover against the personal assets of a party who is secondarily liable for the debt.
  • Red herring
    The preliminary prospectus for an initial public offering. Before the registration statement becomes effective, underwriters may use the preliminary prospectus to market the offering. The preliminary prospectus, however, must bear a legend printed in red ink stating that the offering has been filed but is not yet effective.
  • Regional diversification
    Definitions for what constitute various regions, for diversification purposes, vary among managers, consultants and plan sponsors. Some boundaries are defined based purely on geography; others have attempted to define boundaries along economic lines.
  • Registration statement
    Forms filed with the Securities and Exchange Commission (or the appropriate state regulatory agency) in connection with a proposed offering of new securities or the listing of outstanding securities on a national exchange.
  • Rehab
    Extensive renovation intended to cure obsolescence of a building or project.
  • 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. A corporation or trust that qualifies for REIT status generally does not pay corporate income tax to the IRS. Instead, it pays out at least 90 percent of its taxable income in the form of dividends.
  • REMIC (Real estate mortgage investment conduit)
    A product of the Tax Reform Act of 1986, REMICs are designed to hold a pool of mortgages for the exclusive purpose of issuing multiple classes of mortgage-backed securities in a way that avoids a corporate double tax.
  • Renewal option
    A clause giving a tenant the right to extend the term of a lease.
  • Renewal probability
    Used to estimate leasing-related costs and downtime, it is the average percentage of tenants in a building that is expected to renew at market rental rates upon the expiration of their leases.
  • RentCompensation or fee paid for the occupancy and use of any rental property, land, buildings, equipment, etc.
  • Rent commencement date
    The date on which a tenant begins paying rent.
  • Rent-up period
    The period following construction of a new building when tenants are actively being sought and the project is approaching its stabilized occupancy.
  • Rentable/usable ratio
    A building’s total rentable area divided by its usable area. It represents the tenant’s pro-rata share of the building’s common areas and can determine the square footage upon which the tenant will pay rent. The inverse describes the proportion of space that an occupant can expect to actually use.
  • Rental concession
    What landlords offer tenants to secure their tenancy. While rental abatement is one form of a concession, there are many others such as increased tenant improvement allowance, signage, below-market rental rates, and moving allowances.
  • Rental growth rate
    The expected trend in market rental rates over the period of analysis expressed as an annual percentage increase.
  • REO (Real estate owned)
    Real estate owned by a savings institution as a result of default by borrowers and subsequent foreclosure by the institution.
  • Replacement cost
    The estimated current cost to construct a building with utility equivalent to the building being appraised, using modern materials and current standards, design, and layout.
  • Replacement reserves
    An allowance that provides for the periodic replacement of building components that wear out more rapidly than the building itself and must be replaced during the building’s economic life.
  • Request for proposal (RFP)
    A formal request, issued by a plan sponsor or its consultant, inviting investment managers to submit information on their firms’ investment strategy, historical investment performance, current investment opportunities, investment management fees, other pension fund client relationships, etc. Firms that meet the qualifications are requested to make a formal presentation to the board of trustees and senior staff members. Finalists are chosen at the completion of this process, and contract negotiation begins.
  • Reserve account
    An account that a borrower has to fund to protect the lender. Examples include capital expenditure accounts and deferred maintenance accounts.
  • Resolution Trust Corp. (RTC)
    The RTC was established by Congress in 1989 to contain, manage and sell failed savings institutions and recover taxpayer funds through the management and sale of the institutions’ assets.
  • Retail investor
    When used to describe an investor, retail refers to the nature of the distribution channel and the market for the services – selling interests directly to consumers.
  • Retention rate
    The percent of trailing 12-month earnings that have been plowed back into the company. It is calculated as 100 minus the trailing 12-month payout ratio.
  • Return on assets
    The income after taxes for the trailing 12 months divided by the average total assets, expressed as a percentage.
  • Return on equity
    The income available to common stockholders for the trailing 12 months divided by the average common equity, expressed as a percentage.
  • Return on investments
    The trailing 12-month income after taxes divided by the average total long-term debt, other long-term liabilities and shareholders’ equity, expressed as a percentage.
  • Reversion capitalization rate
    The capitalization rate used to determine reversion value.
  • Reversion value A lump-sum benefit that an investor receives or expects to receive at the termination of an investment.
  • RevPAR (Revenue per available room)
    Total room revenue for the period divided by the average number of available rooms in a hospitality facility.
  • Risk management
    A systematic approach to identifying and separating insurable risks from non-insurable risks, and evaluating the availability and costs of purchasing third-party insurance.
  • Risk-adjusted rate of return
    Used to identify investment alternatives that can be expected to deliver a positive premium, after taking into consideration the expected volatility. The risk-adjusted rate of return is defined as the expected rate of return of a given asset, less the expected return for T-bills, divided by the expected standard deviation of the returns for the assets.
  • Roadshow
    A tour made by executives of a company that plans to go public, where they travel to various cities to meet with underwriters and analysts and make presentations regarding their company and IPO. The roadshow takes place during the marketing period before the registration statement becomes effective.
  • Roll-over risk
    The risk that a tenant’s lease will not be renewed.


  • Sale-leaseback
    An arrangement by which the owner-occupant of a property agrees to sell all or part of the property to an investor, then lease it back and continue to occupy space as a tenant.
  • Sales comparison value
    A value indication derived by comparing the property being appraised to similar properties that have been sold recently.
  • Second-generation or secondary space
    Previously occupied space that becomes available for lease, either directly from the landlord or as sublease space.
  • Secondary financing
    A loan on real property secured by a lien junior to an existing first mortgage loan.
  • Secondary market
    A market where existing mortgage loans are securitized and then bought and sold to other investors.
  • Secondary, or follow-on, offering
    A stock offering made by an existing public company.
  • Securities and Exchange Commission (SEC)
    The federal agency that supervises and oversees the issuance and exchange of public securities.
  • Securitization
    The process of converting an illiquid asset, such as a mortgage loan, into a tradable form, such as mortgage-backed securities.
  • Security deposit
    A deposit of money by a tenant to a landlord to secure the performance of a lease. It also can take the form of a letter of credit or other financial instruments.
  • Seisen (seizen)
    Possession of real property under a claim of freehold estate.
  • Self-administered REIT
    When members of the management are employees of the REIT or an entity having essentially the same economic ownership as the REIT.
  • Self-managed REIT
    A REIT whose employees are responsible for performing property management functions.
  • Senior classes
    With regard to securities, it describes the classes with the highest priority to receive the payments from the underlying mortgage loans.
  • Separate account
    A relationship where an investment manager or adviser is retained by a single pension plan sponsor to source real estate products under a stated investment policy exclusively for that sponsor.
  • Servicer
    An organization that acts on behalf of a trustee for the benefit of security holders.
  • Setback
    The distance from a curb, property line or other reference points, within which building is prohibited.
  • Shares outstanding
    The number of shares of common stock currently outstanding, less the shares held in the treasury.
  • Sidecar Fund or Investment
    A sidecar or over-allocation fund is a blind-pool co-investment vehicle under common sponsorship with a private equity fund. The sidecar fund has a right of second opportunity to participate in larger investments — where there is a need for additional equity capital to complete the deal — brought by the fund sponsor to the lead private equity fund.
  • Site analysis
    Determines the suitability of a specific parcel of land for a specific use.
  • Site development The installation of all necessary improvements made to a site before a building or project can be constructed on the site.
  • Site plan
    A detailed plan that depicts the location of improvements on a parcel.
  • SlabThe exposed wearing surface laid over the structural support beams of a building to form the floor(s) of the building.
  • Social investing
    Investments driven in whole or in part by social or political (non-real estate) objectives. Under ERISA, social investing is economically justified only if proper real estate fundamentals are considered first.
  • Socialize
    To place under government or group ownership or control (to “socialize” the nation’s debt); To make fit for companionship with others (to make something or someone “sociable”); To convert or adapt to the needs of society (to “socialize” the approach); To take part in social activities (he went to the gathering to “socialize”); To engage others in a particular discussion or plan about a specific topic (to “socialize” the topic”).
  • Soft cost
    The portion of an equity investment other than the actual cost of the improvements themselves that may be tax-deductible in the first year.
  • Sovereign Wealth Fund (SWF)
    A sovereign wealth fund (SWF) is a state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals, or other financial instruments. Sovereign wealth funds invest globally. Most SWFs are funded by foreign exchange assets. Read more details.
  • Space plan
    A graphic representation of a tenant’s space requirements, showing wall and door locations, room sizes and sometimes furniture layouts.
  • Special assessment
    Special charges levied against real property for public improvements that benefit the assessed property.
  • Special servicer A firm that is employed to work out mortgages that are either delinquent or in default.
  • Specified investing Investment in individually specified properties or portfolios, or investment in commingled funds whose real estate assets are fully or partially specified prior to the commitment of investor capital.
  • Speculative space
    Any tenant space that has not been leased before the start of construction on a new building.
  • Stabilized net operating income
    Projected income less expenses that are subject to change but have been adjusted to reflect equivalent, stable property operations.
  • Stabilized occupancy
    The optimum range of long-term occupancy that an income-producing real estate project is expected to achieve after exposure for leasing in the open market for a reasonable period of time at terms and conditions comparable to competitive offerings.
  • Step-up lease (graded lease)
    A lease specifying set increases in rent at set intervals during the term of the lease.
  • Straight lease (flat lease)
    A lease specifying a fixed amount of rent that is to be paid periodically, typically monthly, during the entire term of the lease.
  • Strip center
    Any shopping area comprised of a row of stores but smaller than a neighborhood center anchored by a grocery store.
  • Subcontractor
    A contractor working under and being paid by the general contractor, often a specialist in nature, such as an electrical contractor, cement contractor, etc.
  • Sublessee
    A person or identity to whom the rights of use and occupancy under a lease have been conveyed, while the original lessee retains primary responsibility for the obligations of the lease.
  • Subordinated classes
    With regard to CMBS, describes those classes with the lowest priority to receive payments from the underlying mortgage loans.
  • Subordination
    The process of sharing the risk of credit losses disproportionately among two or more classes of securities.
  • Surety
    One who voluntarily binds himself to be obligated for the debt or obligation of another.
  • Surface rights
    A right or easement granted with mineral rights, enabling the possessor of the mineral rights to drill or mine through the surface.
  • Survey
    The process by which a parcel is measured and its boundaries and contents ascertained.
  • Synthetic lease
    A transaction that appears as a lease from an accounting standpoint but as a loan from a tax standpoint.


  • Tag-Along Rights
    A contractual obligation used to protect a minority shareholder. If a majority shareholder sells his or her stake, then the minority shareholder has the right to join the transaction and sell his or her minority stake in the company. (See also Drag-Along Rights)
  • Taking
    A common synonym for condemnation, or any interference with private property rights, but it is not essential that there be physical seizure or appropriation.
  • Target date fund
    Target date funds are based on the premise that the younger the investor, the longer the time horizon he or she has to retirement (or some other goal) and the greater the risk he or she can take to potentially increase returns. A young investor’s portfolio, for example, should contain mostly equities. In contrast, an older investor would hold a more conservative portfolio, with fewer equities and more fixed-income investments. Each family of target-date funds will have a different glide path, which determines how the asset mix changes as the target date approach (see “glide path”). Some have a very steep trajectory, becoming dramatically more conservative just a few years before the target date. Others will take a more gradual approach. The asset mix at the target date can be quite different as well. Some target-date funds assume that the investor will want a high degree of safety and liquidity because he or she might use the funds to purchase an annuity. Other target-date funds assume that the investor will hold onto the funds, and will, therefore, include more equities in the asset mix, reflecting a longer time horizon. Still, others will provide a provision for converting the nature of the vehicle from asset accumulation to income production and delivery
  • Tax base
    The assessed valuation of all real property that lies within a taxing authority’s jurisdiction. When multiplied by the tax rate, it determines the amount of tax due.
  • Tax lien
    A statutory lien for nonpayment of property taxes that attaches only to the property upon which the taxes are unpaid.
  • 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.
  • Technical Risk Ratios
    There are five statistical measures or technical risk ratios used in applying modern portfolio theory (MPT): alpha, beta, standard deviation, R-squared, and the Sharpe ratio.   All of these indicators collectively are intended to help investors determine the risk-reward profile of a managed portfolio of equities or alternatives.
  • Tenant (lessee)
    One who rents real estate from another and holds an estate by virtue of a lease.
  • Tenant at will
    One who holds possession of premises by permission of the owner or landlord. The characteristics of the lease are an uncertain duration and the right of either party to terminate on proper notice.
  • Tenant improvement (TI)
    Improvements made to the leased premises by or for a tenant.
  • Tenant improvement (TI) allowance
    Defines the fixed amount of money contributed 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 of a property’s income stream. In multi-tenanted properties, institutional investors typically prefer a mixture of national credit tenants, regional credit tenants, and local non-credit tenants.
  • Term
    The lifetime of a loan.
  • Time-weighted average annual rate of return
    The constant annual return over a series of years that would compound to the same return as compounding the actual annual returns for each year in the series.
  • Title
    The means whereby the owner has the just and full possession of real property.
  • Title insurance
    A policy issued by a title company that insures against loss resulting from defects of title to a specifically described parcel of real property, or from the enforcement of liens existing against it at the time the title policy is issued.
  • Title search
    A review of all recorded documents affecting a specific piece of property to determine the present condition of title.
  • Total acres
    All land area contained within a real estate investment.
  • Total assets
    The sum of all gross investments, cash and equivalents, receivables, and other assets presented on the balance sheet.
  • Total commitment
    The full mortgage loan amount that is obligated to be funded if all stated conditions are met.
  • Total inventory
    The total square footage of a type of property within a geographical area, whether vacant or occupied.
  • Total principal balance
    The total amount of debt, including the original mortgage amount adjusted for subsequent fundings, principal payments and other unpaid items (e.g., interest) that are allowed to be added to the principal balance by the mortgage note or by law.
  • Total retail area
    The total floor area of a retail center less common areas. It is the area from which sales are generated and includes any department stores or other areas (such as banks, restaurants or service stations) not owned by the center.
  • Total return
    The sum of quarterly income and appreciation returns.
  • Trade fixtures
    Personal property that is attached to a structure that is used in the business. Because this property is part of the business and not deemed to be part of the real estate, it is typically removable upon lease termination.
  • Tranche
    A class of securities. CMBS offerings are generally divided into rated and unrated classes, or tranches, according to seniority and risk. Higher-rated tranches allow for internal credit enhancements; lower-rated classes offer higher yields.
  • Triple net lease
    A lease that requires the tenant to pay all expenses of the property being leased in addition to rent. Typical expenses covered in such a lease include taxes, insurance, maintenance, and utilities.
  • Trustee
    The trustee oversees the flow of funds through the CMBS structure on behalf of the bondholders. The trustee is responsible for collecting principal and interest from the servicer, distributing payments to bondholders and reporting to bondholders.
  • Turnkey project
    The construction of a project in which a third party is responsible for the total completion of a building, or for the construction of tenant improvements to the customized requirements and specifications of a future owner or tenant.


  • Under construction
    The period of time after construction has started but before the certificate of occupancy has been issued.
  • Under contract
    The period of time after a seller has accepted a buyer’s offer to purchase a property and during which the buyer is able to perform its due diligence and finalize financing arrangements. During this time, the seller is precluded from entertaining offers from other buyers.
  • Underwriter
    A company, usually an investment banking firm, that guarantees or participates in a guarantee that an entire issue of stocks or bonds will be purchased.
  • Unencumbered
    Property that is free of liens and other encumbrances.
  • Unimproved land
    Most commonly refers to land without improvements or buildings but also can mean land in its natural state.
  • Unrated classes
    Typically the most subordinated classes of CMBS.
  • UPREIT (umbrella partnership real estate investment trust)
    An organizational structure where a REIT’s assets are owned by a holding company for tax purposes.
  • Usable square footage
    The area contained within the demising walls of the tenant space that equals the net square footage multiplied by the circulation factor.
  • Use
    The specific purpose for which a parcel or a building is intended to be used or for which it has been designed or arranged.


  • Vacancy factor
    The amount of gross revenue that pro forma income statements anticipate will be lost because of vacancies, often expressed as a percentage of the total rentable square footage available in a building or project.
  • Vacancy rate
    The total amount of available space compared to the total inventory of space and expressed as a percentage.
  • Vacant space
    Existing tenant space currently being marketed for lease excluding space available for sublease.
  • Value-added
    A phrase generally used by advisers and managers to describe investments in underperforming and/or undermanaged assets. The objective is to generate 13 percent to 18 percent returns.
  • Value-added
    A phrase generally used by advisers and managers to describe investments in underperforming and/or undermanaged assets that possess upside potential. NOI and property value can be positively affected through a change in marketing, operating or leasing strategy; physical improvements; and/or a new capital structure. The objective is to generate 13 percent to 18 percent returns. Leverage could fall in the 60 percent to 70 percent range.
  • Variable-rate
    A loan interest rate that varies over the term of the loan, usually tied to a predetermined index. Also called adjustable-rate.
  • Variance
    A permission that allows a property owner to depart from the literal requirements of a zoning ordinance that, because of special circumstances, cause a unique hardship.
  • Virtual storefront
    An online business presence for sales.


  • Waiting period
    The time between the initial filing of a registration statement and its effective date.
  • Weighted-average coupon
    The weighted average of the gross interest rates of the mortgages underlying a pool as of the issue date, with the balance of each mortgage used as the weighting factor.
  • Weighted-average equity
    The denominator of the fraction used to calculate investment-level income, appreciation and total returns on a quarterly basis, consisting of net assets at the beginning of the period adjusted for weighted contributions and distributions.
  • Weighted-average rental rates The average proportion of unequal rental rates in two or more buildings within a market.
  • Working drawings
    The set of plans for a building or project that comprise the contract documents 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
    The accounting procedure used when the book value of an asset is adjusted downward to better reflect current market value.
  • Write-off
    The accounting procedure used when an asset has been determined to be uncollectible and is therefore charged as a loss.



  • Yield
    The effective return on investment, as paid in dividends or interest.
  • Yield maintenance premium
    A penalty, paid by the borrower, designed to make investors whole in the event of early redemption of principal.
  • Yield spread
    The difference in yield between a debt instrument or other investment and a benchmark value, typically U.S. Treasuries of the same maturity.


  • Zoning
    The division of a city or town into zones and the application of regulations having to do with the architectural design and structural and intended uses of buildings within such zones.
  • Zoning ordinance
    The set of laws and regulations controlling the use of land and construction of improvements in a given area or zone.

This information is provided without warranty of any kind. These terms are provided for your information only, with the warning that terms may have different meanings or connotations in different markets, in different states, or as used in different statutes or documents.

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