Glossary
🅰️ A
Absorption Rate
The rate at which available commercial properties are leased or sold in a specific market during a given time period.
Adaptive Reuse
The process of repurposing old or underutilized buildings for new uses, such as converting a warehouse into office space.
Amortization
The gradual repayment of a loan over time through regular payments covering both principal and interest.
Anchor Tenant
A major tenant, often a well-known retailer, that attracts customers and other tenants to a commercial property.
Appraisal
An expert assessment of a property’s market value, typically conducted by a certified appraiser.
🅱️ B
Base Rent
The initial rent amount agreed upon in a lease, excluding additional expenses like taxes and maintenance.
Build-to-Suit
A property development approach where a building is constructed specifically to meet the needs of a particular tenant.
Broker Opinion of Value (BOV)
An estimate provided by a real estate broker regarding a property’s potential market value.
🅲 C
Capital Expenditures (CapEx)
Funds used by a property owner to acquire, upgrade, or maintain physical assets like buildings or equipment.
Capitalization Rate (Cap Rate)
A metric used to estimate the return on investment of a property, calculated by dividing net operating income by the property’s current market value.
Common Area Maintenance (CAM)
Charges paid by tenants for the upkeep of shared spaces in a commercial property, such as lobbies and parking lots.
Core Plus
A real estate investment strategy involving properties that are stable but offer opportunities for modest improvements to increase returns.Investopedia
🅳 D
Debt Service Coverage Ratio (DSCR)
A measure of a property’s ability to cover its debt obligations, calculated by dividing net operating income by total debt service.
Due Diligence
The comprehensive appraisal of a property, including its financials, legal status, and physical condition, before finalizing a transaction.
Double Net Lease (NN)
A lease agreement where the tenant is responsible for property taxes and insurance premiums, in addition to base rent.
🅴 E
Effective Gross Income (EGI)
The total income generated by a property, including rent and other income, minus vacancy losses.
Estoppel Certificate
A document used in real estate transactions to confirm the terms and status of existing leases.MIAMI REALTORS®
Exit Cap Rate
The capitalization rate used to estimate a property’s resale value at the end of an investment holding period.
🅵 F
Fair Market Value (FMV)
The estimated price at which a property would sell in an open and competitive market.
Full-Service Lease
A lease where the landlord covers all operating expenses, including utilities, maintenance, and taxes.
Funds from Operations (FFO)
A performance metric used by real estate investment trusts (REITs) to define the cash generated by their operations.
🅶 G
Gross Lease
A lease agreement where the tenant pays a fixed rent, and the landlord covers all property expenses.
Gross Rent Multiplier (GRM)
A valuation metric calculated by dividing a property’s price by its gross rental income.
Ground Lease
A long-term lease agreement where a tenant is permitted to develop a piece of property during the lease period.
🅷 H
Highest and Best Use
The most profitable legal use of a property, determined through analysis of its potential.
Holdover Tenant
A tenant who remains in a property after their lease has expired, without the landlord’s consent.Commercial Real Estate Loans
HVAC
An acronym for Heating, Ventilation, and Air Conditioning systems within a building.
🅸 I
Internal Rate of Return (IRR)
A financial metric used to evaluate the profitability of an investment, representing the annualized rate of return.
Infill Development
The development of vacant or underused parcels within existing urban areas that are already largely developed.NAIOP
Industrial Property
Real estate used for industrial purposes, such as manufacturing, production, or storage.
🅹 J
Joint Venture (JV)
A business arrangement where two or more parties collaborate on a real estate project, sharing profits and losses.
Just Compensation
The fair market value paid to a property owner when their property is taken under eminent domain.
🅺 K
Kick-Out Clause
A lease provision allowing a landlord to terminate the lease if certain conditions are met, such as the tenant failing to meet sales targets.
Key Money
A non-refundable payment made by a tenant to a landlord for the opportunity to lease a desirable property.
🅻 L
Letter of Intent (LOI)
A preliminary agreement outlining the terms under which parties intend to enter into a formal contract.en.wikipedia.org
Load Factor
A percentage that represents the proportion of common areas in a building, used to calculate rentable square footage.
Loan-to-Value Ratio (LTV)
A financial term expressing the ratio of a loan to the value of an asset purchased.
🅼 M
Market Rent
The rental income a property would likely command in the open market, based on comparable properties.
Mezzanine Financing
A hybrid of debt and equity financing, typically used to finance the expansion of existing companies. In real estate, it’s subordinate to senior debt but ranks above equity.
Mixed-Use Development
A project that combines multiple land uses, such as retail, office, residential, or hospitality facilities, into one integrated development.NAIOP
Modified Gross Lease
A lease agreement where the tenant pays base rent plus a portion of the property’s operating expenses.
🅽 N
Net Lease
A lease agreement where the tenant is responsible for some or all property expenses in addition to rent. Types include:
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Single Net Lease (N): Tenant pays property taxes.
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Double Net Lease (NN): Tenant pays property taxes and insurance premiums.
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Triple Net Lease (NNN): Tenant pays property taxes, insurance premiums, and maintenance costs.
Net Operating Income (NOI)
The total income generated from a property after operating expenses are deducted, excluding taxes and financing costs.
Non-Recourse Loan
A loan where the lender’s only remedy in case of default is to foreclose on the property, with no personal liability for the borrower.SIOR
🅾️ O
Occupancy Rate
The percentage of a property’s total rentable space that is currently leased or occupied.
Operating Expenses
The costs associated with operating and maintaining a property, such as utilities, maintenance, insurance, and property management fees.
Option to Purchase
A contractual agreement giving a tenant the right, but not the obligation, to purchase the leased property under specified terms.
🅿️ P
Percentage Lease
A lease where the tenant pays a base rent plus a percentage of their gross sales, commonly used in retail properties.
Pro Forma
A financial statement that projects the future income and expenses of a property, used for investment analysis.
Property Management
The operation, control, and oversight of real estate properties, including tasks like rent collection, maintenance, and tenant relations.
🆀 Q
Quiet Enjoyment
A legal term ensuring that a tenant can possess and use the property without interference from the landlord or other parties.
Quitclaim Deed
A legal instrument that transfers the grantor’s interest in a property without warranties or guarantees.
🆁 R
Real Estate Investment Trust (REIT)
A company that owns, operates, or finances income-producing real estate, offering investors regular income streams and diversification.
Rent Roll
A document listing all tenants in a property, along with lease terms, rental rates, and other pertinent details.
Replacement Cost
The cost to replace a building with one of similar utility, using modern construction methods and materials.
🆂 S
Sale-Leaseback
A transaction where the owner sells a property and simultaneously leases it back from the buyer, often used to free up capital.
Sublease
An arrangement where the original tenant leases part or all of the leased premises to another party.
Syndication
A method of pooling funds from multiple investors to purchase and manage real estate properties.
🆃 T
Tenant Improvements (TIs)
Modifications made to a rental space to meet the needs of a tenant, often negotiated in the lease agreement.
Title Insurance
A policy that protects property owners and lenders against losses from defects in the title.
Triple Net Lease (NNN)
A lease agreement where the tenant is responsible for all property expenses, including taxes, insurance, and maintenance.
🆄 U
Usable Square Footage (USF)
The actual space a tenant occupies, excluding common areas.
Underwriting
The process of evaluating the risk and potential return of a real estate investment or loan.
🆅 V
Vacancy Rate
The percentage of all available units in a rental property that are vacant or unoccupied at a particular time.
Value-Add Property
A property that requires improvements to increase its value and income potential.
🆆 W
Weighted Average Lease Term (WALT)
A metric that calculates the average remaining lease term across all tenants in a property, weighted by rental income.
Work Letter
An agreement outlining the landlord’s responsibilities for tenant improvements, including scope of work and budget.
🆇 X
X-Dates
Key dates in a lease or loan agreement, such as commencement, expiration, and option exercise dates.
🆈 Y
Yield
The income return on an investment, typically expressed as a percentage of the investment’s cost or market value.
🆉 Z
Zoning
Regulations established by local governments dictating how properties in specific geographic zones can be used.
Zoning Variance
An exception to zoning regulations granted by a local authority, allowing for a use not typically permitted in that zone.