The Real Assets Glossary

Browse the glossary by letter below or search the page using your computer or mobile device. To suggest an addition or a correction to the glossary, contact us at info@rpii.org.

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A

• A-Note
  • The highest tranche of an asset backed security (ABS) or other structured financial product; during bankruptcy, default, or other credit proceedings, an A note is senior to other notes, such as B notes. The senior status allows the payment from the underlying assets of A note debt before others; an A note can be rated, or labeled, into AAA, AA, or A categories, depending on the credit quality of the underlying asset. Also known as a “class A note.”
• Abandonment
  • The act of relinquishing or giving up all interests in real property and/or fixtures thereon, with no intention to reclaim or use the property again; not to be confused with simple discontinuance of use or vacating the property.
• Abatement
  • (In legal context) a reduction in something, such as a nuisance or hazard or the process of pursuing a remedy to a nuisance or code violation; often referred to as free rent or early occupancy and may occur outside or in addition to the primary term of the lease. (In property tax context) a reduction in the property tax owed on real property.
• Abnormal Sale
  • A sale that is not typical of what is happening in the marketplace, at the time pertinent to the appraisal assignment.
• Above Building Standard
  • Upgraded finishes and specialized designs necessary to accommodate a tenant's requirements.
• Absolute Return Attribution
  • Identifies the contributions of portfolio components to the total return of a portfolio; also known as “return contribution analysis.”
• Absorption
  • An estimate of the number of units or square feet per time period of a particular property type that can be successfully sold, leased, put into use, or traded in their market area at prevailing prices or rentals; typically arrived through an absorption analysis in a feasibility analysis and reported as the “absorption rate” or “space absorption.”
• Absorption Analysis
  • An analysis of the amount of space or the number of units that can be sold, leased, put into use, or traded on the market during a predetermined period of time and at prevailing prices or rentals.
• Absorption Period
  • An estimate of the total time period over which a property can be successfully sold, leased, put into use, or traded in its market area at prevailing prices or rentals.
• Absorption Rate
  • An estimate of the number of units or square feet per time period of a particular property type that can be successfully sold, leased, put into use, or traded in their market area at prevailing prices or rentals; typically arrived through an absorption analysis in a feasibility analysis and reported as the “absorption” or “space absorption.”
• Abstract of Title
  • A summary of the public records relating to the title to a particular piece of land.
• Abstraction
  • The division of the value of a property between land and improvements. An appraisal method in which the land value is found by deducting the value of improvements from the overall sale price of the property. The value of the improvements may be established by developing a typical ratio of site value to total property value and applying this ratio to the property to be appraised. Most frequently used in appraisals of vacant lots in which comparable sales of vacant lots cannot be found and improved sites must be used as comparables (e.g., in urban areas where few vacant lots exist or in rural areas where few sales exist). Also known as “allocation” or “extraction” method.
• Accelerated Depreciation
  • Depreciation methods, chosen for income tax or accounting purposes, that offer greater deductions in early years.
• Acceleration Clause
  • Condition in a mortgage that may require the balance of the loan to become due immediately, if regular mortgage payments are not made or for breach of other conditions of the mortgage.
• Account Pledgor
  • A loan party that has the right to receive capital contributions from Investors and that pledges the deposit account or securities account into which investor capital contributions are to be funded to the lender.
• Accounting Standards Codification (ASC) 820
  • Codification that defines fair value, provides a framework for measuring fair value in generally accepted accounting principles (GAAP), discusses acceptable valuation techniques and inputs to valuation techniques, establishes a fair value hierarchy that prioritizes the inputs, and requires extensive financial statement disclosures about the valuation of plan investments.
• Accredited Investor
  • An investor with special status under financial regulations and satisfying one or more requirements regarding income, net worth, asset size, governance status and/or professional experience; also known as a “sophisticated investor.”
• Acquisition
  • The process of obtaining a property.
• Acquisition Cost
  • The outlay of funds needed to obtain rights in a property. In addition to the purchase price, it includes expenses such as closing costs, mortgage loan origination fees, legal and appraisal fees, and title insurance.
• Acquisition-Date Cohort
  • Similar investments with the same acquisition date over the same period of time as subject; also known as an “inception-date cohort.”
• Acre
  • A land measure equal to 43,560 square feet. It is also equivalent to 4,840 square yards, 4,047 square meters, 0.4047 hectare, 160 square rods, or 10 square chains. A square mile or section contains 640 acres.
• Acreage Property
  • A large and for the most part an unimproved tract of land; such land may be used for agricultural purposes, as well as residential or commercial uses.
• Activity and Use Limitation (AUL)
  • A legal document required for land that has been remediated for environmental contamination but in which there are conditions that must be maintained in order to prevent potentially hazardous exposure. Restricts possible land use for the future and alerts future property owners that the property has potential risk for exposure. Often an option used by landowners who are required by law to remediate their property, but who do not wish to incur the costs related to achieving a permanent solution without any limitation.
• Actual Age
  • The amount of time that has passed since construction of a structure was completed. Also called chronological, physical, or historical age. See also “effective age,” “economic life,” “physical life,” “remaining economic life,” and “remaining physical life.”
• Ad Valorem
  • Meaning “according to value”; a tax imposed on the value of 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 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.
• Adjustable-Rate Mortgage (ARM)
  • A debt financing obligation issued to a company or an individual by a bank or similar financial institution for which the interest rate (coupon rate) is adjusted periodically to reflect changes in a previously selected index rate May have interest rate caps and floors that limit the annual and/or the lifetime change in the coupon rate.
• Adjusted Basis
  • The original purchase price of an asset plus its acquisition costs plus any capital improvements less the cumulative depreciation deductions.
• Advances
  • Payments made by the servicer when the borrower fails to make a payment.
• Adviser (Advisor)
  • 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.
• Advisory Board
  • A body of individuals that advises the board of directors and/or management of a corporation or fund but does not have authority to vote on corporate matters or investment management decisions of the respective fund.
• Affiliate Agreement
  • A document through which two parties, the company and the affiliate, form a relationship whereby the affiliate receives funds for certain qualified actions.
• Affinity Groups
  • Retail establishments that are perceived to be linked together by the consumer based on the nature of the product or the consumer's shopping habits.
• Affordable Housing
  • Any type of housing made affordable for low-income individuals or families through government subsidy or incentive. Any type of housing where the occupancy cost (e.g., rent) does not cause a financial burden upon an occupant, making it difficult to meet their basic needs given their income and resources.
• After-Tax Cash Flow
  • The amount of money an investment generates after payment of any tax liabilities.
• After-Tax Internal Rate of Return (ATIRR)
  • After-Tax Internal Rate of Return (ATIRR) An internal rate of return (IRR) calculated using after-tax net cash flows.
• Agent
  • An authorized person who manages or transacts business for another called the principal.
• Agglomeration
  • Tendency of businesses to locate and concentrate in a given area, typically due to the advantages gained by being within proximity to other businesses.
• Agglomeration Economies
  • Spatial associations that generate cost reductions for a business activity. There are four categories of agglomeration economies. Transfer economies are those cost reducing factors associated with a firm locating in an area where there are other firms who demand transport services and systems. Internal economies to scale are those cost reducing factors that arise when a firm locates near the buyer of its output. Localization economies are those cost reducing factors that arise from a firm locating in an area where there are other firms in the same industrial group. Urbanization economies are those cost reducing factors that arise when a firm locates in an area where there are firms in all other industrial categories (i.e., an urban or metropolitan area).
• Aggregation Risk
  • Risk associated with warehousing mortgages during the pooling process for future securitization.
• Agreement of Sale
  • Known by various names, such as contract of purchase, purchase agreement, or sales agreement according to location or jurisdiction; a contract in which a seller agrees to sell and a buyer agrees to buy, under certain specific terms and conditions spelled out in writing and signed by both parties.
• Air Rights
  • The legal right to use, occupy, control, and regulate the air space above a parcel of real estate.
• Allocation (in Attribution)
  • (In reference to attribution) the value the manager adds by having different sector weights in the portfolio than the sector weights in the benchmark; a sector weight in the portfolio greater than the equivalent benchmark sector weight would be described as overweight and a lesser weight would be described as underweight.
• Allocation by Abstraction
  • A method of separating a whole property value into land and improvement components; the appraiser estimates replacement cost new, subtracts an appropriate amount for depreciation, and subtracts the remainder from the whole property value to estimate the land value.
• Allocation by Ratio
  • A method of separating a whole property value into land and improvement components, in which the appraiser develops proportions of land and improvement values for comparable properties and applies those proportions to the subject’s whole property value.
• Allocation Method
  • A method used to value land, in the absence of vacant land sales, by using a typical ratio of land to improvement value; also known as “land ratio method.”
• Allocation to States
  • The process of assigning a portion of an interstate system value (unit value) among affected states.
• Allowances
  • A non-cash expense item included in many forecasted income and expense statements to compensate for the future replacement of building components that may wear out in the future, such as a new roof or replacement of heating, ventilating and air conditioning (HVAC) equipment.
• Alpha
  • Alpha A risk adjusted statistical measure of performance; takes the volatility (price risk) of a managed portfolio of equities or alternative assets and compares its risk-adjusted performance to a benchmark index and is reflected as the excess return of the fund relative to the return of the benchmark index is a fund's alpha.
• Alternative Investment(s)
  • Property type(s) that are not considered conventional institutional-grade real estate investments.
• Alternative Investment Risk
  • The risk of loss associated with investment in alternative investments or alternative investment vehicles.
• Alternative Investment Vehicle (AIV)
  • An investment structure created to facilitate one or more specific investments. Typically, a fund is permitted to establish an alternative investment vehicle to accommodate the tax, legal and/or regulatory concerns of any partner or the partnership.
• Alternative Mortgage Instrument
  • Alternative Mortgage Instrument A type of mortgage that has different interest, repayment terms, principal, or other features from the standard fixed rate mortgage (e.g., adjustable-rate mortgage, graduated payment mortgage).
• Alternative Lender
  • An individual, entity or organization that provides loans, lines of credit, or cash advances to others, outside of the traditional forms of credit offered by a commercial bank or credit union.
• Amenity or Amenities
  • A desirable or useful feature(s) of a building or place, providing comfort and convenience for tenants occupying the property.
• Amenity Value
  • The value added to a real estate property by the presence of an amenity.
• American Institute of Certified Public Accountants (AICPA)
  • A national trade association that represents certified public accountants in business and industry, public practice, government, and education.
• American with Disabilities Act (ADA)
  • Americans with Disabilities Act, passed by the US Federal government on July 26, 1990 to establish a clear and comprehensive prohibition of discrimination on the basis of disability.
• Amortize
  • To pay a debt in periodic amounts until the total amount, including any interest, is paid; to “amortize” is also to write off against taxable income something over time such as mortgage points.
• Amortizing/Amortization
  • The liquidation of a financial debt through regular periodic installment payments; for tax purposes, the periodic deduction of capitalized expenses.
• Amortization Rate
  • The ratio of the periodic amortization principal payment to the total principal amount to be amortized; corresponds to a sinking fund factor or rate; the difference between the mortgage (annual) constant (R_M) and the nominal rate of interest.
• Amortization Schedule
  • A table that shows the allocation of payments on a debt to principal and interest. Also known as a “loan schedule.”
• Amortization Term
  • The length of time over which the periodic principal repayments are made to pay off a loan in its entirety.
• Amortizing Mortgage
  • A mortgage in which periodic payments cover both a partial repayment of principal and interest on the outstanding balance.
• Analogue Approach
  • The process of finding existing, successful properties that are similar to the subject property. The comparison is made on the basis of physical, financial, locational features of the site, and customer profiles.
• Anchor
  • The tenant that serves as the predominant draw to a commercial property, usually the largest tenant in a shopping center or retail development. Also known as “anchor tenant.”
• Anchor Tenant
  • The tenant that serves as the predominant draw to a commercial property, usually the largest tenant in a shopping center or retail development. Also known as “anchor.”
• Annual Constant
  • The ratio of the first-year debt payment divided by the beginning loan balance; also known as “mortgage capitalization rate.”
• Annual Debt Service
  • The total mortgage payments, including interest and principal, required in one year by a particular loan or for a particular property.
• Annual Percentage Rate (APR)
  • The interest charged for borrowing that represents the actual yearly cost of the loan expressed as a percentage.
• Annuity
  • A series of cash flows in which payments occur at regular intervals.
• Anticipation
  • The appraisal principle that states that value is created by the expectation of benefits to be received in the future.
• Anti-Dilution Clause/Covenant/Provision
  • An adjustment mechanism for preferred stock, options, or convertible securities that provides the holder the right to receive additional securities in the event of a future financing in which securities are sold at a lower price than originally paid by the holder of the right; typically, there are exceptions for the adjustment mechanism that carve out situations such as the issuance of certain employee options or existing convertible securities.
• Applebaum’s Customer Spotting Model
  • Uses primary data received directly from the consumers by means of personal interviews on the site to define primary and secondary trade areas and the retail establishment's penetration rate in the trade area.
• Appointments
  • Fixtures or personal property found in a building that may increase or decrease the intrinsic value of the property (e.g., equipment, lighting fixtures, furniture).
• Appraisal
  • An estimate of a property’s fair market value by an authorized person with applicable knowledge and expertise.
• Appraisal Institute
  • An international real estate trade organization representing professional real estate appraisers.
• Appraiser
  • A person who possesses the education, training, and experience necessary to accurately render an opinion as to the value of real estate.
• Appreciation
  • The increase in the value of an asset over time, which can be affected by several factors, such as increased demand, weakening supply, or changes in inflation.
• 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.
• Appurtenance(s)
  • Item(s) that have been affixed to a property and thus become an inherent part of the property.
• Arbitrage
  • Buying securities in one market and then selling them immediately in another market to make a profit on the price discrepancy.
• Arbitration
  • A form of alternative dispute resolution process conducted out-of-court whereby the dispute between parties to a contact is decided by an impartial third-party arbitrator.
• Arbitrator
  • One who mediates a dispute to avoid a court determination.
• Architect
  • A person who designs buildings and, in many cases, also supervises their construction.
• Area
  • The surface space defined by two-dimensional boundaries of a building, lot, market, city, or other such space, measured in square units.
• ARGUS
  • A computer program utilized to analyze portfolio performance and purchase opportunities.
• Arithmetic Mean
  • A mathematical representation of the typical value of a series of numbers, computed as the sum of all the numbers in the series divided by the count of all numbers in the series; also known as “average” or “mean.”
• Arm’s Length Transaction
  • A sale between a willing buyer and a willing seller that are unrelated and are not acting under duress, abnormal pressure, or undue influences.
• Arrears
  • (In respect to timing) A payment made at the end of a time period. (In respect to obligation) delinquency in paying a debt.
• Asbestos
  • A material made of non-flammable, natural mineral fibers, frequently used as a type of insulation, and commonly used from 1930-1970 in residential, commercial, and industrial properties and now considered a serious health risk with its usage limited by the US Environmental Protection Agency since 1978.
• 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.
• As-Is Value
  • The estimate of the market value of real property in its current physical condition, use, and zoning as of the appraisal date.
• Asking Rent
  • The list price for rent.
• Assemblage
  • The assembling of adjacent parcels of land into a single unit.
• Assess
  • (In valuation) the process of valuing real property for tax purposes. (In law) the process of determining by a court or commission, the compensation due to a property owner for the taking of real property.
• Assessed Value
  • The monetary value assigned by government assessors to a property and act as the basis for property values.
• Assessment
  • An official valuation of property for tax purposes; also, payments made by condominium or cooperative owners for their share of building maintenance expenses.
• Assessment Base
  • The total worth of all assessed properties in an assessment or tax district.
• Assessment District
  • The area under the authority of an assessor; it may consist of a single tax district or several districts.
• Assessment Period
  • The time frame in which all property in the assessment district must be valued for tax purposes.
• Assessment Ratio
  • The ratio of the assessed value divided by the selling price.
• Assessor
  • A local government official who determines the assessed value of taxable property in a county or municipality; this valuation is used to determine the tax basis for a property in a given area.
• Asset Allocation
  • An investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an investor’s goals, risk tolerance, and investment horizon.
• Asset-Backed Security
  • A debt security collateralized by assets created from the securitization of any loans; may describe the broad category that includes named subcategories, such as securitized residential mortgage-backed securities (RMBS) and securitized commercial mortgage-backed securities (CMBS).
• 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 Manager
  • Professional or firm that oversees the management and value of an asset or portfolio of assets.
• Asset Turnover
  • Calculated as total revenues for the trailing 12 months divided by the average total assets.
• Assets Under Management (AUM)
  • 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.
• Assumable Mortgage
  • A mortgage that does not require approval from the lender to be transferred to a third party.
• Attorn
  • To agree to recognize a new owner of a property and to pay the new owner rent.
• Attribution Analysis
  • The decomposition of the total investment performance into additive components so as to attribute the total performance to sources that may reflect various investment management functions; also known as “performance attribution.”
• Average
  • A mathematical representation of the typical value of a series of numbers, computed as the sum of all the numbers in the series divided by the count of all numbers in the series; also known as “arithmetic mean” or “mean.”
• 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.
• Aviation Easement
  • A right purchased from owners of land near airports or gained through condemnation, which allows aircraft to fly at low elevations over private property.

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B

• Backfill
  • The subsurface material, usually soil or crushed stone, placed against structures, foundations, or footings where excess soil was excavated during construction.
• Bad Boy Acts
  • An exception to the non-recourse nature of a loan that provides for a loan party to have full or partial personal recourse liability for the loan in the event certain events occur, such as filing a voluntary bankruptcy action).
    In a traditional subscription-backed credit facility: typically apply to the general partner of the fund borrowers/guarantors and are limited to actual damages of the lender arising as a result of the fraud, willful misrepresentation or willful misappropriation of loan or capital contribution proceeds on the part of such general partner.
• Balance
  • (In appraisal) the principle that states that property value is created and maintained when contrasting, opposing, or interacting elements are in a state of equilibrium.
    (In lending) the dollar amount outstanding and remaining unpaid on a loan.
• Balance Sheet
  • A statement of the financial position of a business as of a specific date, prepared from books of account. A balance sheet presents the current book values of the assets, liabilities, capital and surplus in a business as of a certain date.
• Balcony
  • An open balustrade or platform that projects from the outside of an upper floor of a building; it is accessible through the building interior and is typically cantilevered or supported by columns.
• Balloon Framing
  • (In construction) a type of framing common in older, multistory, brick buildings in which long studs extend from the top of the foundation wall to the roof; the second floor is supported by a horizontal ribbon or ledger board and joists that are nailed to the studs. This type of framing is rarely used today because of the poor fire resistance and high costs of long studs.
• Balloon Loan
  • A loan with a maturity that is shorter than the amortization period; also known as “bullet loan.”
• Balloon Payment
  • The remaining balance that is due at the end of a balloon mortgage.
• 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.
• Baluster
  • (In construction) a vertical post on a stairway that extends from the handrail to the bottom rail or the stair.
• Balustrade
  • (In construction) a railing on a stairway that consists of a handrail and balusters.
• 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.
• Baseboard
  • In construction, a finishing board attached to the bottom of interior walls at the point where the base of the wall meets the floor.
• Basement
  • The lowest floor in a building; may be partially or wholly underground.
• 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.
• Basic Activities
  • In economic base analysis, those productive activities with outputs primarily intended for export to other areas. Basic activities can be manufacturing, service or government.
• Basic Employment
  • Employment in basic industry.
• Basis Point
  • 1/100 of 1 percent.
• Bay
  • (In construction) the area between four columns or piers.
• Bay Depth
  • A floor area measurement; it is the distance from the tenant side of the corridor wall to the exterior wall.
• Bay Window
  • A window that extends outwardly from the wall creating a horizontal shelf area at the bottom, and is supported by its own foundation. Distinguished from an oriel or box bay window that lacks foundation support.
• Beam
  • A horizontal load-bearing structural member, transmitting superimposed vertical loads to walls, columns, or heavier horizontal members.
• Bearing
  • (In surveying) a horizontal angle from 0 degrees to 90 degrees that specifies the direction of a course or angle in relation to true north or south.
• Bearing Beam
  • A principal load-supporting member of a building that runs between foundation walls and is supported by poles, columns, or pillars.
• Bearing Wall
  • A wall that supports part of a building, usually a floor or roof above it.
• Bedrock
  • The solid rock, usually lying a few feet beneath the topsoil that serves as a good foundation support.
• Bedroom
  • A room, usually measuring at least 80 square feet, used as a sleeping area in residential properties. The number of bedrooms in a house are usually indicated by neighborhood standards with two- and three-bedroom homes being the most widely accepted. Each bedroom should have at least one closet with interior lighting.
• Before-Tax Cash Flow (BTCF)
  • For a property, the result of calculating the effective rental income, plus other income not affected by vacancy, less total operating expenses, less annual debt service, funded reserves, leasing commissions, and capital addition; also known as “cash flow before tax (CFBT).”
• Before-Tax Internal Rate of Return (BTIRR)
  • An internal rate of return (IRR) calculated using before-tax net cash flows.
• Below Grade
  • Any structure or portion of a structure located underground or below the surface grade of the surrounding land.
• Benchmark Cohort
  • A universe of similar investments by competing managers, measured from the same inception date.
• Benchmarking
  • The formal (quantitative) comparison of a given investment agent’s (or portfolio’s) investment performance with that of a suitably defined index or peer group over a specified time period.
• Beneficiary
  • An employee covered by an employee benefit plan; a person who derives advantage from something, especially a trust, will, or life insurance policy.
• Benefits
  • (In an eminent domain proceeding) the betterment gained from a public improvement for which private property was taken in the condemnation.
• Beta (β)
  • A measure of the volatility (or systematic risk) of an investment or a portfolio in comparison to the market.
• Bias
  • The deviation of a statistical estimate from the true parameter the statistical procedure is designed to estimate. It is the systematic error introduced into an analysis by the failure to follow proper procedure or by other errors in the data program.
• Bid
  • An offer, stated as a price or spread, to buy whole loans or securities or property at auction.
• Bitesize
  • A range of money that an investor looks to commit to each investment vehicle in which it invests.
• Blanket Mortgage
  • A loan that is secured by more than one property or lot; it is commonly used in construction financing for subdivision or condominium development.
• Blended Rate
  • An interest rate of newly refinanced debt that is lower than the current market rate but higher than the existing rate on the debt.
• Blind Pool
  • A commingled fund accepting investor capital without prior specification of property assets.
• Block Group-Based Trade Area
  • A geographic area containing the customers of a particular firm or group of firms for specific goods or services based upon census block groups (BGs).
• Block Groups (BGs)
  • Statistical divisions of census tracts, generally defined to contain between 600 and 3,000 people; used to present data and control block numbering.
• Blocker or Blocker Corporation
  • An entity, often a C-corporation, through which tax-exempt investors invest in a fund to shield such tax-exempt investors from having to file a US federal tax return and/or to pay US income tax; also known as “corporate blocker.”
• Blueprint
  • An architectural draft or drawing of a building that provides the details of construction.
• BOMA Standard
  • Building Owners and Managers Association (BOMA) dominant standard for building measurements.
• Bona Fide Sale
  • A sale in a competitive market at the current market price that represents good faith between the buyer and seller.
• Bond Rating
  • A classification assigned by financial reporting organizations reflecting their assessment of the relative financial risk of a bond issue.
• Book Depreciation
  • The amount of capital recapture written off for an asset for a specific period of time.
• 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.
• Borrower
  • One who has temporarily used funds from another using debt financing.
• Borrowing Base
  • Used in asset-based lending facilities to calculate the borrowing value of a borrower’s assets; determines the maximum borrowing availability under the line of credit; typically, a calculated by applying a discount factor to each asset class (often, though not always, constituting the collateral) against which the lender will advance funds, such as uncalled capital contributions, accounts receivable, inventory, loan assets, or the like.
• Boundaries
  • The outer edges of a parcel of land; the outer edges of an area (e.g., neighborhood or district).
• Branch Profits Tax
  • Taxation under Internal Revenue Code (IRC) Section 884(a) that treats a US branch of a foreign corporation as if it were a US subsidiary of a foreign corporation for purposes of taxing profit repatriations; puts the earnings and profits of a branch of a foreign corporation deemed remitted to its home office on equal footing with the earnings and profits of a US subsidiary paid out as a dividend to its foreign parent; applies regardless of whether the US trade or business of the foreign corporation is substantial compared to its worldwide operations.
• Break-Even Ratio
  • The ratio of the operating expenses plus annual debt service of a property divided by its gross income.
• Bridge Loan
  • A short-term loan providing immediate cash flow that is used until a company or fund secures permanent financing; loans are typically short term, relatively high interest and backed by collateral.
• Brinson-Fachler (BF) Attribution Analysis
  • A return attribution model based upon a breakdown of the arithmetic excess return assuming a two-step investment decision process in which the portfolio manager seeks to add value through both allocation and selection decisions; differs from the Brinson-Hood-Beebower (BHB) attribution analysis model only in how individual sector allocation effects are calculated.
• Brinson-Hood-Beebower (BHB) Attribution Analysis
  • A return attribution model based upon a breakdown of the arithmetic excess return assuming a two-step investment decision process in which the portfolio manager seeks to add value through both allocation and selection decisions.
• British Thermal Unit (BTU)
  • A measure of heat that represents the amount of heat required to raise the temperature of one pound of water one degree Fahrenheit at approximately 39.2 degree F; used to measure the capacity of heating and air conditioning equipment.
• Broker
  • A person who buys and sells real estate assets for others.
• Brokerage
  • The business or service of acting as a broker.
• Brownfield
  • A site perceived to be or is contaminated by pollutants from prior uses or nearby site underground, surface runoff and airborne contamination.
• 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 Codes
  • A set of regulations written by city or county officials with the help of construction professionals that governs the design, construction, and modification of commercial buildings, homes, and other structures in the jurisdiction.
• Building Height
  • The total height measured from the bottom of the ground floor to the top of the outer surface of the roof.
• Building Line(s)
  • A line usually set with respect to the frontage of a plot of land which is fixed by statute or by deed or contract and beyond which the owner of the land may not build.
• Building Owners and Managers Association (BOMA)
  • An international real estate trade organization representing owners and managers of commercial real estate; ,provides advocacy and develops various research publications in support of its members
• Building Ratio
  • The ratio of the building value divided by the total property value; used in the income approach to appraisal in band of investment techniques.
• Building Restrictions
  • Regulations or controls used to limit the type and size of structures that can be constructed.
• Building Service Systems
  • The systems and components that provide plumbing, sewage, heating, ventilating, air conditioning, lighting, power, vertical transport, fire protection and special services (e.g., public address, oxygen) to a building.
• Building Site
  • A parcel of land on which a building may be erected, including all surrounding land allocated to ancillary uses supportive of the building's use.
• Building Standard Plus 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.
• 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.
• Built-Up Method
  • A method of developing a discount rate whereby a riskless rate is used and then increased to adjust for types of risk such as management, financial, and non-liquidity risks that are inherent in the property being analyzed.
• Buffer Zone
  • A strip of land separating one type of zoning from another; it will sometimes be left vacant as a buffer from land that is incompatibly zoned.
• Bullet Loan
  • A loan with a maturity that is shorter than the amortization period; also known as “balloon loan.”
• Bundle of Rights
  • An ownership concept that describes real property by the legal rights associated with owning the property. It specifies rights such as the rights to sell, lease, use, occupy, mortgage, and trade the property among others. These rights are typically purchased by the buyer in a sales transaction unless specifically noted or limited in the sale.
• Business Enterprise
  • A commercial, industrial, or service organization pursuing an economic activity.
• Business Enterprise Value
  • A term applied to the concept of an intangible, non-realty component of a property’s value probably ascribable to superior management competence; different from goodwill and going-concern value.
• Business Park
  • A cluster of properties in which the tenant is offered office space with supporting warehouse space, research and development facilities, or production space.
• Business Risk
  • The risk associated with the possible profit outcomes of a business venture.
• Business Value
  • The entire value of a business; the total sum of all tangible and intangible elements.
• Business Valuation
  • An estimate of the worth of complete or partial ownership rights in a business.
• Buyer Characteristics
  • Demographic, economic and psychographic (attitudes, habits, lifestyle, tastes, and preferences) characteristics of the buyer that underlie the demand for the property or the space on the property.
• Buyer’s Agent
  • An agent who represents the buyer in a real estate transaction.
• Buyer’s Market
  • A marketplace characterized by a greater supply of a product than demand for that product.
• Buying Power Index (BPI)
  • A measure of demand in local area relative to a benchmark value.

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C

• Calibration
  • The selection of parameters in a stochastic process so as to make the prices on financial instruments generated by the process replicate observed market prices.
• Call Date
  • Periodic or continuous rights given to the lender to cause payment of the total principal balance prior to the maturity date.
• Cantilever
  • (In construction) a beam or other structural member that is supported only at one end and extends beyond the wall or building part that supports it.
• Capital
  • The accumulated wealth including money and/or property owned or used by a person or business.
• Capital Appreciation
  • The change in market value of a property or portfolio adjusted for capital improvements and partial sales.
• Capital Asset
  • Permanent property used to produce income (e.g., land, buildings, machinery, equipment).
    (In accounting), assets that are used in a company's business operations to generate revenue over the course of more than one year.
• Capital Asset Pricing Model (CAPM)
  • A financial model that describes the relationship between systematic risk (i.e., beta) and expected return for assets.
• Capital Call
  • The legal right of a fund (or its general partner) to demand from its investors that they fund a portion of the money the investors agreed to commit to the fund.
• Capital Call Notice
  • A notice issued by a fund (or its general partner) instructing investors to make a capital contribution to the fund to permit the fund to make an investment or pay for fund expenses or liabilities; also known as a “drawdown.”
• Capital Commitment
  • The financial and legal obligation of an investor in a fund to make capital contributions to the fund over a specified period.
• Capital Contribution
  • The money and/or other assets transferred to a fund by an investor with respect to the investor’s capital commitment.
• Capital Expenditures
  • The money spent to obtain, upgrade, and maintain physical real estate or assets, which may be things like property, equipment, buildings, or technology.
• 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 deterioration of property or add new improvements and appreciably prolong its life.
• Capital Loss
  • The loss derived from the sale of a capital asset.
• Capital Market
  • The market in which long or intermediate term money instruments are traded by buyers and sellers.
• Capital Market Line (CML)
  • A graphical representation of all the portfolios that optimally combine risk and return; a theoretical concept that gives optimal combinations of a risk-free asset and the market portfolio; the slope of the CML is the Sharpe ratio of the market portfolio.
• Capital Market Risk
  • The risk associated with investing; the potential of experiencing losses following a fluctuation in security prices; also known as “investment risk.”
• Capital Markets
  • Venues where savings and investments are channeled between the suppliers who have capital and those who are in need of capital; the entities that have capital include retail and institutional investors while those who seek capital are businesses, governments, and people; composed of primary and secondary markets.
• Capital Recovery Period
  • The time span over which the capital invested in a project is returned.
• Capital Stack
  • The composition of capital invested in a property or investment, reflecting the interests of those who contributed both debt and equity capital.
• Capitalization
  • (In reference to accounting) a method by which a firm expenses the costs associated with the acquisition of an asset over the useful life of the asset rather than at the time it is acquired.
    (In reference to finance) a measure of a firm’s book value (the sum of its stock, long-term debt, and retained earnings) or its market value (the product of the number of outstanding shares and the stock price).
• Capitalization (Cap) Rate
  • The rate at which net operating income is discounted to determine the value of a property; calculated as the net operating income divided by the sales price or value of a property expressed as a percentage.
• Capitalization-Weighted Index (CWI)
  • A type of market index with individual components, or securities, weighted according to their total market capitalization; components with larger market capitalization exert a greater impact on the index value while components with a smaller market capitalization carry less significance; also known as a “value-weighted index.”
• Captive Utility
  • A utility that serves a limited purpose and generally is a wholly-owned subsidiary or division of a company using the service provided by the utility.
• Capture Rate
  • The sales or leasing rate of a real estate development compared to the sales or leasing rate of all developments in the market area.
• Carried Interest
  • A form of incentive fee compensation paid to a fund general partner in the form of an allocation of the profits of the fund, typically calculated as a set percentage of the profits of the fund after returning the investors’ capital contributions and a preferred rate of return; designed to ensure that a general partner’s interest is aligned with the limited partners’ interests; also known as “carry,” “performance allocation,” and “promote.”
• Carry
  • A form of incentive fee compensation paid to a fund general partner in the form of an allocation of the profits of the fund, typically calculated as a set percentage of the profits of the fund after returning the investors’ capital contributions and a preferred rate of return; designed to ensure that a general partner’s interest is aligned with the limited partners’ interests; also known as “carried interest,” “performance allocation,” and “promote.”
• Carryback Financing
  • A financing technique in which the seller finances part of the purchase through a note secured by a junior mortgage or contract for deed.
• 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.
• Cascading Pledge
  • An alternative tiered-collateral structure employed when tax, regulatory or ERISA concerns prevent a feeder fund from guaranteeing and directly pledging collateral to the lender to support a fund borrower’s obligations under a subscription-backed credit facility.
• Cash Equivalent
  • A price expressed in terms of cash as distinguished from a price that is expressed all or partly in terms of the face or nominal amount of notes or other debt securities that cannot be sold on the market at their face amount.
• Cash Flow Before Tax (CFBT)
  • (or a property) the result of calculating the effective rental income, plus other income not affected by vacancy, less total operating expenses, less annual debt service, funded reserves, leasing commissions, and capital addition; also known as “before-tax cash flow (BTCF).”
• Cash Flow Statement
  • A financial statement that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources.
• Cash Flow Sweep
  • A stipulation that any free cash flow must be used to pay down the debt of the company; often activated by the borrower’s failure to meet a financial test; also known as a “cash trap.”
• 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.
• Cash Trap
  • A stipulation that any free cash flow must be used to pay down the debt of the company; often activated by the borrower’s failure to meet a financial test; also known as a “cash flow sweep.”
• Catch-Up Provision
  • A provision included in certain real estate partnership agreements, whereby a special distribution tier is included in the equity waterfall that allows for the general partner to “catch up” with the limited partner's cash flow distributions; most common to structures where the limited partner receives 100% of distributions until it achieves some preferred return requirement, at which point the general partner receives 100% of excess cash flow thereafter until an equitable balance between the limited partner and general partner distributions is achieved.
• CBD (Central Business District)
  • The main business and commercial area of a town or city.
• Ceiling Height
  • The total height from the finished surface of the floor to the lower surface of the bottom chord of the roof truss, or to the bottom of the main beam supporting the roof in the absence of roof trusses.
• Cellar
  • A storage space that is usually but not always underground.
• Census County Division (CCD)
  • A permanent subdivision of a county for census purposes; established for areas that did not have local political subdivisions, such as townships or minor civil divisions (MCDs).
• Census Block
  • Corresponds to the common usage of the term that refers to the physical or geographic area most often rectangular in shape and bounded by streets. It is the smallest statistical unit for which census data is available.
• Census Tracts
  • Small, relatively permanent statistical subdivisions of a county or equivalent entity that are updated by local participants prior to each decennial census; generally have a population size between 1,200 and 8,000 people, with an optimum size of 4,000 people; usually cover a contiguous area, but the spatial size varies widely depending on the density of settlement.
• Central Business District (CBD)
  • The main business and commercial area of a town or city.
• Central Tendency
  • (In statistics) a measure of the tendency of values in a sample of numbers to cluster around a central point in a frequency distribution.
• Certificate of Convenience and Necessity
  • A grant of authority from a state or federal regulatory commission authorizing a company to render a public utility service, usually specifying the area and other conditions of service.
• Certificate of Occupancy (CO)
  • A document issued by a local government agency, certifying that a building meets certain requirements and codes that indicate its fitness to house tenants; these requirements differ across building types, as well as cities and states, and are usually required to be met by new developments.
• Certificate of Reasonable Value
  • A certificate issued by the Veterans Administration that states the estimated market value of a property based on a VA-approved appraisal.
• Certificate of Title
  • A certificate issued by a title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property offered for sale.
• Chain Store
  • A retail store that is under the same ownership and management as several other shops that sell similar merchandise and are uniformly designed and managed.
• Change
  • (In appraisal) a principle that recognizes the fact that a property and its environment are always in transition and are impacted by economic and social forces that are constantly at work.
• Chapter 7
  • The portion of the federal bankruptcy code that deals with business or personal liquidations.
• Chapter 11
  • The portion of the federal bankruptcy code that deals with business reorganizations.
• Chattel
  • A catch-all category of property mostly associated with movable goods. At common law, term includes all property that is not real estate and not attached to real estate.
• Chattel Mortgage
  • A mortgage that is secured by personal property.
• Chimney
  • (In construction) brick or other masonry that extends above the roof and carries the smoke outside.
• Circulation Factor
  • Interior space required for internal office circulation not accounted for in the net square footage.
• City
  • A politically determined geographic area; the area contained within the political boundaries of a large incorporated municipality; a locale in which the inhabitants possess self-government.
• City Growth
  • The nature in which a city grows outward from its point of origin (siting factor).
• Class A
  • A subjective division of buildings by desirability among tenants and investors; generally high quality, well designed, using above-average materials, workmanship, and finish; sought by investors and prestigious tenants; excellently maintained and very well managed, especially if the building is more than 10 years old; attractive and efficient, the most desirable in their markets.
• Class B
  • A subjective division of buildings by desirability among tenants and investors; generally offer useful space without special attractions; have functional layout and design, though not unique; average to good maintenance; typically, 10 to 50 years old.
• Class C
  • A subjective division of buildings by desirability among tenants and investors; generally older buildings that offer space without amenities; average to below-average maintenance and management, average to poor mechanical, electrical, and ventilation systems; attracts moderate to low-income tenants who need affordable space.
• Clawback Provision
  • (In reference to a general partner or manager) a mechanism whereby a manager is obligated to return a portion of its previously received promote or performance fee payment if as a result of timing and fund performance, the general partner receives more carry or performance fee during the life of the fund than the general partner would be entitled to receive had profits and losses been allocated on an aggregate basis at the time of dissolution of the fund.
    (In reference to a limited partner) the obligation of an investor to return previously received distributions to the fund if the fund requires such amounts to fulfill its indemnification obligations or satisfy expenses or other liabilities; also known as “giveback provision.”
• 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.
• Clear Title
  • A marketable title; one free of clouds and disputed interests.
• Closed-End Fund
  • A collective investment vehicle in which the total committed capital and investors are fixed at the end of the proscribed fundraising period, wherein the investors each commit a specified amount of capital and have limited or no rights to redeem their interest or withdraw invested capital until the dissolution of the fund.
• Closing
  • (In securities context) 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.
    (In real estate context) the final phase of mortgage loan processing where the property title passes from the seller to the buyer.
• Closing Costs
  • The numerous expenses, in addition to the purchase price and prepaid items, that buyers and sellers normally incur to complete a transaction in the transfer of ownership of real estate.
• Cloud on Title
  • An encumbrance on the title to a property that may affect the ownership or salability of the property.
• Club Deal
  • (In reference to equity) an investment in one or more properties by a limited group of qualified, experienced investors.
    (In reference to debt) a substantial commercial mortgage loan originated by a small group of lenders or investors that often originate loans together that are not widely offered to the marketplace.
• Cluster Development
  • An area in which housing units are built in groups on sites that are smaller than the typical site, and larger common areas are incorporated into the development.
• Cluster Zoning
  • A type of zoning in which an allowable density of units for an entire area is stated, allowing development within the area to be clustered in different configurations, as opposed to more typical zoning in which zoning is based on a lot-by-lot basis, that specifies an allowable density per lot.
• CMSA
  • Consolidated Metropolitan Statistical Area.
• Code of Ethics
  • A written standard of ethical conduct embraced by the affected trade association or organization to describe appropriate business conduct under a variety of circumstances.
• Coefficient of Correlation
  • A statistical factor that measures the manner and degree in which variables change together. The correlation coefficient can range in value from -1 (perfect negative correlation) to 0 (independence) to +1 (perfect positive correlation).
• Coefficient of Multiple Determination (R²)
  • A statistical factor used in regression analysis that shows how much of the change in a dependent variable is determined by the independent variables used in the equation; the ratio of explained variance to total variance.
• Cohort Survival Method
  • An updating technique that utilizes an age breakdown of the population from the most recent Census of Population, the fertility rate is used to get the estimate of children between the ages of 0-5, the number of women in the primary childbearing years, the survival rate for these cohorts, and net migration to get population estimates.
• Co-Investment
  • An ownership interest in an investment alongside a fund, typically by an investor in the fund but also potentially by an investor not invested in the fund.
    When two or more pension funds or groups of funds share ownership of a real estate investment; relative ownership is always based on the amount of capital contributed.
    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
  • A property or asset that a borrower pledges to a lender in the event of default.
• Collateral Account/Package
  • A deposit or securities account into which collateral in the form of capital contributions is deposited and over which a lender has a perfected security interest.
• Collateralized Mortgage Obligation (CMO)
  • A specific class of commercial mortgage-backed security issued against a pool of mortgages pass-through securities for which the cash flows have been allocated to different classes or tranches, each having a different claim against the cash flows of the pool.
• Collection Loss
  • A deduction from potential gross income due to current or expected future space not rented due to tenant turnover and/or loss from uncollected rent due from delinquent tenants.
• Commercial
  • A term often used to refer to any income-producing real estate, including multifamily.
• Commercial Mortgage-Backed Security (CMBS)
  • A debt security collateralized by a pool of mortgages on commercial real estate in which all principal and interest from the pool of mortgages flow to certificate holders in a defined sequence or manner.
• Commercial Paper
  • Short-term promissory note, typically unsecured.
• Commercial Real Estate
  • A category of real property that is primarily commercial in nature or purpose.
• Commingled Fund
  • A pooled fund vehicle that enables investors to commingle their capital for the purpose of achieving professional management, greater diversification and/or investment positions in larger properties; a commingled fund may be organized as a group trust, a partnership, a corporation, an insurance company separate account, or another multiple ownership entity.
• Commission
  • Compensation paid to a real estate agent (usually by the seller) for services rendered in connection with the sale, exchange, or lease of property.
• Commitment
  • A pledge or promise by a lender regarding the terms and conditions under which a loan will be made.
• Commitment Fee
  • A sum of money paid by a borrower to a lender who agrees to loan funds to the borrower at a future date; it is often calculated as a percentage of the expected loan and refunded from the closing costs when the loan is made.
• Commitment Letter
  • An official document from a lender indicating approval of the borrower and the terms and conditions of the prospective loan.
• Commitment Period
  • The timeframe, typically a period of three to five years, during which a fund is permitted to call capital from investors to make new investments or additional investments in portfolio companies.
• Commodity Pool
  • 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.
• Commodity Pool Operator (CPO)
  • An individual or organization which operates a commodity pool and solicits funds for that commodity pool.
• Common Area
  • The areas of a building (and its site) that are available for the nonexclusive use of all its tenants, such as lobbies, corridors, and parking lots.
• Common Area Maintenance (CAM) Charges
  • Charges paid by a tenant for the upkeep of areas designated for use and benefit of all tenants; tenants usually pay as determined by a negotiated agreement or the tenant’s pro rata share; costs vary but common items may include janitorial services, landscaping, common area electricity, security, trash removal, and snow removal.
• Common Interest
  • (In condominium developments) the percentage of ownership held by one owner as compared to the whole property; may be measured on a square foot or price basis.
• Common Wall
  • (In construction) a wall that is shared by two or more buildings or by two sections of a single building.
• Community Center
  • A retail property type that typically offers a wider range of apparel and other soft goods than neighborhood centers; among the more common anchors are supermarkets, super drugstores, and discount department stores; sometimes contain off-price retailers selling such items as apparel, home improvement/furnishings, toys, electronics, or sporting goods; usually configured as a strip, in a straight line, “L”, or “U” shaped.
• Comparables
  • Recently sold properties that are similar in important respects to a property being appraised; the sale price and the physical, functional, and locational characteristics of each of the properties are compared to those of the property being appraised in order to arrive at an estimate of value; by extension, sometimes used to refer to properties with rent or income patterns comparable to those of a property being appraised; also known as “comparable sales” or “comps.”
• Comparable Sales
  • Recently sold properties that are similar in important respects to a property being appraised; the sale price and the physical, functional, and locational characteristics of each of the properties are compared to those of the property being appraised in order to arrive at an estimate of value; by extension, sometimes used to refer to properties with rent or income patterns comparable to those of a property being appraised; also known as “comparables” or “comps.”
• Compensable Damages
  • (In a condemnation proceeding) damages that are legally required to be paid to the owner or tenant of a property that is being wholly or partially condemned. Damages are usually limited to the loss of value in the property. Sentimental value, inconvenience, and loss of business not related to the real estate are not typically compensable. Physical invasion of the property by a condemning authority or the taking of some property right must usually occur before damages are considered compensable.
• Competition
  • (In appraisal) a concept that states that value is affected by the interaction of supply and demand in a market.
• Competitive Area
  • The physical space or geographic area in which the competition for a subject property operates and where economic and demographic changes can affect its revenues, expenses, and value.
• Competitive Differential
  • The process of identifying the special features that gives one property a competitive edge over another. The data comes from a survey of the competition.
• Competitive Market Analysis (CMA)
  • A method of determining the value of a property by comparing the prices paid for similar properties.
• Competitive Market Segment
  • The group of properties that are in the same classification and compete directly with the subject property in the immediate market area.
• Compound Discount
  • Successive deductions from a future sum or sums receivable at specified future dates, at specified rates of discount, to the present. Mathematically, it is the obverse of compound interest.
• Compound Interest
  • Interest earned on interest that is reinvested at the end of each period.
• Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)
  • The federal Superfund program, administered by the US Environmental Protection Agency (EPA) is designed to investigate and cleanup sites contaminated with hazardous substances; sites managed under this program are referred to as “Superfund” sites.
• Comps
  • Recently sold properties that are similar in important respects to a property being appraised; the sale price and the physical, functional, and locational characteristics of each of the properties are compared to those of the property being appraised in order to arrive at an estimate of value; by extension, sometimes used to refer to properties with rent or income patterns comparable to those of a property being appraised; also known as “comparable sales” or “comparables.”
• Concept Error
  • The error that arises because of the general difference in the meaning between the concept, or general idea, that is to be measured (an abstract item), and the indicator or specific item that provides a usable measurement of that concept (a concrete item).
• Concession(s)
  • A benefit or benefits given by a buyer, seller, landlord or tenant in order to help facilitate a real estate transaction; can be given in both residential and commercial real estate, and are often predetermined during the negotiation period; often included in closing costs, but come in various forms: covering moving expenses and repair costs, rent reduction, or even cash back to the buyer.
• Condemnation
  • The process of taking private property, without the consent of the owner, by a governmental agency for public use through the power of eminent domain.
• Condition
  • (In construction or valuation) the structural defects or physical deterioration present in a building.
• Condition of Sale
  • (In appraisal) an element of comparison in the direct sales comparison approach; it refers to the motivations of the buyer and seller in a sales transaction.
• Condominium (Condo)
  • Individual ownership of a portion of a building, with common areas shared by all owners
• Condominium Conversion
  • The transformation of a rental property into condominium ownership; e.g., changing an apartment complex into condominiums.
• Conduit
  • The financial intermediary that functions as a link between the lender(s) originating loans and the ultimate investor(s).
• Conformity
  • (In appraisal) a principle that states that the more a property is in harmony with its surroundings, the greater the contributory value.
• Consequential Damages
  • Financial compensation made to a person who has suffered loss or injury as a result of a breach of contract which could not reasonably have been prevented.
• Consent Rights
  • Certain class rights that require certain pre-defined actions that cannot be undertaken by a company or fund without the approval of the holders of a majority (or other specific percentage) of their class or series of shares.
• Consideration
  • A deposit made to a seller that represents a buyer's good faith to buy real property; also known as “earnest money” or “deposit.”
• Consistent Use
  • (In appraisal) a principle that states that land and improvements to that land must be valued on the same basis; improvements to the land must contribute to the land value to have any value themselves.
• Constant Amortization Mortgage
  • A mortgage that requires equal periodic principal payments. Because the interest decreases as the loan is amortized, total payments decrease over the loan term.
• Constant Dollars
  • A dollar figure that represents only real growth and does not include inflation.
• Constant Dollar Projections
  • Dollar projections that account for only real growth and not for inflation.
• Construction Completion Guarantee/Guaranty
  • A guarantee granted by a project sponsor or a contractor to ensure a development project will achieve final completion.
    (In the case of the project sponsor) an agreement to provide subordinated financing or equity contributions to the project company if required to complete the construction of the project.
    (In the case of the contractor) an agreement to complete the project in accordance with agreed specifications, which is usually secured by performance bonds or liquidated damages.
• Construction Cost
  • The cost to build a structure including direct costs of labor and materials, contractor's overhead and profit plus indirect costs such as taxes and construction loan interest.
• Construction Debt/Loan/Mortgage
  • A debt financing obligation issued to a company or an individual by a bank or similar financial institution designed to provide interim financing during the developmental phase of a property.
• Construction Lender
  • A person or entity who provides loans designed for the construction phase of a real estate development or improvement project.
• Construction Management
  • The act of ensuring the various stages of the construction process are completed in a timely and seamless fashion.
• Construction Risk
  • The risk associated with construction and the potential of experiencing losses due to a variety of controllable and uncontrollable factors.
• Constructive Notice
  • The legal presumption that a person is responsible for knowing certain facts that may be discovered by diligence or inquiry into the public records.
• 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, investment fund, and portfolio performance; and review of specified property and portfolio investment opportunities.
• Consumer Behavior
  • The study of individuals, groups, or organizations and all the activities associated with the purchase, use and disposal of goods and services, including the consumer's emotional, mental, and behavioral responses that precede or follow these activities.
• Consumer Goods
  • Refers to a category of consumer durable and non-durable products that are typically purchased frequently and by a large number of individuals for personal use or consumption. These goods are also known as “shopper goods” or “fast-moving consumer goods (FMCG).”
• 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; 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.
• Consumer Research
  • The process of investigating the subgroups of the population who express a demand for real estate by analyzing their economic, demographic, and psychographic characteristics.
• Consumption Per Household
  • All purchases made by a household (home or abroad) to meet its everyday needs: food, clothing, housing services (rents), energy, transport, durable goods (notably cars), spending on health, on leisure, and on miscellaneous services.
• 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.
• Contingency
  • (In a contract) a provision that states that the contract is binding only if a certain act or event occurs
• Contingency Allowance
  • A specific provision in a construction budget for unforeseeable elements of cost that may be encountered within a construction project.
• Contingent Fees
  • Compensation that is paid only if certain acts or events occur.
• Continuous Operations Clause
  • A clause commonly written in retail leases that requires a tenant to continuously operate at a property for the entire term of the lease; as anchor tenants may act as a demand driver for a retail center, landlords may enforce this clause to minimize the risk of a major tenant “going-dark.”
• Contour Map
  • A topographic map that depicts the features of the land by contour lines that represent land elevations.
• Contract Documents
  • (With respect to construction) 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” or “stated rent.”
• Contractor
  • The rental obligation, expressed in dollars, as specified in a lease; also known as “face rent” or “stated rent.”
• Contractor’s Overhead
  • Expenses incurred by a contractor to manage or administrate the construction of a project; a component of direct costs in comparison to the developer's overhead that is not part of direct costs; includes costs such as job supervision costs, liability insurance, and unemployment insurance.
• Contractor’s Profit
  • The profit, above and beyond all construction costs, generally expressed as a percentage of direct construction costs that is adequate to compensate a contractor for the time and effort required to construct an improvement; a component of direct costs in comparison to the developer's profit that is not part of direct costs.
• Contribution
  • (In appraisal) a principle that states that the value of a particular component is equal to the amount it contributes to the property. The value of the component is not measured as its cost, but by the amount that its absence would detract from the entire property value.
• Contributory Value
  • The amount a component of a property contributes to the total market value; for improvements, contributory value must be distinguished from cost.
• Controlled Commercial Entity (of Section 892)
  • Any entity engaged in commercial activities as defined in the Internal Revenue Code (IRC) (whether conducted within or outside the US) for which a foreign government directly or indirectly owns at least 50% of the economic or voting interests in, or otherwise exercises effective practical control over, the entity.
• Conventional Mortgage
  • A mortgage that is not insured or guaranteed by a government agency, but may be privately insured.
• Conversion
  • The process of changing an income-producing property into another use.
• 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 Debt/Loan/Mortgage
  • A debt financing obligation issued to a company or an individual by a bank or similar financial institution 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; may also include most of the instruments with which an interest in real estate is created, mortgaged, or assigned.
• Cooperative Apartment
  • A unit in a building in which the resident purchases stock in the corporation or trust that owns the building in an amount representative of the value of a single apartment and receives a lease for that apartment.
• Cooperative Conversion
  • The transformation of rental property into cooperative ownership (e.g., changing an apartment complex into cooperative ownership).
• Cooperative Interest
  • An ownership interest in a cooperative apartment; it does not include the owner's pro rata share of the blanket mortgage.
• Cooperative Ownership
  • A form of ownership in which each resident of a cooperative apartment building has purchased shares in corporation that holds title to the building. The individual pays a proportionate share of operating expenses and debt service on the building owned by the corporation based on the amount of stock held in the corporation. In return for stock in the corporation, the individual receives a lease granting occupancy of a specific unit in the building.
• Core
  • High-quality, unleveraged, or lowly leveraged properties typically located in major metropolitan areas and substantially leased to higher-credit tenants.
• Core-Based Statistical Area (CBSA)
  • Statistical area that consists of the county or counties or equivalent entities associated with at least one core (urbanized area or urban cluster) of at least 10,000 population, plus adjacent counties having a high degree of social and economic integration with the core as measured through commuting ties with the counties associated with the core; represents a core area containing a substantial population nucleus, together with adjacent communities having a high degree of economic and social integration with that core; refers collectively to metropolitan statistical areas and micropolitan statistical areas.
• Corner Influence
  • The effect on value when a property line abuts the intersection of two streets; the value may be greater or less than inside lots depending on the utility associated with being located on a corner.
• Corporate Blocker
  • An entity, often a C-corporation, through which tax-exempt investors invest in a fund to shield such tax-exempt investors from having to file a US federal tax return and/or to pay US income tax; also known as “blocker” or “blocker corporation.”
• Corporate Housing
  • A furnished apartment, condo, or home rented on a temporary basis to individuals, military personnel, intern groups, or corporations as an alternative to a traditional hotel or an extended hotel stay.
• Corporation
  • A legal entity that is separate and distinct from its owners; corporations enjoy many of the rights and responsibilities that an individual possesses and shields the underlying owners from unlimited liability.
• Correlation
  • A measure of the degree to which two variables move in relation to each other; computed into what is known as the “correlation coefficient.”
• Correlation Coefficient (ρ)
  • A statistical factor that measures the manner and degree in which variables change together. The correlation coefficient can range in value from -1 (perfect negative correlation) to 0 (independence) to +1 (perfect positive correlation).
• Corrosion
  • Direct, chemical, or electrochemical reaction of a metal with its environment, and general destruction of any material resulting from reaction with environment.
• Cost Approach
  • One of three approaches to valuation; based on the principle of substitution—that a rational, informed purchaser would pay no more for a property than the cost of building an acceptable substitute with like utility; seeks to determine the replacement cost new of an improvement less depreciation plus land value; estimates the cost of construction based on replacement or reproduction cost new or trended historic cost (often adjusted by a local multiplier); land value is most frequently determined by the sales comparison approach (SCA).
• Cost-Benefit Ratio
  • The ratio of benefits generated by an improvement divided by the cost of that improvement: the (ratio) must exceed 1.00 for the improvement to be considered "desirable." The alternative term, benefit-cost ratio, is more descriptive.
• Cost-Benefit Study
  • An analysis of the cost of creating an improvement versus the benefits that will be created by the improvement; includes nonmonetary issues; typically used by public agencies to make decisions concerning capital improvements.
• Cost Index
  • An index showing the variations in construction costs over time; sometimes, by extension, a set of similar numbers showing the relative costs of construction in different geographic areas.
• Cost of Capital
  • The opportunity cost of capital.
• Cost-of-Living Index
  • An index number that indicates the relative change in the cost of living throughout different periods.
• Cost-of-Sales Percentage
  • An estimate of the costs to sell an investment representing brokerage commissions, closing costs, fees, and other necessary disposition expenses.
• Cost Service Index
  • A table of multipliers that differs by region, used to estimate current costs based on known historical costs.
• Cost to Cure
  • The dollar amount needed to restore an item of deferred maintenance to a new or reasonably new condition.
• Coupon
  • The nominal interest rate charged to the borrower on a promissory note or mortgage.
• Covariance
  • A measure of the degree to which returns on two investments move in tandem; a positive covariance means that investment returns move together, while a negative covariance means investment returns move inversely.
• 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.
• CPI Adjustment
  • An adjustment used in leases in which the rent payment is periodically adjusted by a percentage of the increase in the consumer price index (CPI).
• Crawl Space
  • (In construction) the unfinished space between the first floor and the ground; usually less than a full story in height, and present in buildings without a basement.
• Creative Financing
  • A general term used to describe financing techniques atypical of most transactions.
• 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.
• Credit Facility
  • A short-term loan arrangement provided by a bank to a fund secured again the investors’ commitments in the fund.
• Credit Risk
  • The risk of loss that may occur from the failure of any party to abide by the terms and conditions of any financial contract, principally the failure to make required payments on loans due to an entity.
• Credit Tenant
  • A tenant with the size and financial strength worthy enough of being rated as investment grade by one of the major credit agencies.
• Cross Collateralization
  • A grouping of mortgages or properties that serves to jointly secure one debt obligation.
• Cross Defaulting
  • A default provision that makes an event of default under one loan by a lender, or its affiliate, to a borrower, guarantor, or their respective affiliates, an event of default under another loan by a lender to a borrower.
• Cross-Over Demand
  • Space that is flexible in terms of what it can be used for (for example, space that could be utilized for industrial or office activities); also known as “flex space.”
• Cul-de-Sac
  • A street that dead ends into a large turnaround area; used primarily in residential areas to decrease traffic flow through the street.
• Culvert
  • A small drainage structure that provides access for water to drain under drives, parking lots or other areas.
• Cumulative Attraction
  • Retail establishments located next to each other so that each establishment can benefit from the increased volume of potential customers drawn to the cluster of retail establishments.
• Cumulative Discount Rate
  • Expressed as a percentage of base rent, it is the interest rate used in finding present values that considers all landlord lease concessions.
• Curable
  • Reasonable and economically feasible to cure; refers to physical deterioration and functional obsolescence in which the cost to cure the item is less than or the same as the anticipated increase in value after the item is cured.
• Curable Depreciation
  • Items of physical deterioration and functional obsolescence in which the cost to cure the item is less than or the same as the anticipated increase in value after the item is cured; reasonable and economically feasible to cure.
• Curable Functional Obsolescence
  • A loss in value due to a defect in design, in which the cost to cure the item is less than or the same as the anticipated increase in value after the item is cured (e.g., flaws in materials or design) or materials and design that have become obsolete over time. An element of accrued depreciation. Includes deficiencies requiring additions, substitutions or modernization, and super-adequacies.
• Curable Physical Deterioration
  • Items of deferred maintenance or in need of repair, in which the cost to repair is reasonable and economically feasible; measured as the cost to restore the item to new or reasonably new condition. An element of accrued depreciation.
• Curb
  • The edge of a sidewalk, paved street, floor or well opening; typically made of concrete or stone and often raised.
• Curb Appeal
  • The initial impression one gains of a property, usually as seen from the street while driving by; may be good or bad.
• Cure Period
  • A specified timeframe during which a borrower that has gone into technical default on a contractual payment is permitted to submit payment without further prejudice, and without being considered to have defaulted.
• Current Dollar Projections
  • Dollar projections that account for both real growth and inflation.
• Current Expected Credit Losses (CECL)
  • An expected credit loss accounting standard issued by the Financial Accounting Standards Board (FASB) in 2016, which introduced new methodology for estimating allowances for credit losses; under the accounting standard, financial institutions are required to use historical information, current conditions and reasonable forecasts to estimate the expected loss over the life of a loan; effective for most Securities and Exchange Commission (SEC) filers in fiscal years and interim periods beginning after December 15, 2019, and for all others it takes effect in fiscal years beginning after December 15, 2022.
• Current Occupancy
  • The current leased portion of a building or property expressed as a percentage of its total area or units.
• Current Use
  • The present purpose for which a property is used; it may or may not be the highest and best use.
• Current Value
  • (In accounting) refers to market value at the present time.
• Current Yield
  • An investment's annual income (interest or dividends) divided by the current price of the security.
• Curtain Wall
  • An exterior wall that encloses, but does not support, the structural frame of a building.
• Customer Spotting Technique
  • An approach to estimating the retail trade area (and sales/revenue potential) for a given establishment or center based on the location of existing customers via point-of-sale information (by obtaining customer address or zip code data) or customer surveys (by interviewing customers as they enter the store); data which can later be mapped to determine the extent of the trade area.
• Custodian
  • A financial institution that maintains and safeguards an individuals, mutual fund’s, or investment company's assets for them.

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D

• Dark Space
  • Any space or suite which is physically vacant or “dark”, but for which the tenant is still contractually obligated to pay rent; typically results from a tenant ceasing operations at an unprofitable location, in hopes of saving cash on employee wages and other operating expenses.
• Dead Deal Cost
  • An expense incurred by a buyer and/or seller for a transaction that fails to close.
• Deadlock Provision
  • A contractual clause or series of clauses in a shareholders’ agreement or other form of joint venture agreement which determines how disagreements on key issues are to be resolved in relation to the management of the enterprise.
• Debt
  • An obligation to pay.
• Debt Service
  • The outlay necessary to meet all interest and principal payments during a given period.
• Debt Service Coverage Ratio
  • Debt Service Coverage Ratio The annual net operating income from a property divided by annual cost of debt service.
• Decentralization
  • Dispersion from a central point. The movement of people, industry, and business from the city to the suburbs, rural-urban fringe, and/or smaller cities. The movement of business from the central business district. The establishment of plants away from large cities and at some distance from one another; the breaking down of an existing business into smaller units or expanding through establishment of separate units.
• Declaration of Trust
  • A written statement by a trustee to acknowledge that a property is held for the benefit of another.
• Declining Annuity
  • Payments made on an evenly spaced periodic basis that are decreasing in amount. Also called “decreasing annuity.”
• Decreasing Annuity
  • Payments made on an evenly spaced periodic basis that are decreasing in amount. Also called “declining annuity.”
• Dedicate
  • To appropriate private property to public ownership for a public use.
• Dedication
  • The gift of land by its owner for a public use and the acceptance of it by a unit of government.
• Deed
  • A formal written instrument by which title to real property is transferred from one owner to another.
• 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 Release
  • A document, in the form of a deed, in which one who has limited rights to a piece of real estate (usually a mortgagee or lienholder) abandons those rights back to the owner of the real estate; often takes the form of a quitclaim deed.
• 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.
• Deed Restriction
  • A clause in the deed of a property that limits its type of use or intensity of use; it usually passes with the land regardless of the owner.
• Default
  • The general failure to perform a legal or contractual duty or to discharge an obligation when due.
• Defaulting Investor
  • An investor in a fund that has breached the fund’s constituent documents, namely by failing to make a capital contribution when required pursuant to a capital call notice.
• Defeasance
  • A clause in a mortgage that gives the borrower the right to redeem the property after default, usually by paying the full indebtedness and fees incurred.
• Defect in Title
  • Any recorded instrument that would prevent a grantor from giving a clear title.
• Deferred Annuity
  • A series of cash flows in which payments occur at regular intervals and the first payment does not begin until sometime in the future.
• Deferred Charges
  • Nontangible costs that are expected to provide value over a number of years.
• Deferred Maintenance
  • Repairs and similar improvements that normally would have been made to a property but were not made to the property in question, thus increasing the amount of its depreciation.
• Deferred Maintenance Account
  • An account a borrower is required to fund that provides for maintenance of a property.
• Deferred Payments
  • Payments to be made at some future date.
• Deficiency Judgment
  • 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
  • A company retirement plan in which an employee’s pension payments are calculated according to length of service and the salary they earned at the time of retirement.
• Defined Contribution Plan
  • A retirement plan in which employees allocate part of their paychecks to an account intended to fund their retirements.
• Deflation
  • A state of the economy that occurs when general price levels are decreasing and the purchasing power of money is increasing.
• Delinquency Rate
  • The percentage of loans within a financial institution’s loan portfolio whose payments are delinquent.
• Delivered
  • The total square footage or number of properties in a particular asset class that have been completed (status changing from under construction to inventory) and received a certificate of occupancy during a given period.
• Demand
  • The quantity of real property desired at a certain price or rent at a specific time in a market area and/or market segment.
• Demand Driver
  • An element or force that influences the demand for goods and services in a given market area.
• Demand Loan
  • A loan that may be called by the lender at any time.
• Demised Premises
  • Property subject to a lease.
• Demising Wall
  • The partition wall that separates one tenant’s space from another or from the building’s common areas.
• Demographic Data
  • Information about the human population, especially in reference to changes in size, density, distribution, and characteristics of the population in a specific area.
• Demographic
  • Pertaining to characteristics of the population, such as race, sex, age, household size, or density.
• Demography
  • Study of the characteristics of people residing in an area, including age, sex, income, etc.
• Demolition
  • Destruction and removal of an existing structure from a site; necessary to prepare a site for new construction.
• Demolition Costs
  • The expenses required to tear down and remove an improvement; may be used in highest and best use analysis.
• Denominator
  • The number below the line in a common fraction; a divisor.
• Density
  • (In land use planning context) the ratio of a particular type of land use per given area of land.
• Density Zoning
  • Laws that restrict land use intensity.
• Dependent Variable
  • A variable that measures the effect of (a) independent variable(s) on a data point within a statistical model.
• Depletion
  • A reduction in the value of an asset caused by the removal of an exhaustible material or resource (e.g., the removal of minerals from a mine or oil from a well).
• Depletion Rate
  • The rate at which an exhaustible material or resource is removed from an asset; it equals the amount of recoverable reserves divided by the total volume of production expected; it may be expressed in dollar amounts.
• Deposit
  • A deposit made to a seller that represents a buyer's good faith to buy real property; also known as “consideration” or “deposit.”
• Depreciable Life
  • The total time period over which the depreciation of an asset may be allocated. The depreciable life for tax purposes may be different than the actual estimated service life.
• Depreciable Real Property
  • Property that is subject to wear and tear and is used in a trade or business or held for the production of income; land and personal residences are not depreciable.
• Depreciated Cost
  • Cost new less accrued depreciation as of the valuation date.
• Depreciation
  • (In accounting) allocating the cost of an asset over its estimated useful life.
    (In appraisal) decline in value of a property due to wear and tear, adverse changes in the neighborhood, or any other reason.
• Depreciation Recapture
  • When real property is sold at a gain and accelerated depreciation had been claimed, the owner may be required to pay a tax at ordinary rates to the extent of the excess accelerated depreciation.
• Depression
  • Economic conditions causing severe declines in business activity, reflecting high unemployment, excess supply, and public fear.
• Derivative Security
  • A security that is created artificially (derived from another financial instrument).
• Design
  • The architectural arrangement of a property; if not up to current standards, it may cause functional obsolescence.
• Design/Amenity Attributes
  • The natural and/or physical qualities and characteristics of a property that contribute to people’s appreciation of its pleasantness, aesthetic coherence, and cultural and recreational attributes.
• Developer
  • An entity or person who improves raw land to improved property by use of labor, capital, and entrepreneurial efforts.
• Developer Profit
  • The value created by the developer; the difference between value upon stabilization and construction costs, including land purchase.
• Development Cost
  • The cost to create a project including direct costs of labor and materials, contractor's overhead and profit, plus indirect costs such as taxes and development loan interest.
• Development Feasibility
  • The ease with which building permits for a project may be obtained, as well as the proposed project's ability to meet other regulatory requirements.
• Development Loan
  • A loan used to cover the development costs of a project that is typically paid off from the proceeds for lot or unit sales.
• Devise
  • A gift or transfer of real property through a will.
• Devisee
  • One who inherits real estate through a will.
• Dilution
  • The reduction in the ownership percentage of shareholders caused by the issuance of new securities or the conversion of convertible securities of the issuer, typically with the connotation that the new securities are issued at a lower price than that paid in a previous round of financing.
• Direct Alpha
  • A public market equivalent (PME) methodology where all private equity cash flows are compounded by the returns of the reference benchmark to the same single point in time, which when combined with the final net asset value (NAV), forms a series of future values of net cash flows; the impact of any changes in the reference benchmark on the actual private equity cash flows is effectively neutralized and the resulting net cash flows are not affected by any changes in the reference index but reflect only the sole private equity returns relative to the index returns.
• Direct Capitalization
  • The capitalization method whereby forecasted first year net operating income is divided by an estimated overall capitalization rate in order to arrive at a value estimate for the total property.
• Direct Costs
  • Expenditures necessary for the labor and materials used in the construction of a new improvement; includes contractor's overhead and profit. Also called “hard costs.”
• Direct Investment
  • An investment that involves the outright purchase of a property or properties or mortgage financing not done through other investment vehicles and may include any co-investments.
• Disaggregation
  • A differentiation of the subject property from other properties by sub-classification into smaller groups with differing physical and locational characteristics.
• Disclaimer
  • A denial or disavowal of any interest in or claim to the subject of the action, such as renunciation of any title, claim, interest, estate, or trust.
• Discount Rate
  • (With reference to finance) a yield rate used to convert future payments or receipts into present value; reflects both the safe rate earned from a completely riskless investment (which rate may reflect anticipated loss of purchasing power due to inflation) and compensation for risk, lack of liquidity, and investment management expenses; most often estimated by band-of-investment analysis or sales comparison analysis that estimates typical internal rates of return.
    
    (With reference to monetary policy) the rate that the Federal Reserve Bank charges member banks to borrow.
• Discounted Cash Flow (DCF)
  • A valuation method used to estimate the feasibility and attractiveness of an investment opportunity; utilizes future free cash flow and discount rate estimates to determine a net present value (NPV) of the investment; if the present value of the cash flows is higher than the initial cost of the investment, the DCF analysis will show a favorable investment, or positive net present value (NPV); if the initial cost is higher, however, the NPV will be negative, showing an unfavorable investment.
• Discounted Loan
  • A loan that is offered or traded for less than its face value.
• Discounting
  • The process of converting future income to a present value by mathematically reducing future cash flow by the implied interest that would have been earned assuming an initial investment, an interest rate, and a specified period (possibly divided into shorter equal periodic increments).
• Discretion
  • The level of authority granted to an adviser or investment manager over the investment and management of client capital; also referred to as “discretionary.”
    (With reference to a discretionary account) typically defined as one in which the adviser or investment manager has full authority to invest and manage client’s capital subject only to specific investment guidelines.
• Discretionary
  • The level of authority granted to an adviser or investment manager over the investment and management of client capital; also referred to as “discretion.”
    (With reference to a discretionary account) typically defined as one in which the adviser or investment manager has full authority to invest and manage client’s capital subject only to specific investment guidelines.
• Disintermediation
  • A situation when deposits are removed from a financial intermediary and invested in other assets.
• Disposable Income
  • The personal earnings remaining after payments to the government, including income taxes, are deducted.
• Dispossess Proceedings
  • The legal process by a landlord to remove a tenant and regain possession of a property.
• Distraint
  • The act of seizing personal property of a tenant in default based on the right and interest a landlord has in the property.
• Distribution Waterfall
  • (With reference to a fund) the economic agreement between the investors and the general partner as to the priority of payment of distributions of fund assets as between the investors and the general partner.
• 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.
• Diversifiable Risk
  • The risk inherent to a particular investment or portfolio of investments that can be mitigated or reduced through diversification; also known as “idiosyncratic risk,” “residual risk,” “specific risk,” or “unsystematic risk.”
• Divided Interest
  • A partial interest in a property (e.g., a lessor's interest).
• Dividend
  • Cash or stock distribution paid to holders of common stock.
• Dividend Equivalent Amount
  • The foreign corporation’s effectively connected earnings and profits for the taxable year adjusted for changes in US net equity.
• Dividend Yield
  • The annual dividend rate for a security expressed as a percent of its market price (annual dividend/price = yield).
• Dividend Ex-Date
  • The day on which the stock begins trading without the subsequent dividend value.
• Dollar Stop
  • An agreed dollar amount of taxes and operating expense each tenant will pay on a prorated basis.
• Dollar-Weighted Rate of Return
  • A measure of investment performance calculated by finding the rate of return that will set the present values of all cash flows equal to the value of the initial investment; also known as “internal rate of return” or “money-weighted rate of return.”
• Dominant Estate
  • The estate that derives benefit from the servient estate in an easement.
• Donee
  • A recipient, as of a gift.
• Donor
  • One who gives.
• Dormer
  • A projection containing a window which is built upright from the slope of a roof.
• Double Taxation
  • Taxation of the same income at two levels.
• DownREIT
  • An organizational structure that makes it possible for REITs to buy properties using partnership units; the effect is the same as an umbrella partnership real estate investment trust (UpREIT); however, the DownREIT is subordinate to the REIT itself, hence the name.
• Downspout
  • A pipe that carries rainwater from a gutter along the roof to the ground or sewer system.
• Downzoning
  • A zoning regulation change of an area from a more intense or dense land use to a less intense land use.
• Drag-Along Rights
  • The right that enables a majority shareholder to force a minority shareholder to join in the sale of a company or investment; the majority owner doing the dragging must give the minority shareholder the same price, terms, and conditions as any other seller.
• Draw
  • A periodic advance of funds from a construction lender to a developer.
• Drawdown
  • The actual act of transferring capital in the fund’s portfolio companies; the drawdown may be in the form of a notice issued by a fund (or its general partner) instructing investors to make a capital contribution to the fund to permit the fund to make an investment or pay for fund expenses or liabilities; also known as a “capital call notice"
• Drawing Power
  • The relative ability of one retail establishment versus another to attract and retain a customer's patronage.
• Drive Time-Based Trade Area
  • A geographic area containing the customers of a particular firm or group of firms for specific goods or services based on consumer travel time and distance to the interest point(s); normally reflects barriers to travel not considered in other methods, including water bodies or stretches of freeways without exits.
• Drop Ceiling
  • A ceiling that is suspended below the joists above by hangers so that space exists between the ceiling and floor or slab above it.
• Dry Powder
  • The amount of capital committed to a fund minus the amount of capital that has been called by the sponsor or general partner of the fund.
• Drywall
  • An interior wallboard made of a material other than plaster (e.g., gypsum board, plasterboard, plywood, or wood paneling).
• Dual Agent
  • An agent representing both parties in a transaction.
• Duct
  • A passageway made of sheet metal, or other suitable material, used for conveying air or other gases at low pressures.
• Due Diligence
  • The use of reasonable care in an investigation of the relevant facts, assumptions, parties, conditions, and subject matter pertinent to a transaction.
• Due-on-Sale Clause
  • A provision in a mortgage contract that requires the mortgage to be repaid in full upon a sale or conveyance of partial or full interest in the property that secures the mortgage; protects the lender, or the ultimate mortgage holder, from the risk that the mortgage may be transferred to the new owner of a property when the rate on the mortgage is below current market interest rates; also known as “due-on-transfer clause.”
• Due-on-Transfer Clause
  • A provision in a mortgage contract that requires the mortgage to be repaid in full upon a sale or conveyance of partial or full interest in the property that secures the mortgage; protects the lender, or the ultimate mortgage holder, from the risk that the mortgage may be transferred to the new owner of a property when the rate on the mortgage is below current market interest rates; also known as “due-on-sale clause.”
• Duplex
  • Two dwelling units under one roof; an apartment having rooms on two floors.
• Dutch Auction
  • A bidding process in which the asking price is lowered gradually until an individual or entity places a qualifying bid.
• Dwelling
  • A structure designed for occupancy as living quarters by one or more households; it is usually equipped with cooking, bathing, and heating facilities. It does not include structures used on a transient basis, such as hotels or motels.
• Dwelling Unit
  • A room or rooms containing a single kitchen, constituting an independent unit for living space of a single family; it does not include hotel or motel rooms.

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E

• Early Occupancy
  • A situation in which the buyer is allowed to take possession of a property before closing of the sale.
• Earnest Money
  • A deposit made to a seller that represents a buyer's good faith to buy real property; also known as “consideration” or “deposit.”
• Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
  • A measure of a company's or investment’s overall financial performance; utilized as an alternative to simple earnings or net income in some circumstances.
• Easement
  • A legal right to use another's land for a specific limited purpose.
• Easement Appurtenant
  • An easement attached to the dominant estate; it is passed with the conveyance of the dominant estate and continues to burden the servient estate.
• Easement in Gross
  • A limited right of one person to use another's property when the right is not created for the benefit of land owned by the owner of the easement; it is not attached to any particular estate or land, nor is it transferred through the conveyance of title.
• Eaves
  • The overhang of a roof that extends beyond the face of an exterior wall.
• Economic Base
  • The industry in a geographic area that provides employment opportunities and allows it to attract income from outside its boundaries.
• Economic Base Analysis
  • A study that analyzes the economic activity of a community; used to predict population, income, and other variables that affect real estate values or land utilization based on the relationship between basic and non-basic employment.
• Economic Base Multiplier
  • The ratio of total employment to basic employment in an economic area.
• Economic Feasibility
  • The feasibility of a building or project in terms of costs and revenue, with excess revenue establishing the degree of viability.
• Economic Forces
  • (In appraisal theory) one type of force that affects property value; it includes effects on value such as supply and demand, employment, wage levels, industrial expansion, and availability of mortgage credit.
• Economic Good
  • Any obtainable good involving elements of utility and scarcity that create a desire (demand) for the good.
• Economic Impact Study
  • A systematic analysis based on scientific methodology that seeks to identify and measure any effect on economic activity or market indicators resulting from the location, introduction or change of a major land use activity within the market area.
• Economic Life
  • The typical age of a structure equivalent to the one in question with respect to its utility and condition, as of the appraisal date; see also “actual age,” “effective age,” “physical life,” “remaining economic life,” and “remaining physical life.”
• Economic Obsolescence
  • The reduction in a property’s value due to external circumstances (outside of the property’s boundaries), which may be caused by economic or locational factors; generally deemed to be incurable on the part of the owner, landlord, or tenants; also known as “locational obsolescence.”
• Economic Ownership
  • (With reference to performance calculations) the actual ownership interest in an investment, which may differ from the legal ownership and which reflects the post-promote sharing of the investment’s economics; also known as “effective ownership.”
• Economic Rent
  • The market rental value of a property at a given point in time.
• Economic Regime
  • A given set of rules and/or institutions which are said to govern the economy as a system and account for its qualitative (static or dynamic) behaviors; can be defined in terms of four key factors, which tend to dominate financial market performance: economic growth, inflation, monetary policy, and labor market slack.
• Economics
  • The study of the allocation of scarce resources among competing and relatively unlimited desires in such a way as to maximize human satisfactions.
• Effective Age
  • The typical age of a structure equivalent to the one in question with respect to its utility and condition, as of the appraisal date; see also “actual age,” “economic life,” “physical life,” “remaining economic life,” and “remaining physical life.”
• Effective Annual Rate
  • The annual interest rate that is equivalent to a nominal rate that is compounded more frequently than annually.
• Effective Buying Income (EBI)
  • An individual's disposable income, consisting of salary and wages, dividends, interest, and other profits, less all government taxes and deductions.
• Effective Date
  • The date on which a registration statement becomes effective and the sale of securities can commence.
• Effective Demand
  • The desire to buy coupled with the ability to pay.
• 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; expressed as collected income before expenses and debt service.
• Effective Gross Income Multiplier (EGIM)
  • The ratio of the sale price, after adjustment for non-realty interests and favorable financing divided by the projected first year effective gross income.
• Effective Ownership
  • With reference to performance calculations: the actual ownership interest in an investment, which may differ from the legal ownership and which reflects the post-promote sharing of the investment’s economics; also known as “economic ownership.”
• Effective Practical Control (of Section 892)
  • May be achieved through a minority interest which is sufficiently large to achieve effective control, or through creditor, contractual, or regulatory relationships, which together with ownership interest held by a foreign government, achieve effective control; an entity engaged in commercial activity may be treated as a controlled commercial entity if a foreign government holds sufficient interests in such entity to give it effective practical control.
• 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.
• Effective Tax Rate
  • The average tax rate paid by a corporation or an individual.
    The tax rate expressed as a percentage of market value; will be different from the nominal tax rate when the assessment ratio is not equal to one.
    The relationship between dollars of tax and dollars of market value of a property; may be calculated either by dividing tax by value or by multiplying a property’s assessment level by its nominal tax rate.
• Effective Yield
  • The actual return on an investment rather than the yield anticipated or promised when the investment is made.
• Effectively Connected Earnings and Profits
  • The earnings and profits (without diminution by reason of any distributions made during the taxable year) which are attributable to income which is effectively connected (or treated as effectively connected) with the conduct of a trade or business within the US.
• Effectively Connected Income (ECI)
  • All income from sources both within and outside the US connected with a trade or business conducted within the US by non-resident alien individual and/or foreign corporations.
• Efficiency Apartment
  • An apartment comprising one room that is divided into kitchen, living, and sleeping areas.
• Efficiency Ratio
  • The ratio of leasable space to gross space of a building, expressed as a percentage.
• Efficient Frontier
  • The set of optimal portfolios (i.e., dominant portfolios) that offer the highest expected return for a defined level of risk or the lowest risk for a given level of expected return.
• Egress
  • An outlet or exit or means of exiting.
• Elasticity
  • A concept used to measure the sensitivity of one variable to change in another variable; typically used to gauge consumer demand for a good or service; can be measured by the change in aggregate quantity demanded following a change in price or quality.
• Electrical System
  • The wiring, circuit breakers, fuses, distribution box, wall switches, lighting fixtures and such necessary to provide sufficient electrical service to power all the electrical equipment in a building.
• Elements of Comparison
  • A categorization of property characteristics that cause real estate prices to vary (e.g., property rights, financing terms, conditions of sale, date of sale, location, and physical characteristics).
• Emblement
  • Annual crop (e.g., corn, wheat, rye, potatoes, garden vegetables) produced by labor as opposed to crops that occur naturally.
• Emerging Manager
  • A fund manager with a limited track record, typically of less than two years.
• Eminent Domain
  • The right of government to appropriate private property for public use or benefit through condemnation.
• Employee Retirement Income Security Act of 1974 (ERISA)
  • Legislation passed in 1974 and administered by the Department of Labor that controls the investment activities primarily of corporate and union pension plans.
• Employment Base
  • The number of people in a community who are gainfully employed.
• Employment by Job Site
  • Employment data obtained from businesses and firms and reported based on the firm's location.
• Employment by Residence Site
  • Employment data obtained from individuals and reported based on their residence site.
• Encroachment
  • A part of real estate that physically intrudes upon, overlaps, or trespasses the property of another.
• Encumbered Property
  • A property that has attached to it a lien, claim, liability, or charge.
• Encumbrance
  • Any limitation that affects property rights and value.
• Energy Efficiency
  • The extent to which a building or appliance can produce a given effect by using a minimum amount of energy.
• Entrepreneur
  • A manager, owner or developer who assumes the risk and management of a business or enterprise; a promoter, in the sense of one who undertakes to develop.
• Entrepreneurial Profit
  • The sum of money an entrepreneur expects to receive in addition to costs for the time and effort, coordination and risk bearing necessary to create a project.
• Enterprise Zone
  • A designated area within a depressed, usually inner-city, area in which firms are given favorable tax treatment and freedom from a number of planning constraints.
• Entitlement
  • A legal right conveyed by an approval from a governmental entity to develop a property for a certain use, intensity, building type or building placement.
• Entitlement Risk
  • The risk that the various government agencies with jurisdiction over a construction project will not issue the required approvals necessary to proceed with the development
• Entity Investing
  • An investment in an entity, such as a company or partnership, that controls an investment rather than directly in the underlying assets.
• Enumeration District
  • A geographic area that contains approximately 800 persons or 250 housing units.
• Environment
  • The climate, topography, natural barriers, transportation systems and other factors of location that affect the value of a property.
• Environmental Assessment
  • A report showing the results of investigation into environmental contamination; report is often required by the Environmental Protection Agency (EPA) and other regulatory agencies to establish the extent of contamination; depending on the type and extent of contamination suspected, “Phase I Environmental Site Assessment (ESA)” or more extensive “Phase II Environmental Site Assessment (ESA)” may be required
• Environmental Indemnity Agreement
  • An agreement under which a borrower (and often a guarantor) contracts to indemnify, defend and hold another person (typically the lender) harmless from any liability arising out of existing or potential environmental violations (e.g., contamination from a release of prohibited substances like petroleum) related to the property which is the security for a loan.
• Environmental Impact Study
  • An analysis of the impact of a proposed land use on its environment, including the direct and indirect effects of the project during all phases of use and their long run implications.
• Environmental Protection Agency (EPA)
  • An agency of the US government established in December 1970 and created to promote and protect human and environmental health by creating standards and laws that support this mission.
• Environmental Regulations
  • Standards set by the Environmental Protection Agency (EPA) to control air, water and noise pollution, and other environmental conditions.
• Environmental Risk
  • The risk stemming from environmental conditions of a property or risks based on regulatory programs concerning a property or resource limitations.
• Environmental, Social and Governance (ESG) Criteria
  • A set of standards for a company’s or fund’s operations that socially conscious investors use to screen potential investments; environmental criteria consider how a company or fund performs as a steward of nature; social criteria examine how a company or fund manages relationships with employees, suppliers, customers, and the communities where it operates; governance deals with a company’s or fund’s leadership, executive pay, audits, internal controls, and shareholder rights.
• Equal-Weighted Index
  • A type of market index with individual components, or securities, weighted equally, regardless of capitalization.
• Equilibrium
  • A state of rest achieved by a balance of the forces that impel change; a market is said to be in equilibrium when the factors of production are used in the production of an array of consumer goods that maximize consumer welfare.
• Equilibrium Vacancy
  • Vacancy unrelated to disequilibria in supply and demand, producing no upward or downward pressure on rents; a typical vacancy rate in a given market operating in equilibrium; also known as “frictional vacancy.”
• Equity Build-Up
  • The periodic addition to equity caused by the gradual reduction in the mortgage balance as a result of periodic principal repayment provided for in a loan repayment contract.
• Equity Capitalization (Cap) Rate
  • Equity component of an overall direct capitalization rate; computed by dividing equity earnings by the market value of equity.
• Equity Method
  • A type of accounting used for intercorporate investments; used when an investor holds significant influence over a investee but does not exercise full control over it, as in the relationship between a parent company and its subsidiary; generally, an investor is deemed to have significant influence over an investee if it owns between 20% to 50% of the investee’s shares or voting rights; if, however, the investor has less than 20% of the investee’s shares but still has a significant influence in its operations, then the investor must still use the equity method.
• Equity Participation
  • An agreement by which a lender receives some share of the income and/or cash flow of a property based on the performance of that property. The participation might be based on a percentage of the net operating income, cash flow from operations, and/or the gain from sale of the property. The equity participation results in an additional return to the lender above the interest rate charged on the loan.
• Equity Yield or Equity Yield Rate
  • The return on the portion of an investment financed by equity capital, considering periodic cash flow and the proceeds from resale.
• ERISA Fund
  • A fund that consists of, or is deemed to hold, plan assets and operates as a plan asset vehicle that is subject to Title I of ERISA and/or Section 4975 of the Internal Revenue Code (IRC); (in the context of a subscription-backed credit facility) borrowers and lenders have concerns regarding ERISA funds and potential prohibited transactions with lenders which may subject the fund and the lender to heavy tax penalties.
• ERISA Limited Partner
  • An investor that is (i) an employee benefit plan (as defined in ERISA) subject to Title I of ERISA; (ii) any plan defined in and subject to Section 4975 of the Internal Revenue Code (IRC); or (iii) any other entity whose assets include or are deemed to include the assets of one or more such employee benefit plans in accordance with ERISA and related regulations.
• Erosion
  • The gradual loss of surface land caused by acts of nature such as running water or winds.
• Escalation Clause
  • A clause appearing in a contract that provides for an adjustment in rent or sale price (either up or down) based on some event or index; also known as “escalator cause.”
• Escalation Costs
  • Specific provisions in construction contracts to accommodate for any increase in the cost or prices of equipment, material, labor or supplies over those specified in the contract, due to price level changes over time.
• Escalator Clause
  • A clause appearing in a contract that provides for an adjustment in rent or sale price (either up or down) based on some event or index; also known as “escalation cause.”
• Escape Clause
  • (In a lease) a provision that allows a tenant to cancel a lease under conditions that would not ordinarily justify lease cancellation.
• Escheat
  • The right to have property revert to the state for nonpayment of taxes or when there are no legal heirs of someone who dies without leaving a will.
• Escrow
  • Funds paid by one party to another (the escrow agent) to hold until the occurrence of a specified event, after which the funds are released to a designated individual.
• Estoppel Certificate or Letter
  • A legal document that stops a party from claiming different or additional facts or terms of an agreement.
• Event of Default (EOD)
  • Contractual breach or other event defined within the loan agreement, the occurrence of which gives the lender the right to demand a full and immediate repayment of the loan (subject to cure rights).
• Event Risk
  • The risk of an unexpected, future decrease in credit quality that is a result of events such as a corporate acquisition or material changes in taxes, laws, or regulations.
• Exaction
  • A concept in US real property law where a condition for development is imposed on a parcel of land that requires the developer to mitigate anticipated negative impacts of the development.
• Excavation
  • A process in the construction process in which trenches are dug to provide undisturbed earth for the foundation to rest on, to accommodate footings for piers and chimneys, and to install water, electricity, septic and sewer lines.
• Excess Land
  • On an unimproved site, land that is not needed to accommodate a site's highest and best use. On an improved site, it is the surplus land that is not needed to serve or support the existing improvement.
• Excess Rent
  • The amount by which contract rent exceeds market rent due to unfavorable lease terms. The additional rent could be a result of market changes, sales overage clauses and/or poor negotiating skills on the part of the tenant.
• Excess Return
  • An indication of the degree to which a fund or investment has been successful at adding value or meeting a hurdle rate; calculated by subtracting a predetermined rate of return (e.g., a risk-free rate, minimum acceptable return, or benchmark return) from the net return of a fund or investment over a specified period; used in the calculation of statistics (e.g., the Sharpe ratio).
• Exclusion Clause/Provision
  • A term in a contract which seeks to exclude or limit the liability of one of its parties.
• Exclusionary Zoning
  • A type of zoning that excludes racial minorities and low-income people from an area; may be intentional or non-intentional (e.g., specification of a minimum structure size).
• Exclusive Listing
  • A written agreement in which the seller appoints only one agent to market the property for a specific period.
• Exclusive Right of Sale Listing
  • A written agreement between an agent and a property owner stating that the owner will pay a commission to the agent if the property is sold during a specific time period whether or not the agent is responsible for the sale.
• Exit Capitalization (Cap) Rate
  • The estimated or actual capitalization rate used to estimate the resale value of a property at the end of the holding period; calculated by dividing the expected net operating income (NOI) by the expected sale price and expressed as a percentage; also known as the “residual cap rate” or “terminal cap rate.”
• Expense Ratio
  • The ratio of expenses to gross income; a typical expense ratio is the relationship of normal expenses to effective gross income.
• Expense Reimbursements
  • Costs which are paid back to a landlord by a tenant; generally, includes property taxes, property insurance, maintenance and repair costs, and other operational expenses; at the end of the year (or the end of the lease), the landlord will reimburse the tenant if actual costs are less than expected costs; alternately, the landlord will bill the tenant any additional expenses that were not covered by their monthly tenant reimbursement bill; also known as “recoveries.”
• Expense Stop
  • The level (or maximum amount) up to which the landlord will pay certain operating expenses; amounts above the stop are the responsibility of the tenant.
• Externality
  • An economic term that describes a third-party factor that has a positive or negative impact on an individual or firm where the third-party factor has no direct control over the creation of a cost or benefit.

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F

• Facade
  • The main exterior face of an improvement.
• Face Amount
  • The value of a security as set forth in the document itself; the par value as shown on the document as opposed to the real value or market value that may differ if interest rates have changed. Also known as “face value.”
• Face Rent
  • The rental obligation, expressed in dollars, as specified in a lease; also known as “contract rent” or “stated rent.”
• Face Value
  • The value of a security as set forth in the document itself; the par value as shown on the document as opposed to the real value or market value that may differ if interest rates have changed. Also known as “face amount.”
• Facility
  • Something such as a place, building, or equipment used for a particular purpose or activity.
• Factory
  • An establishment for the manufacture of goods, including the necessary building and machinery; a manufacturing plant.
• Fair Market Rent
  • The amount that a property would command in the market if it were available immediately for lease.
• Fair Market Value
  • The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Also known as “market value.”
• Fair Rental
  • 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. Also known as “market rent.”
• Fair Value
  • A specific value definition used by accountants when classifying loan losses.
• Family Room
  • A more informal room used for relaxation and entertainment.
• Fannie Mae
  • Federal National Mortgage Association.
• Fashion/Specialty Center
  • A retail property type that is mainly composed of upscale apparel shops, boutiques, and craft shops carrying selected fashion or unique merchandise of high quality and price; an anchor is not normally required, although sometimes restaurants or entertainment can provide the draw of anchors; physical design is very sophisticated, emphasizing a rich décor and high-quality landscaping; usually found in trade areas having high-income levels.
• Fast-Moving Consumer Goods
  • Refers to a category of consumer durable and non-durable products that are typically purchased frequently and by a large number of individuals for personal use or consumption. These goods are also known as “shopper goods” or “shopper goods (FMCG).”
• Fatigue
  • (In construction) cracking failure of a material resulting from repeated cyclic stress below the normal tensile strength.
• Favorable Leverage
  • The cost of borrowed funds is less than the free and clear internal rate of return (IRR) on the property. Also known as “positive leverage.”
• Feasibility
  • The ability of a real estate project to satisfy the explicit objectives of an investor.
• Feasibility Analysis
  • An analysis of the economic, regulatory, and technical viability of a real estate development project. Also known as “feasibility study.”
• Feasibility Rent
  • The level of rent that would have to be achieved before it would become feasible to construct a new building in a market that has an excess of supply over demand and therefore has effective market rents (net of concessions) that are below the levels needed to support new construction.
• Feasibility Study
  • An analysis of the economic, regulatory, and technical viability of a real estate development project. Also known as “feasibility analysis.”
• Federal Fair Housing Laws
  • Enacted as part of the Civil Rights Act in 1968, this law makes discrimination on the basis of race, color, sex, religion, or national origin illegal in regard to the sale or rental of housing properties. It does not affect commercial or industrial properties. The Act was amended in 1988 to include families with children and handicaps as additional protected clauses.
• Federal Funds Rate
  • The interest rate charged on loans made by banks to other banks; it is a signal of changes in the national economy.
• Federal Home Loan Bank Board (FHLBB)
  • Administered by twelve regional banks, the Federal Home Loan Bank Board (FHLBB) sets credit policies, administers reserve and liquidity requirements, and controls lending practices of member banks.
• Federal Home Loan Mortgage Corporation (FHLMC)
  • An agency directed by the Federal Home Loan Bank Board for the purpose of increasing the availability of mortgage funds and providing greater flexibility for mortgage investors. It purchases single-family and condominium mortgages from approved financial institutions and resells its mortgage inventories. Also known as “Freddie Mac.”
• Federal Income Taxes
  • Taxes issued by the federal government on ordinary income; depending on current tax laws, cash flows from operating and selling a property may be taxable at the federal income tax rate to some extent.
• Federal National Mortgage Association (FNMA)
  • An independent agency that purchases mortgages from the primary markets and issues long-term debentures and short-term discount notes. Also known as “Fannie Mae.”
• Federal Reserve System
  • The central banking system of the United States that regulates money supply and its member banks; it consists of 12 Federal Reserve Banks and their branches, and banks that are members of the system.
• Federally Related Transaction
  • As specified in the "Financial Institutions Reform, Recovery and Enforcement Act" of 1989, any sales transaction of real property that ultimately involves a federal agency. For example, the property may involve a loan that is made by a federally regulated or federally insured agency. Or, the lender may want to sell the mortgage in the secondary market.
• Fee Appraiser
  • A professional who charges a fee for estimating the value of real estate.
• Fee Drag
  • The negative impact of fees on investment returns.
• Fee Leakage
  • The positive impact on fees on investment returns from the under reporting, or non-capture, of all expenses.
• Fee Loss (in Dollars)
  • The amount of investor profit forfeited because of fees earned by the investment manager.
• Fee Loss (in Percent)
  • The percentage difference between the before fee internal rate of return generated by the investment and the after fee internal rate of return realized by the investor.
• Fee Simple Absolute
  • The highest form of holding title in real estate in which the property owner has unconditional and absolute ownership of real property.
• Fee Simple Defeasible
  • A form of holding title to real property that is subject to a specified condition. Also known as “fee simple determinable.”
• Fee Simple Determinable
  • A form of holding title to real property that is subject to a specified condition. Also known as “fee simple defeasible.”
• Fee Simple Estate
  • The highest form of holding title in real estate in which the property owner has unconditional and absolute ownership of real property. Also known as “fee simple absolute.”
• Feeder Fund
  • An upper-tier special-purpose entity formed by a fund to facilitate investment in the fund by one or more investors, usually to address a tax concern.
• Fiduciary
  • 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; may include but is not limited to staff, trustees, investment board members, administrators, consultants, actuaries, and investment managers.
• Fiduciary Self-Dealing Transactions
  • A transaction wherein a fiduciary acts in its own best interest rather than in the best interest of its clients; represents a conflict of interest and an illegal act, which can lead to litigation, penalties, and termination of employment for those who commit such.
• Final Value Estimate
  • A range of values or a single dollar amount given at the end of an appraisal report that has been derived from the reconciliation of the different methods of valuation used in the report.
• Finance Charges
  • Costs incurred by a borrower either directly or indirectly, and payable to a creditor; includes costs such as mortgage service charges and origination fees.
• Finance, Insurance, and Real Estate (FIRE)
  • A sector of the economy composed of finance, insurance, and real estate; includes banks and credit unions, credit card companies, insurance agencies, mortgage brokers, investment brokerages, real estate agencies, and hedge funds, among others.
• Finance Charges
  • Costs incurred by a borrower either directly or indirectly, and payable to a creditor; includes costs such as mortgage service charges and origination fees.
• Financial Accounting Standards Board (FASB)
  • An independent nonprofit organization that is responsible for establishing accounting and financial reporting standards for companies and nonprofit organizations in the US, following generally accepted accounting principles (GAAP); subject to oversight by the Financial Accounting Foundation (FAF).
• Financial Institutions Reform, Recovery and Enforcement Act (FIRREA)
  • A US federal law passed in 1989 to provide guidelines for the regulation of financial institutions with implications to the real estate appraisal industry, specifically to reform, recapitalize, and consolidate the Federal deposit insurance system, to enhance the regulatory and enforcement powers of Federal financial institutions regulatory agencies, and for other purposes.
• Financial Leverage
  • The use of borrowed funds in the purchase of an investment. If the addition of the mortgage increases the return to the equity, (equity dividend rate or equity yield rate), the addition of the mortgage has resulted in positive leverage. If the addition of the mortgage decreases the return to the equity, the addition of the mortgage has resulted in negative leverage. Also known as “leverage.”
• Financial Management Rate of Return (FMRR)
  • Similar in concept to the adjusted internal rate of return. Negative cash flows are discounted at a safe rate, positive cash flows are compounded forward to the end of the holding period at a reinvestment rate. If negative cash flows occur after a positive cash flow, the negative cash flow is discounted back and netted against the positive cash flow. The net remaining is either discounted back (if negative) or compounded forward (if positive).
• Financial Risk
  • The risk of the possibility that shareholders, investors, or other financial stakeholders will lose money; more distinct probabilities include credit risk, liquidity risk, and operational risk.
• Financial Statement
  • A formal record of the economic status of an individual or entity as of a specific date; usually classifies assets, liabilities, income, expenses and/or cash flows.
• Financially Feasible
  • A requirement of highest and best use; refers to a project that satisfies the economic objectives of the investor.
• Financing
  • The use of debt to fund a portion of a real estate purchase.
• Financing Costs
  • The expense incurred to acquire capital to finance a project; in mortgages, often charged up front in the form of points.
• Financing Premium
  • An incremental amount paid for a property that is purchased with favorable financing.
• Fire Insurance
  • A form of property insurance that covers losses due to fire and possibly other types of hazards, such as smoke or storms.
• Fire-Resistive
  • Properties or designs to resist the effects of any fire to which a material or structure may be expected to be subjected. Fire-resistive materials or assemblies of materials are noncombustible, but noncombustible materials are not necessarily fire-resistive; fire-resistive implies a higher degree of fire resistance than noncombustible. Fire-resistive construction is defined in terms of specified fire resistance as measured by the standard time-temperature curve.
• First Generation Space
  • Generally, refers to new space that is currently available for lease and has never before been occupied by a tenant.
• First Loss (Equity) Position
  • The position in a security that will suffer the first economic loss if the underlying assets lose value or are foreclosed on; carries a higher risk and a higher yield. The lowest class or tranche of a commercial mortgage-backed security (CMBS) that will absorb credit losses from a pool of mortgages first before any other classes are affected.
• First Mortgage
  • A mortgage that is given priority over all other liens on a property.
• First-Close Investor
  • An investor willing to commit to a fund before the fund’s first closing; the investor typically receives an incentive by the fund investment manager for making the commitment prior to the fund’s first close (e.g., reduced fees).
• First-Time Fund
  • The first investment vehicle raised by a fund manager, typically by a firm or fund management team that has not previously raised any prior fund.
• Fixed Assets
  • Assets not readily convertible into cash. Fixed assets are characterized as having a remaining life longer than one year. They denote a firmness of purpose or intent by the owner to continue use or possession. "Fixed" does not refer to the immobility of an asset that is the distinctive characteristic of real estate or fixtures. However, land, buildings and affixed machinery and equipment are all included among fixed assets.
• Fixed Capital
  • Capital invested in fixed property or assets that may be used many times in production. Assets that are considered long-term in character, as land or buildings; ordinarily, but not necessarily, tangible assets.
• Fixed Capital Costs
  • The cost to build a structure including direct costs of labor and materials, contractor's overhead and profit plus indirect costs such as taxes and construction loan interest. Also known as “construction cost.”
• Fixed Expense
  • An operating expense that does not vary with the occupancy level of a property (e.g., property taxes, insurance, repairs and maintenance, advertising, and promotions). Also known as “fixed operating expense.”
• Fixed Liabilities
  • Long term obligations or debts; debts payable more than one year hence as distinguished from current liabilities.
• Fixed Operating Expense
  • An operating expense that does not vary with the occupancy level of a property, (e.g., property taxes, insurance, repairs and maintenance, advertising, and promotions). Also known as “fixed expense.”
• Fixed or Determinable Annual or Periodical Income (FDAP)
  • All income except (i) gains derived from the sale of real or personal property (including market discount and option premiums, but not including original issue discount) and (ii) items of income excluded from gross income, without regard to the US or foreign status of the owner of the income (e.g., tax-exempt municipal bond interest); income is fixed when it is paid in amounts know ahead of time; income is determinable whenever there is a basis for figuring the amount to be paid; income can be periodic if it is paid from time to time; income can be determinable or periodic, even if the length of time during which the payments are made is increased or decreased.
• Fixed Rate Debt/Loan/Mortgage
  • A debt financing obligation issued to a company or an individual by a bank or similar financial institution that features an interest rate that is constant for the term of loan.
• Fixity of Location
  • The unique immobility of real estate as compared to other investments which makes it susceptible to and inescapable from the influence of the surrounding environment.
• Fixture
  • Personal property which is permanently affixed or attached to real property such that it is considered to be an integral part of the real property. For example, windows and doors are considered fixtures when permanently installed.
• Flashing
  • (In construction) strips of sheet metal or other material used in roof and wall construction to protect structural angles and joints from water seepage.
• 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.
• Flat Lease
  • A lease in which payments are made at set intervals in equal amounts throughout the life of the loan.
• Flat Rental
  • A rent specified in a lease that remains constant throughout the lease term.
• Flex Space
  • Space that is flexible in terms of what it can be used for (for example, space that could be utilized for industrial or office activities); also known as “cross-over demand.”
• Floating Foundation
  • (In construction) a type of slab on ground foundation made of a mat, raft, or rigid foundation consisting of four to eight-foot-thick concrete slabs that are heavily reinforced with steel; used in soils with low load-bearing capacity. Also known as “mat and raft foundation.”
• Floating Rate Debt/Loan/Mortgage
  • A debt financing obligation issued to a company or an individual by a bank or similar financial institution that features an interest rate that is not fixed over the term of the loan but is allowed to vary according to the change in a specified index.
• Flood Plain
  • A geographic area close to a river or stream that is subject to flooding.
• Floor Area
  • Total horizontal surface of a specific floor, or the total area of all floors in a multi-story building, computed from the outside building dimensions of each floor. Balcony and mezzanine floor areas are computed separately and added to the total floor area.
• 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.
• Floor Load Capacity
  • The total maximum weight a floor is engineered to support over a given area.
• Flue
  • (In construction) the enclosed passage in a chimney that allows for transmittal of smoke from the building; usually made of fire clay or terra cotta pipe.
• Follow-On Investment
  • Investment in an existing portfolio company of a fund that is made to protect or enhance the value of the fund’s investment; often permitted to be made throughout the life of the Fund, though the amount of capital that may be called to fund a follow-on investment may be limited after the fund’s commitment period has expired and concentration limits may apply to the overall investment in any given portfolio company that is subject to a follow-on investment.
• Footing
  • (In construction) the base of a foundation wall, chimney or column that usually rests on solid ground and is wider than the structure being supported to distribute the weight of the structure over the ground.
• Forced Sale
  • Offering and transferring property for a valuable consideration under conditions of compulsion. 2. A sale at public auction made under a court order.
• Forces
  • In appraisal theory, any of four dynamic and changing powers and their interactions that affect the value of real property; includes social forces (e.g., population trends), economic forces (e.g., employment, wage levels, supply and demand), governmental forces (e.g., zoning, fiscal policies, legislation), and environmental forces (e.g., climate, topography, transportation).
• Forecasting
  • The process of assimilating past information and compiling the data for the purpose of drawing conclusions as to the probable happenings or conditions in the future.
• 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, includes acts of God (e.g., a flood or a hurricane, or acts of man such as a strike, fire, or war).
• Foreclosure
  • A legal term applied to any of the various methods of enforcing payment of the debt secured by a mortgage, or deed of trust, by taking and selling the mortgaged property.
• Foreign Corrupt Practices Act
  • A US federal law passed in 1977 that prohibits US firms and individuals from paying bribes to foreign officials in furtherance of a business deal; also outlines required accounting transparency guidelines.
• Foreign Investment in Real Property Tax Act of 1980 (FIRPTA)
  • A US tax law enacted as Subtitle C of Title XI (the Revenue Adjustments Act of 1980) of the Omnibus Reconciliation Act of 1980, that imposes income tax on foreign persons disposing of US real property interests; tax is imposed at regular tax rates for the taxpayer on the amount of gain considered recognized; purchasers of real property interests are required to withhold tax on payment for the property; the 2015 omnibus spending bill significantly altered FIRPTA with a change in withholding rate for closings post-February 2016.
• Form Report
  • A specific format for presenting an appraisal report; it is typically required by financial institutions, insurance companies, and government agencies.
• Formal Architecture
  • Architectural styles that are identified by common attributes that meet aesthetic and functional criteria of those trained in architectural history. Styles are frequently named in reference to a geographic region, time period, or cultural group.
• Forward Commitment
  • A contractual obligation 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
  • (In construction) the base on which something is built; the part of a structure on which the superstructure is erected; the part of a building that is below the surface of the ground and on which the superstructure rests. Includes all construction that transmits the loads of the superstructure to the earth.
• Foundation Area
  • The total ground or land area covered by the foundation of a structure, measured from the outside dimensions. Also known as “land coverage” or “site coverage.”
• Fraction Rate Capitalization
  • A method of capitalizing cash flows to find property value in which different capitalization rates are used for different types of cash flows; also known as “split rate capitalization.”
• Fractional Appraisal
  • An appraisal of one of the component parts of a property: for example, the land disregarding the building, or the building ignoring the land; also, the appraisal of a lessee's or a lessor's interest; an appraisal of a unit, whether with or without regard to the effect of its separation from the whole of which it is a part.
• Fractional Interest
  • A single interest in the real estate that represents less than the full bundle of rights. Also known as “partial interest.”
• Fractions Rule
  • Established by section 514(c)(9)(E) and the associated Treasury regulations, the rule pertains to some types of tax-exempt qualified organizations (primarily pension funds and educational organizations) seeking to acquire real estate on a leveraged basis through a partnership without incurring an unrelated business income tax (UBIT) on what would otherwise be debt-financed income; compliance with the fractions rule requires that the partnership agreement fall within the substantial economic effect safe harbor of Regulatory Section 1.704-1(b) and that allocations under the partnership agreement cannot result in any qualified organization having a percentage share of overall partnership income in any tax year that is greater than its overall percentage of partnership loss for the tax year in which its share of loss will be smallest; the rule is qualified by several exceptions and limitations.
• Frame
  • (In construction) the load-bearing skeleton of a building.
• Frame Error
  • A deviation that occurs in a study when the list that the analyst generates to represent the population omits certain individuals, whose opinions, attitudes, or other characteristics are not represented.
• Framing
  • (In construction) a system of joining structural members that provides lateral, longitudinal, transverse, and vertical support for a building.
• Freddie Mac
  • Federal Home Loan Mortgage Corporation.
• Free and Clear Title
  • Title to real property that is free of any liens, mortgages, or other encumbrances.
• Freehold
  • An ownership interest in real property in which the time period of ownership is unknown or undeterminable, (e.g., life estate), or in which the ownership period is potentially indefinite or unpredictable, (e.g., fee simple estate); non-freehold estates last for a definite period of time (e.g., leased fee or leasehold estates).
• Free Rent
  • A rent concession that grants occupancy for a certain period of time with no cost to the tenant; used to initially sign a new tenant on a lease.
• Freestanding Office Location
  • An independent office use, relatively unconstrained by other adjacent or nearby land uses.
• Freestanding Stores
  • Retail stores not located in a planned shopping center or in association with a major business district.
• Frictional Vacancy
  • Vacancy unrelated to disequilibria in supply and demand, producing no upward or downward pressure on rents; a typical vacancy rate in a given market operating in equilibrium; also known as “equilibrium vacancy.”
• Frontage
  • The extent of a parcel of land along a street, road, river, or other traffic artery on which the parcel is said to face.
• Front Foot
  • A measurement of land that abuts the street line or other landmark such as a river or lake; typically used for lots of near uniform depth in urban areas.
• Frontage
  • The length of a property that abuts the street line or other landmark, such as a body of water. Frontage differs from width, which may vary from the front of the lot to the back.
• Full Recourse Guarantee
  • With to respect to risk transfer, in general: signifies that the seller (not the buyer) of an asset or the drawer (not the holder) of a negotiable instrument assumes the risk of non-performance of the asset or the non-payment of the instruments. With respect to debt: provides the lender rights to assets beyond the secured collateral specified in the loan contract to cover full repayment of the borrower’s loan obligations in the event of default.
• Full Service Lease
  • A commercial lease where the tenant pays a base rent and the landlord pays for all operating expenses related to the tenant’s occupancy of the space (e.g., common area maintenance, utilities, property insurance, and property taxes); generally, includes an expense stop, above which any additional expenses are passed through to the tenant. Also known as a “gross lease.”
• Full Service Rent
  • An all-inclusive rental rate that includes operating expenses and real estate taxes for the first year; tenant is generally still responsible for any increase in operating expenses over the base year amount.
• Fully Amortized Mortgage
  • A loan with equal, periodic payments that allow for both principal and interest to be recovered over the term of the loan.
• Function
  • (In relation to a building) the intended use, activity or purpose for which a building was designated or altered. (In appraisal) the intended use or uses of an appraisal report by the client or a third party.
• Functional Depreciation
  • The reduction in a property’s value due to changes in tastes, preferences, technical innovations, or market standards. Also known as “functional obsolescence.”
• Functional Integration
  • Refers to the important economic links that exist between the different political-geographic sub-areas in a local economy. It is a concept that is used in the definition of a Metropolitan Statistical Area.
• Functional Inutility
  • An impairment of the functional capacity or efficiency of a property or building according to market tastes and standards; equivalent to functional obsolescence because the ongoing change makes layouts and features obsolete.
• Functional Obsolescence
  • The reduction in a property’s value due to changes in tastes, preferences, technical innovations, or market standards. Also known as “functional depreciation.”
• Functional Utility
  • The extent to which a property can be used for the purpose that it was intended.
• Fund
  • A private collective investment vehicle formed to make equity and/or debt investments in accordance with the criteria and investment objectives set forth in the fund’s constituent documents.
• Fund Expenses
  • Broadly refers to the liabilities incurred in connection with (i) establishing a fund and (ii) operating a fund.
• Future Benefits
  • In appraisal, anticipated positive cash flows or appreciation in property value; a premise of the income approach.
• Future Proposed Space
  • Space in a proposed commercial development that is not yet under construction or where no construction start date has been set; also, may refer to the future phases of a multi-phase project not yet built.
• Future Value
  • The worth of a property at some later date.

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G

• Gable
  • In construction, the triangular area above the eaves between two sloping rooflines.
• Gap Analysis
  • A comparison of demand and supply to determine the existence of present and future excess demand or excess supply in a market. Another way of expressing the same thing is using the phrase "unmet demand or supply shortages."
• General Benefits
  • In an eminent domain proceeding, the betterment gained by the general community from property adjacent to or near property which was taken from private use for a public improvement, but which property was not taken.
• General Data
  • Information that is not specific to a certain property (e.g., interest rates, employments rates, and census information).
• General Office Space
  • Functionally designed office space that houses a wide variety of office operations to support business operations located elsewhere.
• General Partner (GP)
  • The partner in a limited partnership responsible for all investment management decisions of the partnership; owes various legal duties to the fund and is typically compensated for its services through receipt of a management fee and a percentage of the fund’s profits; may also have an equity commitment to the fund; sometimes referred to as the “sponsor.”
• General Partnership
  • An organizational form of real estate ownership in which income, gains, losses, deductions, and credits are passed through to individual partners who pay tax on their own income. It usually ensures that the death or bankruptcy of one partner will not force a termination of the business or cloud the title of the partnership property. However, partners share full liability for debts and obligations of the partnership and can be held responsible for actions of other partners. This form of ownership is not typically used for a large group of investors.
• General Purpose Industrial Building
  • An industrial building that can serve a variety of functions or alternate uses without major alteration or expenditure. This type of property appeals to a wide segment of the market for industrial property. It is usually found in most industrial parks and includes many light manufacturing buildings, warehouses, and distribution facilities.
• Generally Accepted Accounting Principles (GAAP)
  • The US account standards established by the Financial Accounting Standards Board (FASB); the standards, conventions, and rules that accountants follow in recording and summarizing transactions and in preparing financial statements; GAAP, measured at fair value, is the foundational standard for accounting under the NCREIF PREA Reporting Standards.
• Generating Plant
  • A facility at which one or more electrical or mechanical machinery components, either under construction or in service or both, are designed to generate electricity.
• Generative Business
  • A retail operation that has such strong market appeal that it is a primary destination for customer in a specific location. Department stores, well known specialty stores, supermarkets and other anchor stores are examples of this type of market.
• Gentrification
  • A process in which neighborhood properties are purchased and renovated or rehabilitated. This process is not part of the normal neighborhood life cycle.
• Geodetic Survey System
  • The United States Coast and Geodetic Survey System; a legal description of land used to map large areas in which the entire country is marked by a network of bench marks located by latitude and longitude. Base lines, principal meridians, and township lines as used in the rectangular survey system are shown with topographical features in detailed maps called quadrangles. The geodetic survey system is a variation of the rectangular survey system that considers the topographical features of the earth's surface.
• Geo-Fence
  • A virtual perimeter for a real-world geographic area.
• Geographic Core
  • A geographic area containing the customers of a particular firm or group of firms for specific goods or services; encompasses 50 to 80 percent of a store's customers; the area closest to the store and possesses the highest density of customers to population and the highest per capita sales. Also known as a “primary trade area.”
• Geographic Information System(s) (GIS)
  • System(s) (usually computer-based) used for capturing, handling, storing, retrieving, managing, manipulating, and displaying geographic information or geo-coded data.
• Geometric Mean
  • The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment or portfolio; defined as the “nth root product of n numbers.”
• Ginnie Mae
  • Government National Mortgage Association.
• Girder
  • A principal, horizontal structural member or beam that supports lesser beams, joists, or walls.
• Giveback Provision
  • With reference to a general partner or manager: a mechanism whereby a manager is obligated to return a portion of its previously received promote or performance fee payment if as a result of timing and fund performance, the general partner receives more carry or performance fee during the life of the fund than the general partner would be entitled to receive had profits and losses been allocated on an aggregate basis at the time of dissolution of the fund. With reference to a limited partner: the obligation of an investor to return previously received distributions to the fund if the fund requires such amounts to fulfill its indemnification obligations or satisfy expenses or other liabilities. Also known as “clawback provision.”
• 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; 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.
• Global Endowment Management Implied Private Premium® (GEM IPP)
  • A benchmark metric that calculates the annualized rate of excess return that a private return stream generates over a public market benchmark, where a positive (negative) rate indicates outperformance (underperformance).
• Global Investment Performance Standards (GIPS®)
  • A set of standardized, industry-wide ethical principles that provide investment managers with guidance on how to calculate and report their investment results to prospective clients; sponsored by the CFA Institute; serve as the foundational standard for performance within the NCREIF PREA Reporting Standards.
• Going-Concern Value
  • The enhanced or synergistic value of assets due to their existence within, or assemblage into, an operating and economically viable business that is expected to continue its operation in the future with no intention or necessity of liquidation or the material alteration of the scale of operation.
• Going-In Capitalization (Cap) Rate
  • The capitalization rate computed by dividing the projected first year's net operating income by the value of the property.
• Going-Out Capitalization (Cap) Rate
  • The estimated or actual cap rate used to estimate the resale value of a property at the end of the holding period; calculated by dividing the expected net operating income (NOI) by the expected sale price and expressed as a percentage; also known as the “exit cap rate”; “residual cap rate” or “terminal capitalization rate.”
• Goodwill
  • An intangible, salable business asset based on the reputation of a business; includes intangible assets such as trade name, expectations of continued success, and going-concern value. The sale price of a business often reflects its goodwill value.
• Government Accounting Standards Board (GASB)
  • A private non-governmental organization that creates generally accepted accounting principles (GAAP) for state and local governments in the US; subject to oversight by the Financial Accounting Foundation (FAF).
• Governmental Forces
  • In appraisal theory, one of four forces thought to affect real estate value; includes effects on value such as government controls and regulations, public services, fiscal policies, and zoning and building codes.
• Government National Mortgage Association (GNMA)
  • A government agency that purchases mortgages through its secondary mortgage market operations and issues mortgage-backed, federally insured securities called Collateralized Mortgage Obligations (CMOs). Also called Ginnie Mae.
• Government Survey Method
  • A method of legally describing land initially used by the federal government that describes land by east-west lines (base lines) and north-south lines (principal meridians). Further lines are drawn located six miles apart. These east-west lines are called township lines and north-south lines are called range lines. The location within the township and base lines are called townships (measuring 36 square miles). Townships are further divided into 36 sections that measure one square mile. To account for the curvature of the earth, guide meridians are drawn every 24 miles east and west of the principal meridian and standard parallels are drawn every 24 miles north and south of the base line. Also known as “rectangular survey method.”
• Grade
  • Refers to the measurement of the surface’s steepness or inclination, often expressed as a percentage or an angle. It is commonly used in various fields, such as civil engineering, architecture, and construction, to assess and communicate the degree of incline or decline of a particular surface, such as a road, a ramp, a trail, or a hill.
• Grading
  • A process that takes place after construction in which excavated land is pushed back in place by the foundation to form the final level or slope of the land.
• Graduated Lease
  • A lease, generally long-term in nature, in which rent varies depending upon future contingencies.
• Graduated Payment Mortgage (GPM)
  • A loan in which payments start low and increase over the term of the loan. It is designed to help borrowers match payments with projected increases in income.
• Graduated Rental Lease
  • A lease in which rent graduates (usually increases) periodically during a lease term based on changes specified in the lease.
• Grant
  • A technical term used in deeds of conveyance of property to indicate a transfer.
• Grantee
  • A party that receives a property right from a grantor.
• Grantor
  • A party that transfers a property right to a grantee.
• Grantor-Grandee Index
  • Public record books in a recorder's office that list all recorded instruments and a reference for finding the complete document. The books are separated for grantors and grantees, and are stored by date and alphabetical order. Information such as name of grantor or grantee, type and date of instrument, book, page and date of recording, and a description are given.
• Graphic Analysis
  • A method of analyzing comparable sales using Ellwood Graphic Analysis whereby a range of expectation regarding the relationship between expected yield rates and associated changes in cash flow forecasts are projected using sensitivity analysis that if required by an investor would have resulted in the price paid for the comparable property. The technique is used to support the inputs in a discounted cash flow approach.
• Gravity or Gravitational Models
  • Economic models that apply to all types of retailing situations in which a spatial dimension is present; assert that groups of customers are drawn to certain locations because of factors like the distance to market, distance between markets, market population, the size of the retail establishment, the location of competitors, etc.
• Green Field Approach
  • A variant of the cost approach using a replacement model, an optimum site, and an ideal location.
• Gross Building Area
  • The total floor area measured from the exterior of the walls, including below-grade space but excluding unenclosed areas.
• Gross Domestic Product (GDP)
  • An estimated value of the total worth of a country’s production and services, within its boundary, by its nationals and foreigners, calculated over the course of one year.
• Gross Floor Area (GFA)
  • The sum of the floor areas of the spaces within the building, including basements and mezzanine and intermediate-floored tiers; excludes non-enclosed (or non-enclosable) roofed-over areas (e.g., exterior covered walkways, porches, terraces or steps, roof overhangs, and similar features); measured from the exterior faces of exterior walls or from the centerline of walls separating buildings.
• Gross Income
  • Total income generated by an income producing real estate property.
• Gross Income Multiplier (GIM)
  • A capitalization technique that uses the ratio between the sale price of a property and its potential gross income or its effective gross income; may be multiplied against the income of a property to obtain an estimate of value.
• Gross Leasable Area (GLA)
  • The total area rented to tenants, including basements and mezzanine and intermediate-floored tiers; measured from the outside wall surface to the center of interior partitions.
• Gross Lease
  • A commercial lease where the tenant pays a base rent and the landlord pays for all operating expenses related to the tenant’s occupancy of the space (e.g., common area maintenance, utilities, property insurance, and property taxes); generally, includes an expense stop, above which any additional expenses are passed through to the tenant; also known as a “full service lease.”
• Gross Living Area
  • Residential space measured by finished and habitable above-grade areas; does not include finished basements or attic areas. It is measured by the outside perimeter of the building.
• Gross Migration
  • Number of migrants moving into or out of an area.
• Gross National Product (GNP)
  • An estimated value of the total worth of production and services, by citizens of a country, on its land or on foreign land, calculated over the course on one year.
• Gross Negligence
  • A conscious and voluntary disregard of the need to use reasonable care, which is likely to cause foreseeable grave injury or harm to persons, property, or both; conduct that is extreme when compared with ordinary Negligence, which is a mere failure to exercise reasonable care.
• Gross Operating Income
  • The total income generated by the operations of a property before payment of operating expenses; calculated from potential rental income, plus other income affected by vacancy, less vacancy and credit losses, plus other income not affected by vacancy.
• Gross Rent
  • Total rent generated by a residential real estate property that is leased.
• Gross Rent Multiplier (GRM)
  • The factor by which gross rent is multiplied in order to obtain an estimate of value or the ratio between sale price and potential gross income (PGI) or effective gross income (EGI); typically, the term used when developing the relationship based on monthly rent.
• Gross Sales
  • Total sales before subtracting returns, allowances, and such.
• Gross Sales Area (GSA)
  • The gross leasable area minus storage and work areas.
• Ground Area
  • The area of a building computed from the exterior dimensions of the ground floor.
• Ground Coverage Area
  • A ratio of the first-floor area of a building divided by the land area.
• Ground Lease
  • A lease of the land only; usually the land is leased for a relatively long period of time to a tenant that constructs a building on the property; separates ownership of the land from ownership of buildings and improvements constructed on the land. Also known as “land lease.”
• 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.
• Ground Rent Capitalization
  • A method of estimating land value by either dividing a first-year land lease payment by an appropriate land capitalization rate or by discounting a series of land lease payments by an appropriate land discount rate.
• Ground Water
  • All water that has seeped down beneath the surface of the ground or in the subsoil; water from springs or wells.
• Grout
  • A fluid mixture of sand and cement that is used to fill joints and small spaces in masonry work.
• Guarantee/Guaranty
  • A legal assurance given by a guarantor to repay a debt or loan if the borrower defaults and is unable to pay.
• Guarantor
  • A person or firm that promises performance or payment of the obligations of another; one who makes a guarantee or guaranty.
• Gutter
  • 1. A ridge on the shoulder of a road or along the point where a street meets a raised sidewalk that allows for the flowage of rain water. 2. A trough running the length of a building along the roof that allows for the passage of rain water off the building usually through a downspout.

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H

• Haircut
  • The difference between the market value of an asset used as loan collateral and the value ascribed to that asset when used as collateral for that loan (i.e., an ascribed (nominal) reduction to the value of that asset, when it is used as collateral).
• Hard Costs
  • Expenditures necessary for the labor and materials used in the construction of a new improvement; includes contractor's overhead and profit. Also called “direct costs.”
• Hard Goods
  • That class of merchandise, sometimes referred to as hardlines, composed primarily of durable items such as hardware, macrpii, heavy appliances, electrical and plumbing fixtures, and farming machinery and supplies.
• Hazard Insurance
  • Insurance coverage that protects a property owner against damage caused by fires, severe storms, hail/sleet, or other natural events.
• Heat Map
  • A real estate investment analysis tool that uses visual cues in addition to numerical data to distinguish different locations based on performance.
• Heating System
  • A furnace or burner and the necessary ducts, registers, fans, pipes, radiators, and such that are necessary to provide heat in a building. Several different types of systems can be used (e.g., warm or hot air, hot water, steam, or electrical. Heating system fuels include coal, fuel oil, natural gas, and electricity).
• Heating, Ventilation and Air-Conditioning System (HVAC)
  • A system that provides consistent regulation and distribution of heat and fresh air throughout a building.
• 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.
• High-Rise Apartment Building
  • An apartment building, usually more than four stories high and equipped with an elevator and other modern conveniences.
• High-Yield Investment
  • Primarily fixed-income instruments that carry higher risk and return (or yield).
• Historical Age
  • The amount of time that has passed since construction of a structure was completed. Also called chronological, physical, or historical age. See also “actual age,” “effective age,” “economic life,” “physical life,” “remaining economic life,” and “remaining physical life.”
• Historical Cost
  • The cost to build a structure including direct costs of labor and materials, contractor's overhead and profit plus indirect costs such as taxes and construction loan interest. Also known as “construction cost” and “fixed capital costs.”
• Historic District
  • A zoning classification referring to a geographic area that has been recognized as having historical significance.
• Holdback
  • (In lending) the portion of a loan commitment that will not be funded until some additional requirement has been attained, such as presale or rental of 70 percent of the units or completion of all building work. (In construction or interim financing) a percentage of the contractor's draw held back until satisfactory completion of the contractor's work and assurance of no mechanic's or materialman's liens.
• Holding Company
  • A company that owns other companies and allows them to perform daily operations with independence and by which control is maintained through majority voting stock within each company.
• Holding Period
  • The real or expected period of time that an investment is attributable to a particular investor or fund.
• Hold-Over Tenant
  • A tenant retaining possession of the leased premises after the expiration of a lease.
• Home Loan
  • A loan secured by a residence for less than four families under either a mortgage or a deed of trust.
• Homeowner's Association
  • An organization of condominium owners that is responsible for maintaining common areas of the condominium complex.
• Homestead
  • The farmhouse, auxiliary buildings and their lot found on a farm property.
• Homestead Exemption
  • A release from assessment of a portion of the value of the property declared as a homestead.
• Homestead Site
  • The amount of land on which the homestead is located.
• Homogeneous
  • Similar or like property types or neighborhoods; implies that inhabitants have similar cultural, social, and economic backgrounds. Property values in a homogeneous neighborhood are thought to be more stabilized.
• Hoskold Capitalization Rate
  • A factor derived by adding a speculative rate to a sinking fund factor for a safe rate; this is based on the premise that a portion of the net operating income (NOI) is reinvested at a "safe rate" in order to periodically replace the asset. It has historically been used to capitalize the income produced by a wasting asset. This should not be confused with the concept of a modified IRR or FMRR that applies a reinvestment rate to all the cash flow received by the investor.
• Hoskold Premise
  • An appraisal theory that was designed to value the income stream of a wasting asset. Two separate interest rates are used: a speculative rate, representing a fair rate of return on capital, and a safe rate for a sinking fund designed to return all the invested capital in a lump sum at the termination of the investment. The Hoskold premise assumes that a portion of the net operating income (NOI) is reinvested at a "safe rate" to replace the investment.
• Hotel
  • A facility that offers temporary lodging and a few other services such as food, recreation, and sometimes retail shops; it is not considered a residential property.
• Hot Water System
  • A furnace or hot-water heater that provides hot water; may be powered by electricity, gas, or oil. The size of the tank needed is determined by the number of inhabitants and the recovery rate of the unit.
• House Zone
  • Any of three different types of space in a house, characterized by the type of use for that area. For example, the private-sleeping zone includes the bedrooms, bathrooms, and dressing rooms; the living-social zone includes the living room, dining room, family or recreation room, den, and any enclosed porches; the working-service zone includes the kitchen, laundry, pantry, and other work areas. Halls, stairways, and entrances are considered circulation areas.
• Household
  • A housing unit or residence at a given location that is occupied by one or more persons (that is, a social unit comprised of one or more individuals living together in the same dwelling or place).
• Household Population
  • The total number of households in a given geographic market or submarket as defined by specific demographic and socioeconomic characteristics.
• Household Size
  • The average size of a household which is calculated by dividing the number of people residing in households by the number of households.
• Housing Inventory Method
  • An updating technique that uses population and household size figures from the previous census, local area data on building permits, demolitions, conversion, and vacancies since the last census to estimate the current number of households.
• Housing Starts
  • Housing units that are under construction; it may differ from the number of building permits issued. It is often used as an economic measure.
• Housing Submarket
  • The product of disaggregation, defines a relatively homogeneous supply of housing units that tend to be occupied by a relatively homogeneous group of households such as the submarket of 3-bedroom split-level houses selling for $60,000 to $75,000 tend to be occupied by persons with similar economic, social, and demographic characteristics.
• Housing Unit
  • The area a housing consumer occupies (sleeping, eating, bathing, etc.) It generally implies exclusive control by the occupant over the sleeping quarters but does not necessarily imply exclusive occupancy of kitchen, bathroom and living areas. Technically, the term dwelling unit, refers to a housing unit that contains private kitchen and bathroom facilities as well as private sleeping and living areas that are exclusively occupied by the household.
• Huff’s Law of Shopper Attraction
  • Building upon the gravitational model theorized by Reilly’s Law of Retail Gravitation, a model that delineates trading areas on the basis of the product assortment carried at various shopping locations, travel times from the shopper's home to alternative locations, and the sensitivity of the kind of shopping to travel time; to account for differences in the attractiveness of a store relative to other stores, a measure of store utility (e.g., sales volume, number of products in inventory, square footage of sales floor, store parcel size, or gross leasable area (GLA) is used in conjunction with the distance measure); potential store locations can also be input into the model to determine new sales potential as well as the probabilities of consumers patronizing a new store instead of other stores.
• Hurdle Rate
  • The minimum annual rate of return that a fund must generate before the investment manager can receive a performance fee.
• HVAC
  • Heating, ventilating, and air conditioning.
• Hybrid Mortgage
  • A mortgage that allows the lender to participate in income produced from the property or attain some other type of equity interest.
• Hyper-Mall
  • A shopping center that provides anchor stores and other stores that serve the whole spectrum of consumer desires and purchasing power. The mall contains discount stores at one end or in one area, and upscale department stores at one end or in another area. Typically, these areas are separated in some way. In addition, the mall can also contain stores that are not typically found in the existing shopping malls such as home improvement, hardware stores, or auto parts stores.

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I

• Idiosyncratic Risk
  • The risk inherent to a particular investment or portfolio of investments that can be mitigated or reduced through diversification. Also known as “diversifiable risk,” “residual risk,” “specific risk,” or “unsystematic risk.”
• Impact Fees
  • A charge levied against developers of new residential, industrial, or commercial properties by a municipal government to help pay for the added costs of public services generated by the new construction (e.g., charges for hook-up costs for water and sewer lines, road improvements, and extra needs for school, fire, and police services).
• Import
  • The import of consumer dollars from beyond the designated trading area of a retail facility; usually from an area of limited retail activity.
• Improved Land
  • A parcel of land that has been modified or developed for use in constructing improvements; distinguished from unimproved land (e.g., land that has been graded, drained, or installed with utilities). Also known as “improved site.”
• Improved Site
  • A parcel of land that has been modified or developed for use in constructing improvements; distinguished from unimproved land (e.g., land that has been graded, drained, or installed with utilities). Also known as “improved land.”
• Improvement
  • A structure or building that is permanently attached to the land. Also known as “land improvements.”
• Improvement Ratio
  • A ratio of the value of the improvements divided by the total value of the property.
• Impulse Good
  • A product that is purchased without a prior decision to shop for it.
• 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.
• Inception-Date Cohort
  • Similar investments with the same inception date over the same period of time as subject; also known as an “acquisition-date cohort.”
• Income
  • Cash flows or other benefits received.
• Income and Expense Report
  • In real estate, a monthly financial report that displays property operating income and expenses, and distributions to the owner.
• Income Capitalization Approach
  • One of the three approaches to valuation, based on the concept that current value is the present worth of future benefits to be derived through income production by an asset over the remainder of its economic life; uses capitalization to convert the anticipated benefits of the ownership of property into an estimate of present value.
• Income Participation
  • An agreement by which a lender receives some share of the income and/or cash flow of a property based on the performance of that property. The participation might be based on a percentage of the net operating income, cash flow from operations, and/or the gain from sale of the property. The equity participation results in an additional return to the lender above the interest rate charged on the loan. Also known as “equity participation” and “lender participation.”
• Income-Producing Property
  • A real estate property that is typically rented. Also known as “income property.”
• Income Property
  • A real estate property that is typically rented. Also known as “income-producing property.”
• Income Statement
  • A record of the income and expenses incurred by a business during a specified time period. Also known as “profit and loss statement.”
• Income Stream
  • A consistent flow of money or benefits generated by an investment or property.
• Income Tax Liability
  • The dollar amount of taxes owed for a specific time period. The tax liability from operations equals the taxable income multiplied by the appropriate marginal ordinary income tax rate. The tax liability from sale of a property equals the capital gain multiplied by the appropriate marginal ordinary income tax rate.
• (Principle of) Increasing and Decreasing Returns
  • An economic principle that states that the addition of more factors of production will increase the output at an increasing rate until a maximum is reached (the asset's maximum value). Then as more input factors are added, income will increase at a decreasing rate producing an output value that is less than the cost of the added factor.
• Increasing Annuity
  • Payments made on an evenly spaced periodic basis that are increasing in amount.
• Incubator Building
  • An industrial property that is subdivided into space and leased to fledgling business or manufacturing firms in the hope that they will grow and require additional space.
• Incurable Depreciation
  • A defect caused by a deficiency or superadequacy in the structure, materials, or design of a structure; the defect is deemed incurable if the cost to cure the defect is greater than the anticipated increase in value after the defect is cured. A component of accrued depreciation. Also known as “incurable functional obsolescence.”
• Incurable Functional Obsolescence
  • A defect caused by a deficiency or superadequacy in the structure, materials, or design of a structure; the defect is deemed incurable if the cost to cure the defect is greater than the anticipated increase in value after the defect is cured. A component of accrued depreciation. Also known as “incurable depreciation.”
• Incurable Physical Deterioration
  • A defect caused by physical wear and tear on the building that is unreasonable or uneconomic to correct. An element of accrued depreciation. Incurable physical deterioration can be further classified as long-lived or short-lived. Long-lived items are expected to have a remaining economic life that equals the remaining economic life of the structure. Short-lived items are expected to have a remaining economic life that is less than the remaining economic life of the structure.
• Indemnity
  • Security or protection against a loss or other financial burden.
• Independent Variable
  • A variable that is manipulated or changed in a statistical model (e.g., regression analysis) and whose effects on a data point are measured and compared; a variable whose value is not determined by other (dependent) variables.
• Index Lease
  • A lease that specifies that rent adjustments in any year are based on changes in a specifically identified cost of living adjustment.
• Index Rate
  • The interest rate of a security or other index on which the interest rate of an adjustable-rate mortgage is based (e.g., interest rates on U.S. Treasury securities or inflation rates based on the CPI).
• Indirect Costs
  • Construction expenses for items other than labor and materials (e.g., financing costs, taxes, administrative costs, contractor's overhead and profit, legal fees, interest payments, insurance costs during construction, and lease-up costs). Also known as “soft costs.”
• Industrial Park
  • A cluster of buildings designed as a unit to be used for manufacturing, processing, assembly and storage of products or natural resources; includes appurtenances such as public utilities, streets, railroad sidings, water and sewage facilities are provided in the park.
• Industrial Plant
  • A single location where industrial operations are performed; includes all structures on the site.
• Industrial Property
  • Land and buildings used for manufacturing, processing, assembly and storage of products or natural resources.
• Inflation Index
  • A time series trend that tracks the erosion of the purchasing power of currency.
• Inflation Risk
  • The risk due to a decrease in purchasing power of assets or cash flow due to inflation; also known as “purchasing power risk.”
• Information Ratio
  • A measurement of portfolio returns beyond the returns of a benchmark, usually an index, compared to the volatility of those returns; often used as a measure of a portfolio manager's level of skill and ability to generate excess returns relative to a benchmark; also attempts to identify the consistency of the performance by incorporating a tracking error, or standard deviation component into the calculation.
• Informational Efficiency
  • The degree to which market prices quickly and correctly reflect information and, thus, the true value of an underlying investment.
• Infrastructure
  • Refers to the essential physical and organizational systems, facilities, and services that support and enable the functioning of a society, economy, or organization, including transportation, communication, utilities, and other fundamental structures necessary for societal operations and development.
• Ingress
  • The path by which one accesses or enter a property; the opposite of egress.
• Initial Closing Date
  • With respect to a fund: the date on which the fund first accepts capital commitments from investors, typically after the fund manager has raised the minimum amount of capital needed to execute the fund’s investment program.
• Initial Yield
  • The amount of income that an investment produces at the time of acquisition.
• Input Linkage
  • For a business or firm, the costs of maintaining spatial relationships with the providers or suppliers of the inputs into the business or productive activity. The inputs can be labor services, materials, financial services, information, etc.
• Input-Output Model
  • Describes the internal relationships in the business sector and is an alternative to the circular flow or income as a descriptive technique for an economy.
• Inside Lot
  • A lot located between the corner lots on a specific block.
• Installment Contract
  • A contract that specifies that a sale is paid through partial payments over a period of time; the title to property is not usually transferred until all payments under the contract are made.
• Installment Note
  • A promissory note that specifies that payment of the principle is paid in partial payments at stated times.
• Insulation
  • In construction, material such as plasterboard, asbestos, compressed wood-wool, or fiberboard placed between inner and outer surfaces that reduces the transfer of heat, cold or sound by dissipating air currents.
• Insurable Value
  • The value of the destructible parts of a property; this value is used to determine the amount of insurance carried on the property.
• Insured Mortgage
  • A mortgage in which payment is assured by a party other than the borrower in case of default.
• Intangible Personal Property
  • Property that has no physical existence beyond merely representational, nor any extrinsic value; includes rights over tangible real and personal property, but not rights of use and possession; value lies chiefly in what it represents.
• Intangible Value
  • The worth of a non-material right, agreement or action that results in an exclusive or preferred position in the marketplace; the excess value attributable to an above market lease.
• Interaction (in Attribution)
  • An effect that measures the combined impact of a portfolio manager's selection and allocation decisions within a segment; not a residual but rather a directly calculable effect resulting from the combination of (or “interaction” between) allocation and selection effects.
• Intercept Locations
  • Those competitive locations that are first encountered and first seen by potential users of the subject site and that, by virtue of their favorable exposure, may divert activity or capture part of the market being sought by the subject site.
• Intercreditor Agreement
  • An agreement between two or more creditors of the same borrower, governing joint or unilateral action, and the manner in which common collateral will be held and foreclosed.
• Interest
  • Money paid for the use of money over time; a return on capital. Interest payments are deductible for income tax purposes although payments of principal are not.
• Interest Expense
  • The periodic cost incurred through a debt.
• Interest in Property
  • The legal portion of a property that is owned; may be a full or partial ownership interest (e.g., fee simple interest, leased fee interest, leasehold interest, subleasehold interest).
• Interest-Only Loan
  • A non-amortizing loan in which payments of interest are made at specified times throughout the life of the loan and the principal is paid in a lump sum at the maturity of the loan.
• Interest Rate
  • The ratio of the cost of using money divided by the money advanced.
• Interest Rate Cap
  • The maximum interest rate charge allowed on an adjustable-rate mortgage; a cap may be set for a particular adjustment period or for the entire life of the loan.
• Interest Rate Risk
  • The possibility of a reduction in the value of a security, especially a bond, resulting from a rise in interest rates.
• Interim Close
  • A periodic, non-final closing of a fund during the fund’s capital raising period, typically name in the sequence in which the close occurs (e.g., first close, second close and so forth); once an initial or first close occurs, a fund can initiate making investments.
• Interim Use
  • A temporary use for a property when the highest and best use of the property is different from the highest and best use of the land "as if" vacant.
• Interior Door
  • A door within a building, often with a hollow core, but sometimes made of solid wood in older homes. The quality of the door often indicates the overall quality of construction for the building. Door types include louver, French, accordion, and batten.
• Interior Wall
  • In construction, any wall contained in the inner space of a building; typically made with wood studs covered by drywall materials, but range from simple wire partitions to solid masonry walls that provide fire protection.
• Intermediary
  • An entity that acts as the middleman between two parties in a financial transaction.
• Internal Economies to Scale
  • The cost reducing factors that arise when a firm locates near the buyer of its output.
• Internal Rate of Return (IRR)
  • A discounted cash-flow analysis calculation used to determine the potential total return of an investment during an anticipated holding period; a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero; also known as “dollar-weighted rate of return” or “money-weighted rate of return.”
• International Council of Shopping Centers (ICSC)
  • An international trade organization that represents the shopping center and retail real estate industry.
• International Financial Reporting Standards (IFRS)
  • A set of accounting standards developed by the International Accounting Standards Board (IASB), an independent, nonprofit organization; provides a global framework for how public companies prepare and disclose their financial statements; provides general guidance for the preparation of financial statements, rather than setting rules for industry-specific reporting.
• Interpolation
  • The estimation of a value that falls within the range of available data on which the estimation is based. Interpolation is sometimes necessary when using financial tables because the factors are only calculated for a range of interest rates.
• Interval Ownership
  • Under an "interval ownership" plan, ownership terms last for a specified number of years, after which time, owners are free to enter into a new agreement.
• Inventory
  • All space within a certain proscribed market without regard to its availability or condition.
• Invested Capital
  • The owner's capital investment in a property; the property value less the balance of any debt as of a particular point in time.
• Investment
  • Money or capital used to purchase an interest in a property, usually with the intention of receiving some sort of cash flow or profit from the property plus a recovery of the initial outlay of funds; it is usually considered a more long-term use, as distinguished from speculation.
• Investment Adviser
  • A person or firm that is engaged in the business of providing investment advice to others or issuing reports or analyses regarding securities, for compensation; investment advisers may include money managers, investment consultants, financial planners, general partners of hedge funds, and others who are compensated for providing advice about securities; advice about securities not only includes advice about specific securities (e.g., stocks, bonds, real estate, mutual funds, limited partnerships, and commodity pools), but may also include advice about market trends, the selection or retention of other advisers, the advantages of investing in securities over other types of investments, the furnishing of a selective list of securities, and asset allocation.
• Investment Advisers Act of 1940 (Investment Advisers Act)
  • A US federal law that regulates investment advisers; requires that firms or sole practitioners compensated for advising others about securities investments must register with the Securities and Exchange Commission (SEC) (with certain exceptions) and conform to regulations designed to protect investors.
• Investment Analysis
  • According to the Uniform Standards of Professional Appraisal Practice, a study that reflects the relationship between acquisition price and anticipated future benefits of a real estate investment.
• Investment Company Act of 1940
  • A US federal law that regulates the organization of companies, including mutual funds, that engage primarily in investing, reinvesting, and trading in securities, and whose own securities are offered to the investing public; designed to minimize conflicts of interest that arise in these complex operations and requires these companies to disclose their financial condition and investment policies to investors when stock is initially sold and, subsequently, on a regular basis; it does not permit the Securities and Exchange Commission (SEC) to directly supervise the investment decisions or activities of these companies or judge the merits of their investments.
• Investment Grade Security
  • A security rated AAA through BBB- that generally reflects a safer tranche of security with a higher level of subordination.
• Investment Guidelines or Limitations
  • Provisions in a fund’s governing documents that place restrictions on the types of investments the fund may undertake, which may include limitations on the size, geography, industry, concentration or return characteristics arising out of applicable regulations or law.
• Investment Interest
  • The amount of interest incurred to purchase or carry investment property. This does not include interest paid on a personal residence or passive-activity interest. Investment property includes that producing income defined as interest, dividends, annuities, or royalties, and any trade or business in which the taxpayer does not materially participate, so long as that activity is not treated as a passive activity. Investment interest is deductible to the amount of the investment income.
• Investment Period
  • The timeframe during which a fund is permitted to make new investments on behalf of the fund.
• Investment Policy
  • A document that formalizes an institution's guidelines for investment and asset management; 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 Property
  • Property or an interest in property that is purchased for the purpose of receiving a profit.
• Investment Risk
  • The risk associated with investing; the potential of experiencing losses following a fluctuation in security prices; also known as “capital market risk.”
• Investment Value
  • The worth of an investment property to a particular investor. Investment value may or may not coincide with market value depending on the requirements of the specific investor.
• Investment Yield
  • The return on an investment; it considers income received over time; the discount rate that equates the present value of future cash flows with the initial investment. Same as “internal rate of return” and “investment yield.”
• Investor Letter
  • An undertaking agreement or acknowledgement made by an investor in favor of a subscription-backed credit facility lender whereby the investor makes representations, acknowledgments and covenants in favor of the lender as a condition to the investor being included in the borrowing base; typically, includes an acknowledgement of the existence of the subscription-backed credit facility and the pledge of the right to receive and enforce the subscription-backed credit facility collateral, and the investor will agree to make capital contributions upon notice by the lender during an event of default.
• Investor Opinion
  • A letter issued by legal counsel to an investor stating various legal conclusions with respect to the investor, delivery of which is often a condition to the Investor being included in the borrowing base of a subscription-backed credit facility; under certain circumstances, an authority certificate can be delivered in lieu of an investor opinion.
• Inwood Premise
  • An appraisal theory used to value an income stream of equal payments in which the present value of the income stream is based on a single discount figure; the basis for the present value of an ordinary annuity factor in compound interest tables.

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J

• J Factor
  • A constant used to transform a variable income stream into its level equivalent annuity based on the equity yield rate. A way to stabilize income. It represents a change in net operating income over a specified holding period with the pattern of change reflecting the change in a sinking fund based on growth determined by the equity yield rate.
• Japanese Real Estate Investment Trust (J REIT)
  • A corporation-type closed-end fund listed on the Tokyo Stock Exchange (TSE), where the investment units are publicly traded.
• Jensen’s Alpha
  • A risk-adjusted performance measure that represents the average return on a portfolio or investment, above or below that predicted by the capital asset pricing model (CAPM), given the portfolio's or investment's beta and the average market return.
• Joint Tenancy
  • Joint ownership by two or more persons with right of survivorship in which each person has an identical interest and right of possession.
• Joint Venture (JV)
  • An investment entity formed by one or more entities to acquire or develop and manage real property and/or other assets.
• Joist
  • In construction, the smaller, horizontal timbers laid edgewise to which the boards of a floor or lath of a ceiling are nailed; two by four boards that support the floor.
• Judgment
  • The ability to formulate an opinion, estimate, or conclusion about an issue or problem given the data or evidence available. In appraising, the ability to render an estimate of value, usually depending on the knowledge, experience, and analytical ability of the appraiser.
• Judgment Sampling
  • A non-probabilistic sampling technique used in research and statistical analysis where the researcher selects sample elements based on their own judgment or expertise.
• Junior Debt/Loan/Mortgage
  • A debt financing obligation issued to a company or an individual by a bank or similar financial institution which is lower in priority to a first or more senior debt/loan/mortgage.
• Junior Department Store
  • A store that in both size and selection of merchandise, can be classified as being between a full-time department store and a variety store.
• Junior Lien
  • A lien placed on a property that has less priority than another lien on the same property.
• Junior Mortgage
  • A mortgage that has less right or lien priority than another mortgage on the same property (e.g., a second or third mortgage). It typically carries a higher interest rate because it contains more risk than a senior mortgage.
• Just Compensation
  • Fair and reasonable compensation to both the private owner of property and the public when property is taken for public use through condemnation.

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K

• K Factor
  • A factor that can be used to convert a stream of income that changes at a constant ratio (compound rate) into a level payment equivalent. A way of stabilizing income.
• Key Person Clause/Provision
  • The right given to limited partners to terminate a fund’s investment period and/or appoint a new general partner to manage the fund in the event that specified provisions are not met by the general partner, including the number of original principals of the managing firm or the amount of time such principals devote to managing the fund.
• Kick-Out Clause/Provision
  • With reference to leasing: a right of a party to terminate an agreement (e.g., a tenant’s or landlord’s right to terminate a lease based on insufficient percentage rent, or a hotel owner’s right to terminate a management agreement based on poor performance). With reference to asset acquisition: a purchaser’s right to exclude certain properties or loans from a multi-property or multi-loan acquisition.
• Kitchen
  • A room, usually measuring at least 80 square feet, used in residential properties for food preparation and storage, eating, and entertainment. Considered to be the most important room in the house, it serves more functions than any other room. Most kitchens are laid out in a work triangle that consists of a sink/food preparation area, a refrigerator, and a cooking area. The kitchen area should also include good ventilation, lighting, and sufficient electrical outlets. See also building description, house zone.

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L

• Lag Vacancy
  • The vacancy in between consecutive leases.
• Land
  • The earth's surface including land, water and anything attached to it; natural resources in their original state (e.g., mineral deposits, timber, soil).
    
    (In law) land is considered to be the solid surface of the earth and does not include water. Common methods used to provide legal descriptions of land include the metes and bounds system, rectangular survey (government survey) system, geodetic survey system, and lot and block system. Land valuation techniques include the direct sales comparison approach, allocation, extraction, subdivision development, land residual, and ground rent capitalization.
• Land Capitalization Rate
  • The rate that reflects the first-year land lease payment divided by the value of the land.
• Land Contract
  • An installment contract that calls for periodic payments of sales price, usually with interest added. Title does not change hands until the contract is fulfilled. Often used as a vehicle for seller financing.
• Land Coverage
  • The total ground or land area covered by the foundation of a structure, measured from the outside dimensions. Also known as “foundation area” or “site coverage.”
• Land Development
  • The addition of improvements to land (utilities, roads, grading and services) that makes the land suitable for resale as developable sites for housing or other purposes.
• Land Improvements
  • A structure or building that is permanently attached to the land. Also known as “improvements.”
• Land Lease
  • A lease of the land only; usually the land is leased for a relatively long period of time to a tenant that constructs a building on the property; separates ownership of the land from ownership of buildings and improvements constructed on the land. Also known as “ground lease.”
• Land Ratio Method
  • A method used to value land, in the absence of vacant land sales, by using a typical ratio of land to improvement value. Also known as “allocation method.”
• Land Residual Technique
  • A technique used to find the value of a property by subtracting income attributable to the building from the net operating income and valuing the residual land income. The land residual technique is one way of evaluating the highest and best use of a site. Under its highest and best use the building value should equal its development cost and the highest land value will result for this use.
• Land Use
  • The utilization of a site to produce revenue or other benefits.
• Land-Use Intensity
  • Local zoning codes designed to regulate the density of development on land; includes restrictions on the minimum and maximum amount of floor area per land area, and living space and recreation space requirements; important in the development of planned unit developments.
• Land Utilization Studies
  • An analysis of the potential uses of a parcel of land and a determination of the highest and best use for that parcel; a complete inventory of the parcels in a given community or other area classified by type of use, plus (in some cases) an analysis of the spatial patterns of use revealed by this inventory. It does not embody the viewpoint of any investor, nor does it focus on any one parcel. Furthermore, no consideration of markets and feasibility are normally included.
• Landlocked
  • A parcel of land that is surrounded by land belonging to another.
• Landlord
  • One who leases a property to another; the lessor. The landlord retains a reversionary interest in the property so that when the lease ends, the property will revert to the landlord.
• Landscaping
  • Any activity that modifies the visible features of an area of land.
• Lath
  • In construction, material fastened to the rafters, ceiling joists, or wall studs to form a base for plaster, slates, tiles, or shingles.
• Laundry Areas
  • An area that is ideally a separate room, but may be in a closet, and may be located in any of several accepted areas throughout the house.
• Law of Retail Gravitation
  • Reilly’s Model of Retail Gravitation. An approach to estimating the retail trade area (and sales/revenue potential) for a given establishment or center which holds that trade centers draw consumers from neighboring communities in proportion to the trade areas’ populations and in inverse proportion to the distances between the communities and the trade areas; in analogy with Isaac Newton's law of gravitation, the point of indifference is the point at which the "attractiveness" of two retail centers (postulated to be proportional to their size and inversely proportional to the square of the distance to them) is equal; utilized as the traditional means of trading-area delineation that establishes a point of indifference between two cities or communities, so the trading area of each can be determined; heuristic developed by William J. Reilly in 1931.
• Layout
  • The floor plan of a building.
• 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 the parties.
• Lease Commencement Date
  • The date usually constitutes the commencement of the term of the lease, whether or not the tenant has 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 on an annual basis, without regard to renewal options.
• Lease Interest
  • A property interest that arises from the association of a lease with a property (e.g., a leased fee estate or leasehold estate).
• Lease Option
  • A clause in a lease that gives the tenant the right to purchase the property under specified conditions.
• Lease Premium
  • The amount by which contract rent exceeds market rent due to unfavorable lease terms. The additional rent could be a result of market changes, sales overage clauses and/or poor negotiating skills on the part of the tenant. Also known as “excess rent.”
• Lease Rollover
  • The re-leasing of a space with the same tenant, after the expiration of a previous lease on the same space.
• Lease Terms
  • The details outlined in the lease agreement, including such factors as rent, term, responsibility for expenses, renewal options, tenant allowances, and other such items.
• Leased Fee Estate
  • An ownership interest held by a lessor with the rights of use and occupancy conveyed by lease to another.
• 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. Also known as “sale-leaseback.”
• Leasehold Improvements
  • Improvements or additions made to a leased property by the lessee.
• Leasehold Mortgage
  • A mortgage on the lessee's interest in the leased premises.
• Leasehold Value
  • The value of a tenant's interest in a property; the term applies to a long-term lease when rent paid under the lease is lower than current market rates; some US states permit the lessee to claim the leasehold interest from the landlord in a condemnation proceeding, unless the lease prohibits such a claim; represented by a price which would be agreed upon by a willing seller and a willing buyer under usual and ordinary circumstances without any compulsion to either buy or sell.
• Legal Description
  • A description of a parcel of land complete enough to allow a competent surveyor to locate the exact boundaries of the land.
• Legally Conforming Use
  • A property use that is permitted by current zoning; including use, building set back, parking requirements, and such.
• Legally Nonconforming Use
  • A use that was lawfully established and maintained, but no longer conforms to the zoning in which it is located; usually caused by zoning changes; precludes any additions or changes that were made without municipal approval.
• Legally Permissible
  • Required in highest and best use; that which is allowable by law. To be the highest and best use of a site, the use must be legally permissible.
• Legislative Risk
  • The risk that a government enacts regulations or may do something that adversely affects the value of an investment.
• Lendee
  • The person or entity to whom something is lent.
• Lender
  • An individual, a public or private group, or a financial institution that makes funds available to another with the expectation that the funds will be repaid.
• Lender Participation
  • An agreement by which a lender receives some share of the income and/or cash flow of a property based on the performance of that property. The participation might be based on a percentage of the net operating income, cash flow from operations, and/or the gain from sale of the property. The equity participation results in an additional return to the lender above the interest rate charged on the loan. Also known as “income participation” and “lender participation.”
• Less-Than-Freehold Estate
  • The estate held by a person who rents or leases property. This classification includes an estate for years, periodic tenancy, estate at will, and estate at sufferance.
• Lessee
  • A person who holds the lease of a property.
• Lessee/Lessor’s Interest
  • An ownership interest in the real estate held by a landlord who has transferred the right of occupancy to a property through the execution of a lease. The landlord retains the right to receive rental payment throughout the term of the lease and the right to possess the property at the termination of the lease.
• Lessor
  • A person who leases or lets a property to another.
• Letter of Transmittal
  • A letter accompanying an appraisal report that formally presents the report to the person who requested it; it may include information such as: address and description of the property, property interest being appraised, statement that property inspection and all necessary analyses were completed by the appraiser, date of appraisal, value estimate, any extraordinary assumptions or limiting conditions, appraiser's signature, and reference to accompanying appraisal.
• Letter Report
  • A shortened appraisal report that states the conclusions of the appraiser's investigation and analysis. It typically contains an identification of the property, purpose of the appraisal, a description of the analysis, the date of valuation and limiting conditions. Much of the data and reasoning are omitted.
• Level Annuity
  • A periodic income stream consisting of equal payments over a specified number of periods of equal length.
• Level-Payment Mortgage
  • A mortgage in which equal, periodic payments are made over the life of the loan that cover both interest and principal. Payments are credited first against interest on the declining balance, and then against principal, so that the amount of money credited to principal gradually increases over the life of the loan, while that credited to interest gradually decreases.
• Leverage
  • The use of borrowed funds in the purchase of an investment. If the addition of the mortgage increases the return to the equity, (equity dividend rate or equity yield rate), the addition of the mortgage has resulted in positive leverage. If the addition of the mortgage decreases the return to the equity, the addition of the mortgage has resulted in negative leverage.
• Leverage Ratio
  • Any ratio used to measure the ability of a company or investment to meet financial obligations.
• Liability Driven Investment (LDI)
  • An investment philosophy and strategy that is designed toward gaining enough assets to cover all current and future liabilities; general approach consists of minimizing and managing liability risk followed by generating asset returns and maximizing asset performance relative to plan liability; considers a wide range of risks, including interest rate risk, inflation risk, longevity risk, credit risk, and foreign-exchange risk.
• License
  • A formal agreement from a constituted authority that allows an activity to be conducted.
• Licensed Appraiser
  • As specified in the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), an appraiser who has been licensed by the appropriate state to value property. The FIRREA states that only licensed or certified appraisers may appraise property valued at less than $1 million that involves a federal agency. Only certified appraisers may appraise property valued at $1 million or more that involves a federal agency.
• Lien
  • A charge or claim by one party on the property of another as security for the payment of a debt.
• Life Annuity
  • An annuity that comes only during the lifetime of the recipient; as distinguished from an annuity certain, that continues for a specified period of time.
• Life Estate
  • An estate that is limited to the lifetime of a designated party and conveys the rights to use, occupy, and control the property.
• Life Tenant
  • One who owns an estate that is limited to the lifetime of a designated party.
• Lifecycle
  • The various developmental stages of a property: pre-development, development, leasing, operating, and redevelopment (or rehab).
• Limited Common Elements
  • Items in a multi-unit project that are available for use by one or more, but not all, units (e.g., parking stalls or storage units).
• Limited Liability Company (LLC)
  • A US corporate structure whereby the owners are not personally liable for the company's debts or liabilities; a hybrid entity that combines the characteristics of a corporation with those of a partnership or sole proprietorship.
• Limited Partner Excuse
  • The right by which an investor is permitted to opt-out from an investment on a case-by-case basis, often as a result of regulatory issues or due to a policy of the Investor that would prohibit the investor from participating in a particular investment; also used to describe the right a general partner has to exclude an investor from participating in investments on a case-by-case basis for regulatory or other legal reasons.
• Limited Partner Transfer
  • The legal sale, assignment, pledge or disposition of all or an undivided portion of an investor’s interest in a fund, including its obligation to make capital contributions and its right to receive distributions of fund assets; the constituent documents of a fund will place limitations on an investor’s ability to transfer or encumber its interest, except in accordance with the terms and conditions set forth therein and with the general partner’s consent.
• Limited Partner Withdrawal
  • The termination of an investor’s participation in a fund; rights of withdrawal (either mandatory or voluntary) are typically limited to situations where the investor’s continued participation in the fund would result in the investor or the fund violating applicable regulations or law.
• 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.
• Limited Partnership Agreement (LPA)
  • The contract between all partners in a limited partnership, defining the terms of the limited partnership including the authority of the general partner and the rights of all limited partners.
• Limited Purpose Industrial Building
  • An industrial building that is designed and built to serve a specific function or functions and that may not be easily adapted to serve other alternative uses. Such property appeals to a smaller segment of the market and consequently has reduced utility once there is no longer an economic need for its original purpose. Includes both special purpose industrial building and single purpose industrial building.
• Limiting Conditions
  • Specifications in an appraisal report that restrict the assumptions in the report to certain situations (e.g., date and use of the appraisal, definition of value, identification of real estate and property rights being valued, definition of surveys used or not used).
• Line of Credit
  • An agreement between a lender and a borrower in which the borrower can borrow up to a certain maximum amount of money from the lender without a formal loan submission; the borrower then has available a quick loan service without the delay of a credit review (although the line of credit is usually periodically reviewed); usually used by banks for their most reliable and creditworthy customers.
• Linear Regression
  • In statistics, an analysis of the nature of the relationship between two variables.
• Linkage
  • The physical or economic concept pertaining to the time and distance between a land use and support facilities, or between people and their activities.
• Liquidation Value
  • The price received when a property is sold as a quick sale.
• Liquidity
  • The ease with which assets can be bought or sold without affecting the price.
• Liquidity Risk
  • The risk that an investment cannot be bought or sold quickly enough to prevent or minimize a loss due to a lack of marketability.
• Lis Pendens
  • A recorded legal notice of the filing of a suit in which the title to a property may be affected. If this property is purchased, the buyer is then subject to any judgement entered. The notice of filing is not a lien on the property, but rather a notice of pending action.
• Listing
  • A written agreement between a property owner and a real estate broker authorizing the broker to find a buyer or tenant.
• Listing Agent
  • The agent who represents the seller of a property.
• Listing Price
  • The asking price at which a property is listed for sale; it does not necessarily equal the market value or the sale price. Also known as “asking price.”
• Live-Load Floor Capacity
  • A moving or variable weight that can be safely supported by a structure, expressed in pounds per square foot; the weight of people furniture and equipment that can be supported by the floor.
• Livestock Ranch
  • A business enterprise that depends primarily on range forage for production of livestock and related products. Primary considerations in appraising a livestock ranch are the land, relationship of the land and vegetation to the livestock, type of operation, grazing potential of the land, and use of nonfee land through leases or permits.
• Living Area
  • Residential space measured by finished and habitable above-grade areas; does not include finished basements or attic areas. It is measured by the outside perimeter of the building.
• Living Room
  • A formal room, usually measuring at least 170 square feet, used in residential properties for relaxing and entertainment. At one time considered the center of the house, it is now used less frequently for entertaining as rooms such as the family room or kitchen have been expanded and used more often.
• Load
  • (In construction) the weight supported by a structural part or member.
• Load Factor
  • The ratio of the average kilowatt demand during a specified time interval, to the rated capacity of the equipment, for a given power plant or electric utility company.
• Loan
  • The act of borrowing or lending money. The term loan is often used loosely to imply a mortgage loan.
• Loan Balance
  • The amount of principal left to be paid on a loan at a specified period of time; it equals the present value of future payments discounted at the contract rate of the loan. Also known as “mortgage balance.”
• Loan Commitment
  • A pledge or promise by a lender regarding the terms and conditions under which a loan will be made (i.e. the sum of money to be loaned, date of payment, and interest rate are specified). After a borrower applies for a loan, the lender writes a commitment letter that is a detailed offer to loan money according to specific terms. If accepted and fulfilled by the borrower, mortgage documentation is prepared by the lender.
• Loan Fee
  • A fee charged by a lender to issue a loan.
• Loan Payment
  • Money paid to a lender to decrease the principal and/or interest on a mortgage. The amount of the mortgage payment varies depending on the type of loan. On a level payment mortgage, the payment can be calculated as the annuity to pay the principal at the specified interest rate and mortgage term.
• Loan Schedule
  • A table that shows the allocation of payments on a debt to principal and interest. Also known as an “amortization schedule.”
• Loan Term
  • The lifetime of a loan.
• Loan to Value Ratio
  • The ratio of the outstanding loan balance divided by the total property value.
• Local Economic Analysis
  • Refers to the systematic examination and assessment of the economic activities, trends, and conditions within a specific geographical area, typically at the regional, city, or community level with the primary objective to gain a comprehensive understanding of the economic dynamics and factors influencing the local economy.
• Localization Economies
  • The cost reducing factors that arise from a firm locating in an area where there are other firms in the same industrial group.
• Location
  • The time-distance relationship (linkage) between a property or neighborhood and all other origins and destinations.
• Location Analysis
  • A thorough study of a location in terms of a specific use, environment, time, and anticipated pattern of change.
• Location Quotient
  • A ratio of the local economy's employment percentage in a given industry to a larger economy's employment percentage in that same industry. It is used to identify export industries. Typically, a value of the ratio greater than one occurs for a basic industry.
• Locational Obsolescence
  • The reduction in a property’s value due to external circumstances (outside of the property’s boundaries), which may be caused by economic or locational factors; generally deemed to be incurable on the part of the owner, landlord, or tenants; also known as “economic obsolescence.”
• Lock-Out Period
  • With respect to debt: the period during which a loan may not be prepaid. With respect to a fund: the period of time during which an investor in an open-end fund is not permitted to redeem or sell its equity interest. Also known as “lock-up period.”
• Lock-Up Period
  • The period of time during which an investor in an open-end fund is not permitted to redeem or sell its equity interest; also known as “lock-out period”
• Loft Building
  • A multistory building with an open floor design that is used for light manufacturing, warehousing, and sometimes offices.
• London Interbank Offering Rate (LIBOR)
  • The most widely used reference rate, defined as the average interest rate that banks charge each other in the London interbank market.
• Long-Lived Item
  • A component with an expected remaining economic life that is the same as the remaining economic life of the entire structure.
• Lot
  • Land within a set of defined boundaries. Also called a parcel, plot, or tract.
• Lot and Block Survey System
  • A legal description of subdivided land that refers to the lot by lot and block numbers that appear on survey maps and plats of recorded subdivided land.
• Low Income Housing Tax Credit (LIHTC)
  • A form of subsidy that offers developers nonrefundable and transferable tax credits to subsidize the construction and rehabilitation of housing developments that have strict income limits for eligible tenants and their cost of housing.
• Lump Sum Payment
  • The remaining balance that is due at the end of a balloon mortgage. Also known as “balloon payment.”

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M

• Machinery and Equipment
  • All tangible fixed assets other than real estate (tools, tooling, conveyor, and other personal property) used in any way to facilitate any manufacturing, assembly, or warehousing activity.
• Main
  • A pipe, conduit, or circuit leading to or from the branches of a utility system; carries the combined flow of all the branches.
• Maintenance
  • Procedures and expenditures necessary to keep a property in operating condition.
• Maintenance Fee
  • The payments made by the individual owners in a condominium to the homeowner's association for expenses incurred in the maintenance and upkeep of the common areas.
• Major Tenant
  • The tenant that serves as the predominant draw to a commercial property, usually the largest tenant in a shopping center or retail development. Also known as “anchor tenant.”
• Mall
  • A landscaped public area that is designated for pedestrian use only; typically used in shopping centers but also created in downtown areas to revitalize existing businesses and sometimes used in suburban areas to generate new business.
• Management Fee
  • A fee paid for the administration and supervision of a property; typically considered a variable operating expense.
• Management Risk
  • The risk associated with decisions made by a company’s managers in relation to the overall interest of shareholders and the company at large.
• 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.
• Manufactured Housing
  • Residential buildings that are partially assembled or completely assembled before being placed on a permanent site.
• Marginal Tax Rate
  • The ordinary income tax rate charged on the last dollar of income; the tax rate used when making investment decisions.
• Market
  • The interaction of buyers and sellers who exchange a specific product for cash or other assets.
• Market Analysis
  • A study of the demand for and supply of a property type and the specific market area for that property type.
• Market Approach
  • One of three approaches to valuation; estimates a property’s value (or some other characteristic, such as its depreciation) by reference to comparable sales. Also known as the “sales comparison approach (SCA).”
• Market Area
  • The geographic area from which most of the demand is derived and the majority of competition is located.
• Market Comparison Approach
  • One of three approaches to valuation; estimates a property’s value (or some other characteristic, such as its depreciation) by reference to comparable sales; also known as the “sales comparison approach.”
• Market Conditions
  • Characteristics of the market such as vacancy rates, interest rates, employment levels, etc.
• Market Cycle
  • The period between the two latest highs or lows of a common benchmark; refers to trends or patterns that emerge during different business environments; often has four distinct phases and at different stages of a full market cycle, different asset classes will respond to market forces differently.
• Market Delineation
  • The process of defining the geographic extent of the demand for a specific property.
• Market Disaggregation
  • The process of dividing a market into smaller, more homogeneous submarkets based on product characteristics.
• Market Gap Analysis
  • An analysis to determine whether there is or will be unmet or unfilled demand in the market.
• Market Interest Rate
  • The prevailing rate of interest paid on deposits and other investments, determined by the interaction of the supply of and demand for funds in the money market.
• Market Participants
  • Those buyers and sellers transacting business in the principal market for an asset or liability; they are not related parties, have a reasonable understanding of the asset or liability, are capable of entering into a transaction to buy or sell the item, and are motivated to do so.
• Market Portfolio
  • A theoretical portfolio consisting of all assets available to investors, with each asset held in proportion to its market value relative to the total market value of all assets.
• Market Price
  • The amount actually paid, or to be paid, for a property in a particular transaction. Market price differs from market value; it is an accomplished historical fact, whereas market value is and remains an estimate.
• Market Rent
  • 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; also referred to as “fair rental.”
• Market Rent Equivalency Adjustment
  • The adjustment that reflects the impact of any existing below market leases on the market value of a property. It represents the difference between the fee simple interest and the leased fee interest unless the leased fee interest is greater than the fee simple interest.
• Market Research
  • The process of collecting and analyzing data and trends that provides useful information to make marketing decisions.
• Market Risk
  • The risk inherent to the entire market that cannot be mitigated or reduced through diversification. Also known as “non-diversifiable risk,” “systematic risk,” or “undiversifiable risk.”
• Market Risk Premium
  • A measure of the extra return, or risk premium, that investors demand to bear risk; the difference between the expected return on a market portfolio and the risk-free rate and is equal to the slope of the security market line (SML).
• Market Segmentation
  • The process of dividing a market of potential customers into groups, or segments, based on different characteristics; segments created are composed of consumers who will respond similarly to marketing strategies and who share traits such as similar interests, needs, or locations.
• Market Share
  • The percentage of total sales in a retail category that each competing outlet is expected to capture based on current patterns and trends in the market.
• Market Standard
  • The quality and/or quantity of various physical, financial, locational, and site feature characteristics that define the "norm" for a market as established by competitive sites that are existing, in process, and not yet developed.
• 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 most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Also referred to as “fair market value.”
• Marketability
  • The ease with which a property can be absorbed, sold, or leased.
• Marketability Analysis
  • A study of how a specific property is expected to perform as it competes for the available market demand in a specific market.
• Marketable Title
  • A title that is free and clear of objectionable liens, clouds, or other title defects.
• Marketing Period
  • The time period beginning when an owner decides to begin actively selling a property to when the sale is closed.
• Mass Appraisal
  • According to the Uniform Standards of Professional Appraisal Practice, the process of valuing a universe of properties as of a given date utilizing standard methodology, employing common data, and allowing for statistical testing.
• Mass Appraisal Model
  • According to the Uniform Standards of Professional Appraisal Practice, a mathematical expression of how supply and demand factors interact in a market.
• Master Lease
  • A primary lease that controls subsequent leases and may cover more property than subsequent leases.
• Master Limited Partnership (MLP)
  • A limited partnership in which the individual interests are issued to one limited partner who arranges the public trading of the shares; also called a publicly traded limited partnership.
• Mat and Raft Foundation
  • (In construction) a type of slab on ground foundation made of a mat, raft, or rigid foundation consisting of four to eight-foot-thick concrete slabs that are heavily reinforced with steel; used in soils with low load-bearing capacity. Also known as “floating foundation.”
• Material Defect
  • Any attribute affecting property value that is not readily observable but which might be known by the seller of such property must be disclosed to residential buyers under most state laws using state mandated disclosure forms.
• Maturity (Loan)
  • The termination period of a loan. May differ from amortization term, in which case a balloon payment is due at maturity.
• Maximally Productive
  • One of four criteria in highest and best use analysis; it states that a use is the highest and best use if it produces the highest value or price.
• Mean
  • A mathematical representation of the typical value of a series of numbers, computed as the sum of all the numbers in the series divided by the count of all numbers in the series. Also known as “arithmetic mean” or “average”
• Mean-Variance Analysis
  • The process of weighing risk (i.e., variance) against expected return; a component of modern portfolio theory (MPT), which assumes that investors make rational decisions and expect a higher return for increased risk.
• Measurement Error
  • A deviation that arises when individuals who respond to questions in a survey give information that is not true.
• Median
  • The middle figure in a numerically ordered set of data such that an equal number of values lie above and below the middle figure; a measure of the central tendency of data. If an even number of data points are present in the data set, then the median is the average of the middle two figures.
• Median Income
  • The middle point of area incomes; divides the income distribution range for a given area in half, one with residents having incomes above the median, and the other with residents having incomes below the median.
• Mercantilism
  • A theory of value popular in the eighteenth and nineteenth centuries that stated that wealth is associated with a nation's power. It focused on maintaining a favorable balance of trade through strong economic controls to accumulate gold.
• Meridian
  • Used in the rectangular survey method of describing land, lines running north and south.
• Metes and Bounds Method
  • A legal description of land in which land boundaries are referred to by a point of origin, metes, and bounds. The point of origin is extended by a line in a specified direction (metes), the points at which these lines change direction are called bounds.
• Metropolitan Statistical Area (MSA)
  • Generally, the area in and around a major city; the Office of Management and Budget (OMB) defines an MSA as having one of the following characteristics: a city with a population of at least 50,000, or an urbanized area with a population of at least 50,000 with a total metropolitan population of 100,000.
• Mezzanine
  • An intermediate floor with less area than the regular floors.
• Mezzanine Debt/Loan/Mortgage
  • A debt financing obligation usually secured not by a lien on property, but secured by the ownership of equity interests of a borrower (for example, the shares of a corporation or the membership units of a limited liability company).
• Migrant
  • A person who moves to a residence in a different county.
• Mill
  • One-tenth of a cent; often used in tax assessment calculations.
• Mineral Rights
  • The right to use subsurface land and extract profits from that land. Mineral rights are normally passed with the conveyance of real property but can be separated from the conveyance of real property.
• Mini-Mall Shopping Center
  • A typical gross leasable area between 80,000 and 150,000 square feet on a corresponding site of 8 to 15 acres, emerges as an enclosed mall mostly adapted to community-type shopping facilities in areas of extreme climatic variations. Key tenants in the mini-mall are a junior department store, variety, food, or drug store; the remaining tenants consist of specialty services.
• Mini-Warehouse
  • A storage structure ranging in size from 10 to 200 square feet, designed for individuals and small businesses.
• Minimum Lot Size
  • Specified by a zoning ordinance, the smallest dimensions of a lot allowed for construction of a building.
• Minimum Rent
  • The smallest amount of rent due from a tenant with a variable rental rate (e.g., a rent calculated as a certain percentage of gross sales with a minimum rent of a certain amount per month).
• Misplaced Improvement
  • An improvement located on a tract of land whose highest and best use does not match the highest and best use of the tract of land as if vacant.
• Mixed-Asset Portfolio
  • An investment portfolio containing a well-diversified blend of asset types.
• Mixed-Use
  • A building or project that provides more than one use (e.g., office/retail or retail/residential).
• Mobility
  • In real estate, the ease with which people can move from one location to another.
• Mode
  • The most frequent value in a set of numbers or most frequent response in a set of responses. The mode is not affected by extreme numbers. If the sample size is very small and no duplicate numbers exist, a mode does not exist.
• Modern Portfolio Theory (MPT)
  • An investment theory put forth by Harry Markowitz based on the idea that risk-averse investors can construct portfolios to optimize or maximize expected return based on a given level of market risk, emphasizing that risk is an inherent part of higher reward; MPT suggests that it is possible to construct an efficient frontier of optimal portfolios, offering the maximum possible expected return for a given level of risk.
• Modernization
  • A type of renovation in which worn or outdated elements are replaced with their current counterparts.
• Modified Economic Age-Life Method
  • A method of estimating accrued depreciation in which the ratio of effective age to total economic life is multiplied by the reproduction or replacement cost minus curable physical and functional obsolescence to calculate the incurable accrued depreciation.
• Modified Internal Rate of Return
  • An internal rate of return analysis in which different reinvestment rates for both positive and negative cash flows have been specified.
• Module
  • A standard measure of any size used in construction and design; allows repetition in design and use and saves material and labor costs.
• Molding
  • In construction, a finishing board used to cover a joint (e.g., the point where a wall meets the ceiling).
• Money Market
  • The interaction of buyers and sellers of short-term money instruments.
• Money-Weighted Rate of Return
  • A measure of investment performance calculated by finding the rate of return that will set the present values of all cash flows equal to the value of the initial investment. Also known as “dollar-weighted rate of return” or “internal rate of return.”
• Monitor
  • A raised structure on a roof with windows or louvers that ventilate or light the building; usually found on a factory or warehouse.
• Monitor Roof
  • A type of framing that includes an elevated central section and provides better lighting and ventilation; generally found in industrial buildings.
• Monte Carlo Simulation
  • A computerized mathematical technique that allows an individual to account for risk in quantitative analysis and decision making; furnishes the decision-maker with a range of possible outcomes and the probabilities they will occur for any choice of action; performs risk analysis by building models of possible results by substituting a range of values—a probability distribution—for any factor that has inherent uncertainty and establish the odds for a variety of outcomes.
• Monthly Present Value Interest Factor (MPVIF)
  • The present value reversion of $1 calculated on a monthly basis.
• Monthly Present Value Interest Factor – Annuity (MPVIFA)
  • The present value of ordinary annuity $1 per period calculated on a monthly basis.
• Monument
  • A natural or artificial visible object that is fixed in place and used by surveyors to establish real estate boundaries.
• Moral Hazard
  • The risk that a party has not entered into a contract in good faith or has provided misleading information about its assets, liabilities, or credit capacity; occurs when one party in a transaction has the opportunity to assume additional risks that negatively affect the other party, with such a decision based not on what is considered right, but what provides the highest level of benefit, hence the reference to morality.
• Mortgage
  • A legal document in which real estate is named under certain conditions as the security or collateral for the repayment of a loan.
• Mortgage Balance
  • The amount of principal left to be paid on a loan at a specified period of time; it equals the present value of future payments discounted at the contract rate of the loan. Also known as “loan balance.”
• Mortgage-Backed Securities
  • Bond-type securities that are secured by pools of mortgages or trust deeds; generally, not an obligation of the issuer; used to transfer funds from securities markets to housing markets (e.g., Ginnie Mae, Freddie Mac and Fannie Mae have mortgage-backed securities programs).
• Mortgage Capitalization Rate
  • The ratio of the first-year debt payment divided by the beginning loan balance. Also known as “annual constant.”
• Mortgage Coefficient (C)
  • A multiplier used in the Ellwood formula to compute a capitalization rate; a function of the terms of the mortgage loan, the projected ownership period, and the equity yield rate.
• Mortgage Constant
  • The ratio of the first-year debt payment divided by the beginning loan balance. Also known as “mortgage capitalization rate.”
• Mortgage Equity Analysis
  • A real estate analysis or valuation approach to estimating value for an income producing property where the influence of mortgage financing is considered and the investment returns to the equity position are given primary importance.
• Mortgage Interest
  • Money paid for the use of borrowed money through a mortgage; the rate can be fixed or variable.
• Mortgage Note
  • A legal document that acknowledges a promise to the mortgage.
• Mortgage Payment (PMT)
  • Money paid to a lender to decrease the principal and/or interest on a mortgage. The amount of the mortgage payment varies depending on the type of loan.
• Mortgage REIT
  • A REIT that makes or owns loans and other obligations that are secured by real estate collateral.
• Mortgage Release Price
  • A specific amount of money that must be paid to a lender so that the lien specified by the mortgage on a particular property will be released.
• Mortgage Residual Technique
  • An appraisal technique for solving for value when the amount of available equity is known but the mortgage value is unknown.
• Mortgage Revenue Bonds
  • Bonds issued by state and local governments or state housing finance agencies to finance the sale, repair, or construction of real estate. Interest on mortgage revenue bonds is tax exempt. Therefore, they are sold at a lower interest rate.
• Mortgage Term
  • The length of time over which a mortgage loan must be paid off; it is specified in a mortgage contract.
• Mortgage Yield Rate
  • The discount rate that equates the present value of the loan payments with the principal borrowed.
• Mortgagee
  • A person or firm to whom property is conveyed as security for a loan made by such person or firm (a creditor).
• Mortgagor
  • One who borrows money, giving as security a mortgage or deed of trust on real property (a debtor).
• Most Favored Nations Clause
  • A contract provision by which a fund sponsor promises to provide an investor with terms no less favorable than the terms provided to any other investor in the fund; entitle an investor to elect to have any more-favorable right or privilege granted to another investor by the fund apply to it; clause subject to numerous exceptions, qualifications, and exclusions to rights.
• Most Probable Selling Price
  • The most likely price at which a property would sell if exposed in a competitive market for a reasonable period of time, under the market conditions at the date of the appraisal.
• Most Probable Use
  • The use to which a property most probably will be put, given existing improvements, existing use of the property and existing market conditions as of the date of the analysis. Highest and best use in the context of most probable selling price.
• Most Profitable Use
  • Highest and best use in the context of investment value.
• Mover
  • A person who changes residence.
• Multi-Asset Portfolio
  • An investment portfolio containing a well-diversified blend of asset types.
• Multifamily Structure
  • A structure that is architecturally intended for habitation by more than one family.
• Multiple Internal Rates of Return
  • An occurrence in which more than one internal rate of return can be calculated from the same cash flows of an investment; occurs when the sign of the cash flows changes more than once.
• Multiple Listing Service (MLS)
  • A means by which agents list properties offered for sale by other agents, often available through the internet to the public.
• Multiple Nuclei Model
  • A land development model that theorizes that a city grows by developing multiple nodes of economic activity that are distributed over space. The nodes can be place of employment, retail districts and office districts.
• Multiple Regression
  • In statistics, an analysis that measures the nature of the simultaneous influence of two or more independent variables on one dependent variable. Often used in mass appraisal of single-family residences.
• Multi-Tenant
  • A property that has two or more tenants.

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N

• Narrative Report
  • The most common and complete type of appraisal report; it includes an introduction, assumptions of the appraisal, presentation and analysis of data and addenda.
• Natural Increase and Migration Method
  • Updating technique that uses information from the most recent Census of Population about the number of resident females in the primary childbearing years, the fertility rate of women in this age category, the number of annual births per thousand, the survival rate, or its complement, the death rate, by age category to estimate current population.
• Near Twin Approach
  • In trade area analysis, the use of the trade area for a comparable or similar establishment to estimate the trade area for the subject property. The characteristics that determine comparability are internal factors such as age/condition of the structure, floor plan and layout, structural design, cleanliness, attractiveness, etc.; and external factors such as location of competition, the street network serving the property, traffic volume, curb cuts and turn lanes, time/distance to customer, and the characteristics of the customers (economic, demographic, and psychographic) and their expenditure patterns and habits.
• Negative Amortization
  • The difference between the loan payment and the amount of interest charged when the loan payment is less than the interest charged per period; in effect the loan balance increases each period by the amount of interest unpaid. This generally occurs in mortgages with initially low payments that increase at some point in time. Mortgages with negative amortization usually require higher interest rates or larger down payments.
• Negative Cash Flow
  • A circumstance occurring when either the operating expenses are greater than the total income generated by an investment or the operating expenses plus any annual debt service payment is greater than the income generated in any one year.
• Negative Externalities
  • Forces from outside the property's boundaries that cause the property value to decrease.
• Negative Leverage
  • The cost of borrowed funds is greater than the free and clear internal rate of return (IRR) on the property.
• Neighborhood
  • A geographical area delineated by geographical or political boundaries that is characterized by having complimentary land uses.
• Neighborhood Analysis
  • The objective analysis of observable and/or quantifiable data indicating discernible patterns of urban growth, structure, and change that may detract from or enhance property values.
• Neighborhood Boundaries
  • Borders that surround the area that influences the value of a subject property; may coincide with changes in prevailing land use, occupant characteristics, or physical characteristics.
• Neighborhood Center
  • A retail property type that is designed to provide convenience shopping for the day-to-day needs of consumers in the immediate neighborhood; normally anchored by a supermarket or drugstore, supported by stores offering pharmaceuticals and health-related products, sundries, snacks, and personal services; usually configured as a straight-line strip with no enclosed walkway or mall area, although a canopy may connect the storefronts.
• Neighborhood Life Cycle
  • The changes that occur in a neighborhood over time; the cycle is defined by four stages: growth, stability, decline, and revitalization. Gentrification is not part of the natural neighborhood life cycle.
• Neighborhood Shopping Center
  • A shopping center that measures approximately 30,000 to 100,000 square feet with 15 to 20 retail or convenience store spaces (e.g., barber shop, laundry) and is typically anchored by a supermarket. It may consist of more than one building with a common parking area and management.
• Neoclassical Theory
  • A theory of value popular in the late nineteenth and early twentieth centuries that stressed supply and demand as factors for determining value.
• Nelson Technique
  • An approach to estimating the retail trade area (and sales/revenue potential) for a given establishment or center.
• Net Absorption
  • A measurement of the net change of the supply of commercial space in a given real estate market over a specific period of time; measured by deducting commercial space vacated by tenants and made available on the commercial space market from total space leased up.
• Net Asset Value (NAV)
  • The value of an individual asset or portfolio of real estate properties net of leveraging or joint venture interests.
• Net Income
  • With reference to property level performance calculations: accrual basis net income of the property (which would ultimately be consolidated into the fund’s net investment income).
• Net Income Multiplier (NIM)
  • The ratio of the price or value of a property divided by its net operating income; the reciprocal of the overall rate.
• Net Investment Income (NII)
  • With reference to fund level performance calculations: accrual basis net investment income for the consolidated fund as reported in the financial statements.
• Net Income Ratio (NIR)
  • The ratio of net operating income divided by effective gross income.
• Net Lease
  • A contractual agreement where a lessee pays a portion or all taxes, insurance fees, and maintenance costs for a property in addition to rent; in its purest form, the tenant is expected to pay for all the costs related to a property as if the tenant were the actual owner.
• Net Leasable Area
  • Floor space that can be rented to tenants; the space that is available for rent; generally, excludes common areas. Also known as “net rentable area.”
• Net Migration
  • The number of migrants into the county less the number of migrants out of the county.
• Net-Net-Net Lease
  • A lease in which the tenant pays all operating expenses including taxes, insurance, and maintenance.
• Net Occupied Area
  • The amount of space occupied by tenants.
• Net Operating Income (NOI)
  • A before-tax computation of gross revenue less operating expenses and an allowance for anticipated vacancy.
• Net Present Value (NPV)
  • The discounted value of all future cash flows minus the initial cash outlay. A net present value greater than zero is acceptable.
• Net Realizable Value
  • A specific value definition used by accountants when classifying loan losses.
• Net Rentable Area
  • Floor space that can be rented to tenants; the space that is available for rent; generally, excludes common areas. Also known as “net leasable area.”
• Net Rented Area
  • The amount of space in the building(s) under legal lease to tenants, whether the space is utilized or not. Distinguished from net leasable area.
• Net Sales Proceeds
  • Proceeds from the sale of an asset or part of an asset less brokerage commissions, closing costs, legal and marketing expenses.
• Neutral Leverage
  • The cost of borrowed funds is the same as the free and clear internal rate of return (IRR) on the property.
• Nominal Alpha
  • The actual over (under) return relative to the market (benchmark) without taking risk into account; calculated as actual return less benchmark return.
• Nominal Interest Rate
  • The stated rate of interest in a note or contract; it does not necessarily equal the effective annual rate or effective rate of interest.
• Nominal Tax Rate
  • The stated tax rate, which does not necessarily correspond to the effective tax rate.
• Nomogram
  • A diagram, chart or arrangement of scales used for the graphic solution of problems with fixed numerical relationships.
• Non-Amortizing Debt/Loan/Mortgage
  • A type of loan in which payments on the principal are not made until a lump sum is required; generally, requires a higher interest rate due to the unsecured nature of the loan and lower installment payments, reducing the cash flow to the lender.
• Non-Basic Industry
  • A service or support industry in an area; the opposite of a basic industry that generates income from outside the area.
• Non-Compete Clause/Provision
  • 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.
• Non-Conforming Use
  • A use of property that does not comply with the applicable zoning ordinance. Uses that differ noticeably from prevailing uses in a neighborhood.
• Non-Conventional Mortgage
  • A mortgage that is insured or guaranteed by a government agency or private insurance company (e.g., Federal Housing Administration or Veterans Administration).
• Non-Discretion or Non-Discretionary
  • The level of authority granted to an adviser or investment manager over the investment and management of client capital that permits only the undertaking of specific tasks that are authorized on a per task basis; in general, the investor retains the decision on whether to invest.
• Non-Diversifiable Risk
  • The risk inherent to the entire market that cannot be mitigated or reduced through diversification; also known as “market risk’’, “systematic risk’’, or “undiversifiable risk.”
• Non-Realty Interests
  • Property rights that might be purchased with real estate, land, buildings, and fixtures, that are either tangible or intangible personal property such as furniture in a hotel or the franchise (business) value of the hotel.
• Non-Recourse
  • The concept of a lender not having the right to pursue recovery from any assets of a borrower other than those assets specifically given as collateral.
• Non-Recourse Debt/Loan/Mortgage
  • A debt financing obligation issued to a company or an individual by a bank or similar financial institution wherein a lender does not have the right to pursue recovery from any assets of a borrower other than those assets given as collateral.
• Non-Residential Property
  • Property that is not used as a permanent dwelling; includes property types such as: office, industrial, retail, hotel, and special purpose properties.
• Non-Specialized Office Space
  • Speculative space that has no special facilities and is suitable for general office tenants.
• Non-Speculative Office Space
  • Space custom-designed and built for the exclusive occupancy of a particular office user.
• Non-Structured Questionnaire
  • A questionnaire with no fixed list of questions, and an attempt is made to develop a free interchange between the interviewer and the respondent about a specific problem or issue.
• Non-Transferable Debt/Loan/Mortgage
  • A debt financing obligation issued to a company or an individual by a bank or similar financial institution that is prohibited by the terms of the loan from being assumed by any other party.
• Normal Curve
  • In statistics, a symmetrical, bell-shaped curve that represents a probability distribution of numbers in which 68.3% of the values in the distribution fall within plus or minus one standard deviation of the mean, 95.4% of the values fall within plus or minus two standard deviations of the mean, and 99.7% fall within plus or minus three standard deviations of the mean. The values in the distribution can be derived from a large sample of any type of population.
• Normal Probability Distribution
  • In statistics, a continuous, symmetrical, probability distribution that can assume any number between negative infinity and positive infinity and is described by the mean value and standard deviation of the numbers in the distribution. It can be graphed as a bell-shaped curve. Many types of statistical analysis, including regression analysis, rely on some sort of assumption regarding a normal probability distribution.
• Note
  • A legal document that acknowledges a promise to pay a specified debt.
• Nuisance
  • A land use that is incompatible or that interferes with the surrounding land uses (e.g., activities that produce excessive noise or pollution in a residential area, a junkyard in a residential or other highly visible area, or activities that are not socially acceptable). A nuisance is avoided through private deed restrictions and zoning laws.
• Numerator
  • The number above the line in a common fraction showing how many of the parts indicated by the denominator are taken.

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O

• Observed Depreciation
  • The loss in utility hence in value of a building or component, as compared with a new building or component, that is identified from direct inspection of the premises, detailed estimates of accrued physical deterioration, studies of functional deficiencies or defects, and other observable conditions affecting the property and its desirability to potential users and/or purchasers.
• Obsolescence
  • A loss in value resulting from defects in design or forces outside the boundaries of a property; may be either functional or external. See also accrued depreciation, curable functional obsolescence, external obsolescence, incurable functional obsolescence.
• Occupancy Cost
  • The outlay of funds necessary to maintain occupancy in a property; does not include expenses directly attributable to the operation of a business.
• Occupancy Rate
  • The ratio of rented or used space to the total amount of available space.
• Off-Site Improvements
  • Physical improvements that affect the use and the value of a parcel of land but that are not directly located on the land (e.g., streets, curbs, traffic signals, and water and sewer mains).
• Offer
  • A proposal to purchase property at a specified price and terms.
• Office Building
  • A building used primarily by companies to conduct business.
• Office Classifications – Class A
  • The property has an excellent location and access; the building is in good to excellent physical condition and meets or exceeds building code requirements, returns are competitive with new construction.
• Office Classifications – Class B
  • The property has a good location, construction and physical condition are good and meet code, but the building suffers from some functional obsolescence and physical deterioration; rents are below new construction.
• Office Classifications – Class C
  • The property is an older building (15-25 years) and may not meet code; the building suffers physical deterioration and function obsolescence, but remains part of the active supply, with reasonable occupancy rates at generally lower rents than Class B buildings.
• On-Site Improvements
  • Physical improvements that are constructed within the boundaries of a parcel of land (e.g., buildings, structures and other support facilities installed within the boundaries of the property).
• One-Hundred Percent Location
  • A specific area in a city considered to be the prime location.
• Open Space
  • Land that has not been improved with buildings; such land is often left by a developer in a subdivision for recreational use and enjoyment by all the property owners.
• Open Steel Construction
  • A type of construction in which a rigidly connected steel frame that is unwrapped, or without fire-proofing, carries all loads directly to the foundation and footings; in a multistory structure, the exterior walls are carried on this framework, usually at each level.
• Open-End Fund
  • A collective investment vehicle in which interests are continuously offered and investors are generally permitted to redeem their equity interests subject to limited timing and notice requirements.
• Open-End Mortgage
  • A mortgage that allows the mortgagor to borrow additional sums based on specified conditions such as minimum asset to debt ratios.
• Operating Expense Ratio (OER)
  • The ratio of total operating expenses divided by effective gross income.
• Operating Expense Risk
  • The risk of a negative impact associated with the continuous financial obligations incurred in the daily operation of the business.
• Operating Costs
  • Cash outlays necessary to operate and maintain a property (e.g., real estate taxes, property insurance, property management and maintenance expenses, utilities, and legal or accounting expenses). Also known as “operating expenses.”
• Operating Expenses
  • Cash outlays necessary to operate and maintain a property (e.g., real estate taxes, property insurance, property management and maintenance expenses, utilities, and legal or accounting expenses). Also known as “operating costs.”
• Operating Property
  • Includes any asset which has been completed and/or placed into service for 12 months or is at least 60% leased, whichever occurs sooner.
• Opportunity Cost
  • The principle that the cost of a resource for one use is the value of the resource in its best alternative use.
• Optimum
  • The best or most desirable under the circumstances.
• Option
  • A legal contract that allows one to buy, sell, or lease real property within a specified time limit under specified terms.
• Option Term
  • The time period specified in an option agreement over which an option can be executed.
• Option to Renew
  • In a lease, a clause that gives the tenant the right to lease the same property under specified conditions after the current lease has expired.
• Oral Report
  • A complete unwritten appraisal report that contains an introduction, assumptions of appraisal, presentation and analysis of data and addenda; it must be based on the same facts and conclusions as a written report.
• Orchard
  • A planting of uniformly spaced fruit- or nut-bearing trees. Primary considerations in appraising an orchard include an in-depth knowledge of the particular variety of tree, its characteristics, stage of development, production, and requirements.
• Ordinary Income
  • Income that is taxable by law; calculated as the net operating income minus interest and depreciation. Taxable income from sale of a property equals the capital gain.
• Original Cost
  • The actual cost of a property to its present owner; may differ from construction cost if the current owner did not construct the property.
• Origination Fee
  • Monetary charges to the borrower of a loan or mortgage by the lender for costs associated with issuing the loan.
• Other Income
  • In an operating statement, income received from sources other than the primary source of income, such as vending and parking; does not include income received from rents.
• Outlet Center
  • A retail property type consisting mostly of manufacturers’ outlet stores selling their own brands at a discount; normally not anchored and usually in rural or occasionally in tourist locations; usually configured in a strip, although some may be in enclosed malls or village clusters.
• Outliers
  • Observations that have unusual values, that is, they differ markedly from a measure of central tendency.
• Outparcel
  • A parcel of land adjacent to a shopping center that is improved such that it can be used by a tenant. Typical users of outparcels include banks and fast-food franchises.
• Outsourcing
  • A practice of a firm hiring third-party labor to replace services previously performed in-house.
• Outstanding Balance
  • The loan balance divided by the original principal.
• Overage Rent
  • The additional rent (over a base amount) that is paid by tenants to owners on tenant sales over a specified dollar amount; frequently found in retail leases. Also known as “percentage rent.”
• Overall Capitalization Rate
  • A single year's cash flow ratio that is calculated by dividing the net operating income by the total value of the property.
• Overall Yield Rate
  • The discount rate that equates the present value of the NOI and resale proceeds with the purchase price. Sometimes referred to as a free and clear yield because it does not consider financing.
• Overhead Expenses
  • The expenses incurred in directing or conducting a business (including the construction process), as distinguished from the expense of manufacturing, selling, and financing. The items included depend upon the nature of the business, but usually encompass such items as salaries of officers, rent of offices, or office and general expenses. Also known as “administrative expenses.”
• Over-Improvement
  • A type of functional obsolescence that is caused by a structural component that is too large or of a higher quality than what is needed for the highest and best use of the property; an item in which its cost exceeds its value.
• Override Fee
  • A commission fee paid to a broker as additional compensation.
• Overstored Trading Area
  • A geographic area with so many stores selling a specific good or service that some retailers will be unable to earn an adequate profit.
• Owner of Record
  • The person or entity named in the public record as the owner of a property or mortgage.
• Ownership of Real Property
  • Possession of real estate rights or interests; may be partial or full ownership.

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P

• Paired Data Analysis
  • A procedure used in the direct sales comparison approach to estimate values of specific property characteristics in order to find a value of the subject property; property sales are paired by similar property characteristics. Ideally, the properties are the same except one characteristic. The difference in sale price can then be attributed to the difference in this characteristic. However, usually several adjustments must be made to paired sales to isolate the effect of one characteristic.
• Panelboard
  • A single integral enclosed unit including cabinet buses and automatic overcurrent protective devices, with or without manual or automatic control devices, for the control of electric circuits; designed to be accessible only from the front.
• Par Value
  • The face value of an item of intangible property that has both a stated face value and a fluctuating market value; applied especially to corporate stocks.
• Parallel Fund
  • An investment vehicle generally established to make the same investments and dispositions of assets at the same time as the main fund to which it is related; generally, have substantially the same terms as the main fund and are formed to accommodate the tax, regulatory or other requirements of the investors that are investing through the parallel fund.
• Parameter
  • Refers to a numerical characteristic of a population that is of interest for analysis or inference; it is a fixed, unknown value that describes a particular feature of the entire population.
• Parcel
  • Land within a set of defined boundaries. Also known as “lot”, “parcel” or “tract.”
• Pari-Passu
  • A Latin phrase meaning “equal footing” that describes situations where two or more assets, securities, creditors, or obligations are equally managed without preference.
• Parking Area
  • The area of a facility, such as a shopping area, industrial plant, or supermarket, used to park automobiles of customers and/or employees.
• Parking Index
  • The ratio of the number of parking bays occupied in a time duration to the total space available; gives an aggregate measure of how effectively parking space is utilized.
• Parking Ratio
  • The total rentable square footage of a property divided by the number of parking spaces; typically expressed as a ratio of spaces per 1,000 square feet.
• Parquet Floor
  • A floor that is laid in short pieces of hardwood arranged in various patterns such as rectangular or square patterns.
• Partial Interest
  • A single interest in the real estate that represents less than the full bundle of rights; also known as “fractional interest.”
• Partial Release
  • A mortgage clause in a blanket mortgage in which the lender agrees to release certain parcels from the mortgage lien upon payment of a specified amount by the mortgagor; frequently found in tract development construction loans.
• Partial Taking
  • The exercise of the power of eminent domain by the government in which part of a private property is taken for public use upon payment of just compensation.
• Partially Amortizing Mortgage
  • A loan in which the periodic payments are less than the interest charged per period, therefore the loan is not fully amortized at maturity and the outstanding balance must be repaid in one lump sum upon maturity.
• Participation Debt/Loan/Mortgage
  • A debt financing obligation issued to a company or an individual by a bank or similar financial institution which allows the lender to share in part of the income, or resale proceeds, of a property; as such, the lender becomes an equity partner in the purchase, rather than just a mortgage issuer.
• Participation Rate
  • Employment by residence site divided by population.
• Partition
  • The division of real property into separately owned parcels according to the owners' proportionate shares; usually pursuant to a judicial decree; severs the unity of possession, but does not create or transfer a new title or interest in property.
• Partnership
  • An association of two or more persons or entities for the purpose of carrying out an investment or business for profit and for sharing of both profits and losses.
• Partnership Interest
  • An ownership interest in a partnership.
• Party Wall
  • A wall erected on a property line for use of both property owners.
• Party-in-Interest
  • Any fiduciary, legal counsel, employee of an employer-sponsored benefit plan, or service provider to the plan.
• Party-in-Interest Transaction
  • An otherwise legitimate transaction that is prohibited under the Employee Retirement Income Security Act (ERISA).
• Pass-Through
  • The tax advantage of a partnership or real estate investment trust that permits cash flows and deductions, especially depreciation, to "pass through" the legal structure of the partnership directly to the individual investors. It could also refer to expenses billed directly to a tenant as a result of expense stop provisions in a lease.
• Pass-Through Entity
  • A special business structure that is used to reduce the effects of double taxation.
• Pass-Through Lease
  • A lease that requires some expenses to be paid by tenants. For example, insurance, taxes and utilities or a percentage of insurance, taxes and utilities may be paid by the tenant.
• Payback Period
  • The time required for cumulative income from an investment to equal the amount initially invested. Usually calculated to the next whole year. It does not consider the time value of money and, therefore, is not a discounted cash flow analysis technique.
• Penetration Rate
  • The estimated percentage of a total market that is currently absorbed by existing facilities or is projected to be absorbed by expected construction. Also known as “capture rate.”
• Penthouse
  • A building on the roof a structure that contains elevator machinery, ventilating equipment, etc.
• Percent Complete
  • The total of man-hours of labor (by type) expended, materials quantities installed, equipment and machinery incorporated into total construction activity to date, expressed as a percentage of total labor man-hours, materials quantities, equipment, and machinery forecasted or budgeted to be required to complete construction of a facility fully ready to operate. All estimates and calculation are made as of a given date (usually the valuation date).
• Percent Installed
  • Total installed costs on a given date, expressed as a percentage of total booked costs (or CWIP) as of that same date.
• Percentage Adjustments
  • The adjustment of the price of a comparable property when the amount of adjustment is based on a percentage of either the price of the subject property or a percentage of the price of the comparable property.
• Percentage in Point (PIP)
  • A unit of change in an exchange rate of a currency pair. Also known as “price interest point.”
• Percentage of Completion Method
  • A system of recording construction contract income in which income is estimated by the percentage of construction completed. Performance is often measured by the amount of costs incurred.
• Percentage of Loan Paid Off (P)
  • The amount of principal on loan that has been paid off divided by the original amount of principal as of a specific time.
• Percentage Rent
  • The additional rent (over a base amount) that is paid by tenants to owners on tenant sales over a specified dollar amount; frequently found in retail leases; also known as “overage rent.”
• Perceptual Distance
  • A concept that focuses on consumer perceptions about distance and travel time from one site to another. Consumers perceive the distance or time to be different from its actual figures. Pleasant circumstances can make subjective distance shorter than actual distance and time. Unpleasant circumstances have the opposite effect. Also known as “subjective distance.”
• Percolation Test
  • A test conducted by a hydraulic engineer to determine the ability of soil to absorb and drain water; helps to determine the suitability of the site for certain types of development and septic tanks.
• Performance Allocation
  • A form of incentive fee compensation paid to a fund general partner in the form of an allocation of the profits of the fund, typically calculated as a set percentage of the profits of the fund after returning the investors’ capital contributions and a preferred rate of return; designed to ensure that a general partner’s interest is aligned with the limited partners’ interests. Also known as “carried interest,” “carry,” and “promote.”
• Performance Attribution
  • The decomposition of the total investment performance into additive components so as to attribute the total performance to sources that may reflect various investment management functions. Also known as “attribution analysis”
• Performance Fee
  • Fee paid to advisers or managers based on returns to investors, often packaged with a modest acquisition and asset-management fee structure.
• Permanent Loan
  • A long-term loan that is used to finance a completed structure; proceeds from the permanent loan are often used to pay off a temporary loan such as a construction loan.
• Personal Property
  • Consists of every kind of property that is not real property; movable without damage to itself or the real estate; subdivided into “tangible personal property” and “intangible personal property.”
• Perpetual Easement
  • An easement that lasts forever.
• Perpetuity
  • (In finance) a perpetuity refers to a financial instrument or investment that promises a series of equal cash flows that continue indefinitely into the future. Unlike most financial assets or loans that have a fixed maturity date, a perpetuity has no specific end date, making it an infinite stream of periodic payments.
• Personal Property
  • According to the Uniform Standards of Professional Appraisal Practice, identifiable, portable, and tangible objects which are considered by the general public as being "personal" (e.g., furnishings, artwork, antiques, gems and jewelry, collectibles, machinery, and equipment); all property that is not classified as real estate.
• Phase I Environmental Site Assessment (ESA)
  • A study of a property and its surrounding area to determine whether there are any hazards to the environment and human health; if issues are found, it presents a potential liability for the lender and/or owner, as well as affecting the value of the property; completed prior to the closure of a real estate transaction and can be used to satisfy the requirements of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) innocent land owner defense under the All Appropriate Inquiries (AAI) rule.
• Phase II Environmental Site Assessment (ESA)
  • A study of a property and its surrounding area to determine whether there are any hazards to the environment and human health triggered when a Phase I Environmental Site Assessment (ESA) identifies a Recognized Environmental Condition (REC) or the potential for soil contamination; determines the presence, or absence of, petroleum products or hazardous waste in the subsurface of a site and includes sampling and laboratory analysis to confirm the presence of hazardous materials.
• Phase III Environmental Site Assessment (ESA)
  • A study of a property and its surrounding area to determine whether there are any hazards to the environment and human health triggered by the confirmation of environmental contaminants discovered during a Phase II Environmental Site Assessment (ESA); determines the extent of environmental contaminants and the amount of soil and groundwater impacted; allow parties involved to develop a Remedial Action Plan (RAP) to remove environmental contaminants from the property.
• Physical Age-Life Method
  • A method of estimating incurable physical deterioration in which the deterioration is calculated by multiplying the ratio of effective age divided by the total physical life of the item by the reproduction or replacement cost of the item minus any curable physical deterioration already charged.
• Physical Characteristics
  • The tangible aspects of real estate. Also known as “physical data.”
• Physical Data
  • The tangible aspects of real estate. Also known as “physical characteristics.”
• Physical Depreciation
  • The loss in property value due to age, wear and tear, any negative functional superadequacy or deficiencies and/or external forces.
• Physical Deterioration
  • The loss in property value due to age, wear and tear, any negative functional superadequacy or deficiencies and/or external forces.
• Physical Life
  • The typical age of a structure equivalent to the one in question with respect to its utility and condition, as of the appraisal date.
• Physical Obsolescence
  • The reduction in a property’s value due to gross mismanagement and physical neglect resulting in deferred maintenance; however, physical deterioration in itself is not a form of obsolescence that is too costly to repair.
• Physically Possible
  • One of four criteria in highest and best use analysis; for a use to be the highest and best use, the size, shape, and terrain of the property must be able to accommodate the use.
• Physiocrat
  • A theory of value popular in the mid-eighteenth century; it stressed the use of land and agricultural productivity as the source of wealth.
• Pier and Beam Foundation
  • A type of foundation in which piers resting on footings support beams or girders, which in turn support the superstructure. A relatively inexpensive type of foundation, it is often used for resort houses, porches, and outbuildings, but rarely used for residential homes because of building code restrictions.
• Piles
  • A wood timber or other tube that is driven into the ground to support the foundation of a building or pier; used in soils with low load bearing capacity.
• Pipeline Analysis
  • An analysis of the amount of space or the number of units that are currently in the construction phase.
• Pitch
  • In construction, the slope of a roof measured as the vertical distance in inches (rise) divided by the horizontal distance in feet (span).
• PITI (Principal, Interest, Taxes and Insurance) Ratio
  • A residential real estate underwriting term referring to the maximum percentage of the borrower's income (either gross or net) that may be allocated to total PITI on the property.
• Placement Agent
  • An intermediary who raises capital for investment funds; professional placement agents are required to be registered with the security’s regulatory agency in their jurisdiction, such as (in the US) the Securities and Exchange Commission (SEC)
• Plank and Beam Framing
  • In construction, a type of framing in which beams are placed up to eight feet apart and are supported by posts and exterior walls; frame members are much heavier than in other types of framing; popular in colonial houses and barns and gaining some popularity in the 1970s. Also known as “post and beam framing.”
• Planned Unit Development (PUD)
  • A class of zoning for a subdivision that sets density limits for a development but allows for the units to be laid out in clusters in order to provide for common open space.
• Plans and Specifications
  • Working papers used in construction. Plans include all drawings pertaining to the property under consideration (e.g., building drawings, mechanical drawings, electrical drawings, etc.). Specifications are written instructions to the builder that contain information pertaining to dimensions, materials, workmanship, style, fabrication, colors, and finishes; they supplement the detail indicated on the working drawings.
• Plant
  • The tangible property used in conducting a manufacturing business, including land, buildings, fixtures, machinery, appliances, tools, and everything in which capital is invested or by which the work is accomplished but not including the material used or produced.
• Plat
  • A map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements.
• Plat Book
  • A public record of maps that identify the location, size, and owner of individual parcels of land in a specified area.
• Platform Framing
  • In construction, a type of framing in which the building is constructed one story at a time. Studs are cut at the height of each story, horizontal plates are laid on top, then the next story studs are attached and so on, so that each story serves as a platform for the next; the most common type of framing.
• Plot
  • Land within a set of defined boundaries. Also called a parcel, plot, or tract.
• Plot Plan
  • A map that shows the arrangement of improvements on a lot; includes details such as location, size of improvements, parking areas and landscaping.
• Plottage
  • An increment of value that results when extra utility is created by combining two or more sites under a single ownership.
• Plumbing System
  • The piping and fixtures necessary to carry water, wastes and other fluids to and from a building. Piping consists of a large part of the cost of the plumbing system and may or may not be constructed to last for the life of the building. Water is carried through pipes under pressure, whereas waste pipes depend on gravity.
• Point-Of-Origin Survey
  • Customer survey designed to determine what the primary trading area of a retail facility is by asking customers their home address. These addresses are pinpointed on a street map allowing the researcher to delineate the trading area of a retail facility. Generally speaking, a minimum sample size of three hundred is required to obtain a reasonable degree of accuracy.
• Points
  • A one-time charge paid to the lender for issuing a loan.
• Police Power
  • The governmental right to regulate property for the purpose of protecting public safety, health, and general welfare (e.g., condemnation, rent control zoning).
• Pollution Control Equipment
  • Equipment required by regulations or standards established under federal and state laws to correct hazards to health and safety leading to the contamination of the physical environment, (especially air and water) by smoke, smog, fumes, light, noise, effluent, hazardous radiation, and other emissions, including those from nuclear or other electric generating plants.
• Portfolio Deal
  • A single transaction involving the sale of multiple buildings or companies.
• Positive Cash Flow
  • A circumstance wherefore in a year either the operating expenses are less than the total income generated by an investment or the operating expenses plus any annual debt service are less than the income generated.
• Positive Externalities
  • Economies or diseconomies outside a property's boundaries that cause the property value to increase.
• Positive Leverage
  • The cost of borrowed funds is less than the free and clear internal rate of return (IRR) on the property. Also known as “favorable leverage.”
• Post and Beam Framing
  • In construction, a type of framing in which beams are placed up to eight feet apart and are supported by posts and exterior walls; frame members are much heavier than in other types of framing; popular in colonial houses and barns and gaining some popularity in the 1970s. Also known as “plank and beam framing.”
• Potential Demand
  • The desire or need for real estate. Potential demand represents the quantity of real estate of a particular type that would be taken off the market by being purchased.
• Potential Gross Rent
  • The total rent a property would produce if 100 percent occupied at market rent.
• Potential Gross Income (PGI)
  • The sum of potential gross rent and miscellaneous income; the income from rent and other sources that a property could generate with normal management, before allowing for vacancies, collection losses, and normal operating expenses.
• Potential Gross Income Multiplier (PGIM)
  • The ratio calculated by dividing the sales price of a property by its potential gross income.
• Power Center
  • A retail property dominated by several large anchors, including discount department stores, off-price stores, warehouse clubs, or category killers (stores that offer tremendous selection in a particular merchandise category at low prices); typically consists of several freestanding (unconnected) anchors and only a minimum amount of small specialty tenants.
• Power Plant
  • A plant, within a structure or building, that generates power from coal, gas, oil, or water for its own use or for commercial distribution to other; includes engines, dynamos, etc.
• Precision
  • Refers to replication of estimates. Estimates are precise if they are close together. If the analyst uses two or more techniques to measure the same value (i.e., population) and the estimates are close together, the estimates are precise.
• Pre-Engineered Building
  • A building constructed of predesigned, manufactured, and assembled units (e.g., wall, framing, floor, and roof panels that are erected at the construction site).
• Preferred Debt/Loan/Mortgage
  • A financial obligation that has priority over other types of debt.
• Preferred Return
  • A profit distribution preference whereby profits, either from operations, sale, or refinance, are distributed to one class of equity before another until a certain rate of return on the initial investment is reached.
• Preliminary Drawings
  • The initial project plans of a construction, development, or tenant improvement project that are produced to convey concepts, design ideas, and establish an understanding among professionals, clients, and project stakeholders.
• Prepaid Interest
  • Interest that is paid before it is due.
• Prepayment
  • The act of paying all or a portion of an outstanding loan balance prior to the contractually agreed date for such payment.
• Prepayment Penalty
  • A fee charged by a lender to allow a loan to be paid before it is due; usually calculated as a percentage of the loan.
• Prepayment Privilege
  • A mortgage provision that allows the mortgagor to pay off part or all the loan before it is due.
• Presale
  • The sale of a property before it is constructed; sometimes required by lenders before funds will be loaned on a multi-unit project such as a condominium. In some states, the developer must obtain a preliminary public report before the presale is binding.
• Prescription
  • The acquisition of a right to property through adverse possession for a continuous and uninterrupted period of time as specified by a state statute.
• Present Value (PV)
  • The current value of a payment or series of future payments found by discounting the expected payments by a desired rate of return in order to compensate for the time value of money.
• Preservation Easement
  • An easement that prevents certain physicals changes from being made in an historic property; usually based on the condition of the property at the time the easement is made, or immediately after a proposed restoration.
• Pre-Tax Cash Flow (PTCF)
  • Income that remains from net operating income (NOI) after debt service is paid, but before ordinary income tax on operations is deducted. See also after-tax cash flow, net operating income. Also known as “equity dividend” and “pre-tax cash flow.”
• Price
  • The amount of money paid or asked for in a specific transaction; the price may include non-realty items such as personal property or a financing premium; it does not necessarily equal the market value.
• Price Interest Point (PIP)
  • A unit of change in an exchange rate of a currency pair; also known as “percentage in point.”
• Pricing Risk
  • The risk of a decline in the value of a security or an investment portfolio excluding a downturn in the market.
• Primary Data
  • Information gathered by the appraiser that is not available in a published source.
• Primary Members
  • The main load-carrying members of structural system, including the columns, end-wall posts, rafters, or other main support members.
• Primary Metropolitan Statistical Area (PMSA)
  • An area of more than one million population that consists of a large, urbanized county or a cluster of counties with very strong internal economic and social links; designated under standards set in 1980 by the Federal Committee of MSAs.
• Primary Mortgage Market
  • The interaction of lenders who originate loans for borrowers, usually service the loans, and bear the long-term financing risk.
• Primary Trade Area
  • A geographic area containing the customers of a particular firm or group of firms for specific goods or services; encompasses 50 to 80 percent of a store's customers; the area closest to the store and possesses the highest density of customers to population and the highest per capita sales. Also known as a “geographic core.”
• Prime Space
  • Typically refers to first-generation space that is available for lease.
• Prime Rate
  • The interest rate charged by commercial banks on short-term loans to their most reliable and credit-worthy customers.
• Prime Tenant
  • The major tenant in a building, or the major or anchor tenant in a shopping center.
• Principal and Interest Payment (P&I)
  • Money paid to a lender to decrease the principal and/or interest on a mortgage. The amount of the mortgage payment varies depending on the type of loan. On a level payment mortgage, the payment can be calculated as the annuity to pay the principal at the specified interest rate and mortgage term.
• Principal Loan
  • The amount of capital borrowed or remaining to be paid on an investment. Also refers to that portion of a loan payment that reduces the balance of the loan.
• Principal Market
  • The market in which the reporting entity normally would enter into a transaction to sell the asset or to transfer the liability; the market in which the reporting entity normally exits its leveraged equity positions.
• Principle (Appraisal)
  • The theories that attempt to explain the rationale of market behavior that affects value. Appraisal principles include the theories of anticipation, change, supply and demand, substitution, and balance.
• Private Placement
  • An offering of securities that is not registered with the Securities and Exchange Commission (SEC) and which are sold not through a public offering, but rather through a private offering, mostly to a small number of chosen investors.
• Private Placement Memorandum
  • An offering document for a private placement that contains relevant disclosures so that an investor may make an informed investment decision.
• Pro Forma(s)
  • Financial document(s) created in advance to show an expected financial transaction, status, or result.
• Probability
  • A percentage number that represents the likelihood that an event will occur.
• Probability Analysis
  • A study of the outcomes occurring under different scenarios.
• Probability Sampling
  • Sampling procedures based on the principle that each element in the population has a known chance of being selected into the sample.
• Probability Sampling Techniques
  • A set of sampling techniques that ensures that each member of the population has an equal and random chance of being selected for inclusion in the sample therefore permitting the use of probabilistic statistical inference methods to analyze the results; includes simple, stratified, and systematic random sampling.
• Proceeds of Resale
  • The lump sum payment received by an investor at resale of the investment.
• Profit
  • (In accounting) a fundamental financial metric that represents the excess of revenue over expenses during a specific period.
    
    (In economics) the residual that accrues to an entrepreneur after interest for capital, rent for land, and wages for labor and management are paid.
• Profit and Loss Statement
  • A record of the income and expenses incurred by a business during a specified time period. Also known as “income statement.”
• Profitability Index (PI)
  • The ratio of the present value of future cash flows at a specified discount rate divided by the initial cash outlay. It is similar to the net present value except that the initial cash outlay is divided into the present value of future cash flows instead of subtracted from the present value of future cash flows. A profitability index greater than one is acceptable.
• Pro-Forma Statement
  • A financial statement that contains forecasts of income and expenses from the operation of a real estate property based on a certain set of assumptions.
• Progression
  • An appraisal concept that states that the value of an inferior property is increased when it is associated with a superior property of the same type; opposite of regression.
• Prohibited Transaction
  • A certain transaction between a retirement plan and a disqualified person that is prohibited by law; two general types of transactions are prohibited: transactions with parties in interest and fiduciary self-dealing transactions; certain exemptions apply and can be statutory or granted by the US Department of Labor either on a class or individual basis.
• Prohibited Transaction Safe Harbor
  • Under Internal Revenue Code (IRC) Section 857(b)(6)(C) safe harbor provides that the term “prohibited transaction” does not include a sale of property that is a real estate asset if certain requirements are met.
• Project Cost
  • The total cash outlay needed to complete a project; includes costs such as those needed to obtain construction, land, equipment, financing, and professional compensation.
• Projected Income
  • The amount of net cash flow forecasted for a future period; may be used in the income approach.
• Projection
  • A mathematical process of extending historical trends into the future using either straight-line or curvilinear formula solutions.
• Projection Period
  • The term of ownership or expected ownership of an investment. In appraisal, the projection period used reflects the appraiser's estimate as to what the typical expected projection period would be for a particular property.
• Promissory Note
  • A legal document that acknowledges a promise to pay a specified debt.
• Promote
  • A form of incentive fee compensation paid to a fund general partner in the form of an allocation of the profits of the fund, typically calculated as a set percentage of the profits of the fund after returning the investors’ capital contributions and a preferred rate of return; designed to ensure that a general partner’s interest is aligned with the limited partners’ interests. Also known as “carried interest,” “carry,” and “performance allocation.”
• Property
  • The right held by an entity to possess, to use, to encumber, to transfer and to exclude an item. The item may be tangible or intangible and be classified as real, personal, or non-real.
• Property Characteristics
  • Physical and functional features of the property including the site and structural characteristics that underlie the demand for the property or the space on the property.
• Property Condition Assessment Report
  • An evaluation of a commercial real estate asset based on a thorough inspection, including all improvements and all the systems of each building on the property; purpose of which is to observe and report on the physical condition of the subject property and to provide professional recommendations regarding future issues including financial risk or liability to the client.
• Property Insurance
  • Protection by an owner/user against the risk of a certain loss or disastrous event.
• Property Manager
  • A professional or company that is responsible for the operation and oversight of income producing real estate; property managers market, maintain, and operate rental property on behalf of a landlord.
• Property Residual Technique
  • An outdated term applied to an appraisal technique used to find the value of a total property by discounting all expected future cash flows from operation and resale using a property discount rate.
• Property Rights
  • The privileges associated with the ownership of real estate; includes rights such as the right to sell, lease, occupy or use. They may be divided separately of the real estate itself.
• Property Stacking Plan
  • A visual representation of a commercial structure that shows the tenants on each floor, the square footage of each floor, when each tenant’s lease will expire, and other pertinent information.
• Property Tax
  • An ad valorem tax issued by the government based on the assessed value of property; a government levy based on the assessed value of privately-owned property.
• Property Tax Assessment
  • The valuation of real property for tax purposes based on appraisals by local government officials.
• Property Tax Base
  • The total worth of all assessed properties in an assessment or tax district.
• Property Value (V)
  • The monetary worth of interests held in real estate arising from property ownership; a property may have several different values depending on the interest or use involved. Common methods of estimating property value include the cost approach, direct sales comparison approach, and income approach.
• Property Yield Rate
  • The discount rate that equates the present value of the NOI and resale proceeds with the purchase price. Sometimes referred to as a free and clear yield because it does not consider financing.
• Proportional Shift (Analysis)
  • Compares the local change in employment (growth or decline) of each industrial sector to the national change of that industrial sector to determine whether the industry is changing locally at a different rate from the nation. It compares the rate of change in the local industry's employment level to the rate of change in the same industry's employment at the national level.
• Proprietary Lease
  • In a multi-unit building, the lease a corporation provides to the stockholders which allows them to use a specific unit under the conditions specified.
• Prospective Value
  • A value opinion effective as of a specified future date; frequently sought in connection with projects that are proposed, under construction, or under conversion to a new use, or those that have not yet achieved sellout or a stabilized level of long-term occupancy.
• Prospectus
  • A formal document submitted to the Securities and Exchange Commission (SEC) by a company that wishes to market a debt or equity offering to the market.
• Protecting Americans from Tax Hikes Act of 2015 (PATH Act)
  • A US tax law created to protect taxpayers against fraud and permanently extend certain expiring tax laws; makes significant changes to provisions of the Internal Revenue Code (IRC) of 1986, as amended with respect to real estate investment trusts and the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA), and permanently extends some provisions that have been the subject of frequent extender legislation in prior years.
• Proximity Damage
  • In an eminent domain proceeding, the damage to the remainder caused by its nearness to the public improvement being constructed or by its nearness to unfavorable characteristics of the public improvement such as noise, dust, and such.
• Prudent Man Rule
  • The standard to which a fiduciary is held accountable under the Employee Retirement Income Security Act of 1974 (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."
• Psychographic Characteristics
  • Characteristics of potential buyers and tenants, includes their attitudes, habits, lifestyle, tastes, and preferences.
• Public Market Equivalent (PME)
  • A collection of performance measures developed to assess private equity funds and to overcome the limitations of the internal rate of return (IRR) and multiple on invested capital measurements.
• Public Restrictions
  • An application of police power by a local government that provides a legal mechanism for the government to regulate land use and density of development for privately owned real property. Zoning establishes areas with uniform restrictions regarding property characteristics such as property use (residential, commercial, etc.), improvement height, specifications for signs and billboards, and density of development.
• Punch List
  • Items yet to be completed during new construction based on an inspection by the buyer or tenant.
• Purchase Money
  • The outlay of funds, either equity or debt, used to obtain a property.
• Purchase-Money Mortgage
  • A mortgage taken back by a seller in lieu of cash from a buyer.
• Purchase Option
  • A provision in a lease, that gives the lessee an option to purchase the property.
• Purchasing Power
  • The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy.
• Purchasing Power Risk
  • The risk due to a decrease in purchasing power of assets or cash flow due to inflation; also known as “inflation risk.”
• Purpose of an Appraisal
  • The question for which the appraisal client seeks an answer (e.g., the market value as of a specific date or the value of a particular property interest as of a stated date).
• Pyramid Zoning
  • A type of zoning in which higher-zoned uses are allowed in lower-zoned areas.

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Q

• Quadrangle
  • A square-shaped land area, 24 miles on each side used in the government rectangular survey method of land description.
• Qualified Borrower
  • (In fund management) generally, a portfolio company of a borrower or a guarantor under the credit facility; a fund vehicle (often a holding company for an investment or a portfolio company) that is a borrower under a subscription-backed credit facility whose obligations are guaranteed by the fund vehicle itself.
• Qualified Buyer
  • A buyer who has demonstrated the financial ability to afford the asking price of a property.
• Qualified Business Income
  • The net amount of qualified items of income, gain, deduction and loss from any qualified trade or business, including income from partnerships, S corporations, sole proprietorships, and certain trusts; generally, this includes, but is not limited to, the deductible part of self-employment tax, self-employed health insurance, and deductions for contributions to qualified retirement plans (such as, SEP, SIMPLE and qualified plan deductions).
• Qualified Client or Investor
  • An investor that meets as least one of the following requirements: (i) an individual with at least $1 million in assets under management with the advisor immediately after entering into an investment advisory contract with the advisor; (ii) an individual with a net worth of $2.1 million or more, either individually or jointly with a spouse, immediately before entering into an advisory contract, not including the value of their primary residence; (iii) an individual who matches the definition of a qualified purchaser at the time an advisory contract is enacted, including ownership of at least $5 million in investments; (iv) an individual with the position of executive officer, director, trustee, general partner, a person serving in a similar role, or the advisor; and/or (v) an employee of the advisor who is involved in the investment activities, and has been so for at least one year.
• Qualified Foreign Pension Fund (QFPF) or Plan (QFPP)
  • Under Internal Revenue Code (IRC) Section 897(I)(2), any trust, corporation, or other organization or arrangement) that satisfies five separate requirements: (i) created or organized under the law of a country other than the US, (ii) established (a) by such country (or one or more political subdivisions thereof) to provide retirement or pension benefits to participants or beneficiaries that are current or former employees (including self-employed individuals) or persons designated by such employees, as a result of services rendered by such employees to their employers, or (b) by one or more employers to provide retirement or pension benefits to participants or beneficiaries that are current or former employees (including self-employed individuals) or persons designated by such employees in consideration for services rendered by such employees to such employers, (iii) does not have a single participant or beneficiary with a right to more than five percent of its assets or income, (iv) subject to government regulation and with respect to which annual information about its beneficiaries is provided, or is otherwise available, to the relevant tax authorities in the country in which it is established or operates, and (v) with respect to which, under the laws of the country in which it is established or operates (a) contributions to such eligible fund that would otherwise be subject to tax under such laws are deductible or excluded from the gross income of such entity or arrangement or taxed at a reduced rate, or (b) taxation of any investment income of such eligible fund is deferred or such income is excluded from gross income of such entity or arrangement or is taxed at a reduced rate
• Qualified Organization (QO)
  • Includes qualified trusts under Internal Revenue Code (IRC) 401, educational organizations described in IRC 170(b)(1)(A)(ii) and their supporting organizations described in IRC 509(a)(3), and organizations described in IRC 501(c)(25).
• Qualified Plan
  • Any employee benefit plan that is qualified by the Internal Revenue Code (IRC) 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.
• Qualified Purchaser
  • Under Section 2(a)(51) of the Investment Company Act: (i) any natural person (including any person who holds a joint, community property, or other similar shared ownership interest in an issuer that is excepted under section 3(c)(7) with that person's qualified purchaser spouse) who owns not less than $5,000,000 in investments, as defined by the Securities and Exchange Commission (SEC); (ii) any company that owns not less than $5,000,000 in investments and that is owned directly or indirectly by or for two or more natural persons who are related as siblings or spouse (including former spouses), or direct lineal descendants by birth or adoption, spouses of such persons, the estates of such persons, or foundations, charitable organizations, or trusts established by or for the benefit of such persons; (iii) any trust that is not covered by clause (ii) and that was not formed for the specific purpose of acquiring the securities offered, as to which the trustee or other person authorized to make decisions with respect to the trust, and each settlor or other person who has contributed assets to the trust, is a person described in clause (i), (ii), or (iv); or (iv) any person, acting for its own account or the accounts of other qualified purchasers, who in the aggregate owns and invests on a discretionary basis, not less than $25,000,000 in investments.
• Quality of Construction
  • The character of the workmanship and materials used in the construction of a building.
• Quantity Survey
  • A method used by appraisers to estimate reproduction cost (new) of an improvement; detailed cost of all materials, labor, and overhead required to reproduce a structure.
• Query
  • A request for data or information from a database, database table or combination of tables.
• Quick Sale
  • A property sale that was made with the primary intention of selling in a short amount of time; it may not represent a market value for the property.
• Quiet Enjoyment
  • The right of an owner or any other person legally entitled to possession to the use of property without interference.
• Quiet Title Action
  • Court action to settle a title dispute.
• Quiet Title Suit
  • A suit in court to remove a defect, cloud on the title, or suspicion regarding legal rights of an owner to certain parcel of real property.
• Quitclaim Deed
  • A deed that conveys only the grantor’s rights or interest in real estate, without stating the nature of the rights and with no warranty of ownership.

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R

• R Value
  • A method of rating the insulating ability or heat conductivity of material. Materials with higher R-values are better able to insulate from heat transfer.
• Rafters
  • In construction, the structural members of a roof that support the roof load.
• Random
  • Without uniformity of dimension or design (e.g., in construction, masonry wall with stones placed irregularly, not in a straight course).
• Random Sample
  • In statistics, selection of an item in a population or group to be sampled by chance.
• Range
  • An interval in numbers ordered sequentially from the lowest to the highest number.
• Range Lines
  • In the rectangular survey system, a north-south line spaced six miles apart, used to define a township.
• Range of Value
  • In an appraisal report, the confidence interval in which the final estimate of a property's value may lie.
• Rate Analysis
  • A study of the validity of value estimations reached by using an overall capitalization rate in an appraisal report. The study analyzes the relationship of estimated resale prices to different yield levels, the sensitivity of the equity yield rate to fluctuations in value, and the inference of equity yield rates from market-derived overall capitalization rates.
• Rate of Performance
  • In utility accounting and analysis, the actual income or rate of return earned on an investment; in contrast to a rate of return allowed or permitted but not necessarily accomplished.
• Rating Agency
  • Independent firm engaged to rate the creditwortrpiis of securities for the benefit of investors.
• Ratio Analysis
  • An updating technique used in the absence of complete information that determines from past data the ratio between two known data elements, only one of which is currently known, adjusts it for intervening trends and subsequently multiplies it by the currently known value to derive the unknown element.
• Raw Land
  • Land that is vacant or has not been developed to a useful state. Also known as “unimproved land.”
• Real Estate
  • According to the Uniform Standards of Professional Appraisal Practice, an identified parcel or tract of land, including improvements, if any.
• Real Estate Market
  • The interaction of buyers and sellers who exchange real property rights for cash or other assets.
• Real Estate Market Cycle Risk
  • The risk of financial losses due to economic volatility associated the real estate market cycle.
• Real Estate Taxes
  • An ad valorem tax issued by the government based on the assessed value of property; a government levy based on the assessed value of privately owned property.
• Real Interest Rate
  • In financial theory, an interest rate that does not include a premium for anticipated inflation.
• Real Property
  • According to the Uniform Standards of Professional Appraisal Practice, the interests, benefits, and rights inherent in the ownership of real estate.
• Real Property Interest
  • Consists of the interests, benefits, and rights inherent in the ownership of land plus anything permanently attached to the land or legally defined as immovable; the bundle of rights with which ownership of real estate is endowed.
• Realty
  • According to the Uniform Standards of Professional Appraisal Practice, the interests, benefits, and rights inherent in the ownership of real estate.
• Reappraisal Lease
  • A lease in which rent is adjusted periodically according to the revaluation of the real estate. Also known as “revaluation lease.”
• Reassessment
  • The revaluation of real property to assign new assessed values for tax purposes based on appraisals by local government officials.
• Recapture
  • Depending on current tax laws, if capital gains are not taxed at the ordinary tax rate, any excess depreciation taken over the amount allowed under a straight-line method is taxed at the ordinary tax rate. This prevents the taxpayer from taking advantage of both accelerated depreciation and capital gain treatment.
• Recognized Environmental Condition (REC)
  • A term used to identify environmental liability within the context of a Phase I Environmental Site Assessment (ESA); indicates the presence or likely presence of any hazardous substances or petroleum products in, on, or at a property that is (i) due to release to the environment, (ii) under conditions indicative of a release to the environment, or (iii) under conditions that pose a material threat of a future release to the environment.
• Reconciliation
  • With reference to valuation: the final step in the valuation process wherein consideration is given to the relative strengths and weaknesses of the three approaches to value, the nature of the property appraised, and the quantity and quality of available data in formation of an overall opinion of value (either a single point estimate or a range of value).
• Reconstructed Operating Statement
  • A document that states estimated future income and expenses of a property in the proper format for calculating net operating income (NOI). Statements prepared for the property owner often have to be reconstructed because they include items for accounting purposes such as tax depreciation.
• Recording
  • The process of filing a legal document with the appropriate government agency so that a public record is created. Recording of the document protects the parties involved and gives constructive notice to the public.
• Recourse Debt/Loan/Mortgage
  • A debt financing obligation issued to a company or an individual by a bank or similar financial institution which provides the lender rights to assets beyond the secured collateral specified in the loan contract to cover full repayment of the borrower’s loan obligations in the event of default.
• Recoveries
  • Costs which are paid back to a landlord by a tenant; generally, includes property taxes, property insurance, maintenance and repair costs, and other operational expenses; at the end of the year (or the end of the lease), the landlord will reimburse the tenant if actual costs are less than expected costs; alternately, the landlord will bill the tenant any additional expenses that were not covered by their monthly tenant reimbursement bill. Also known as “expense reimbursements.”
• Recreational Lease
  • A written contract between a building owner and a tenant in which the right to occupy a property used for entertainment purposes (health clubs, tennis courts) is transferred to the tenant for a specific period of time in return for a specified rent. This type of lease is used primarily in residential condominium projects, and is often a long-term, net lease tied to the CPI.
• Recreation Room
  • A more informal room used for relaxation and entertainment, usually measuring at least 180 square feet and located near the kitchen. The concept evolved after World War II. Also called a “family room.”
• Recreational Property
  • An improvement constructed for entertainment purposes.
• Rectangular Survey Method
  • A method of legally describing land initially used by the federal government that describes land by east-west lines (base lines) and north-south lines (principal meridians).
• Redemption Period
  • The timeframe after an initial lock-up period during which an investor may withdraw its capital (in whole or in part) from a fund, usually on a quarterly basis; typically applies to hedge funds, core real-estate funds and other open-end fund investment vehicle structures.
• Redemption Queue
  • With reference to a fund: Form when investor demand for liquidity exceeds both incoming capital from new investors and proceeds available from property dispositions; generally redeemed pro rata to the extent of cash available for redemptions; depending on the severity of liquidity needs, investors can wait for a quarterly redemption or seek liquidity in the secondary market.
• Redevelopment
  • The replacement, rehabilitation, or repurposing of existing improvements on an already developed site.
• Refinance
  • Obtaining a new loan to pay off an existing loan.
• Regional Center
  • A retail property that provides general merchandise (a large percentage of which is apparel) and services in full depth and variety; main attractions are its anchors: traditional, mass merchant, discount department stores, or fashion specialty stores; usually enclosed with an inward orientation of the stores connected by a common walkway and parking surrounds the outside perimeter.
• Registration Statement
  • Forms filed with the Securities and Exchange Commission (SEC) (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.
• Regression
  • An appraisal concept that states that the value of a superior property is decreased when it is associated with an inferior property of the same type; opposite of progression. See also "Regression Analysis."
• Regression Analysis
  • A particular statistical technique, similar to correlation, used to analyze data in order to predict the value of one variable (the dependent variable), such as market value, from the known values of other variables (the independent variables), such as lot size, number of rooms, and so on; if only one independent variable is used, the procedure is called simple regression analysis and differs from correlation analysis only in that correlation measures the strength of relationship, whereas regression predicts the value of one variable from the value of the other; when two or more variables are used, the procedure is called multiple regression analysis.
• Regression Line
  • A straight line that describes how a response variable y (the dependent variable) changes as an explanatory variable x (the independent variable) changes; often used to predict the value of y for a given value of x.
• Regulation A+ Offering (Reg A+)
  • An exemption from registration requirements—instituted by the Securities Act—that applies to public offerings of securities that do not exceed $50 million in any one-year period; companies utilizing the exemption must still file offering statements with the Securities and Exchange Commission (SEC); however, the companies utilizing the exemption are given distinct advantages over companies that must fully register.
• Regulation D Offering (Reg D)
  • A Securities and Exchange Commission (SEC) regulation governing private placement exemptions that allows companies to raise capital through the sale of equity or debt securities without having to register their securities with the SEC.
• Regulatory Lag
  • The time intervening between the initiation of a proceeding before a regulatory commission or agency and the effective date of the final decision or disposition of the case, as in a request by an electric utility for a rate increase or for a revision of allowable return on equity.
• Rehabilitation Costs
  • Expenses to improve or transform an existing property into one having greater utility.
• Reilly’s Law of Retail Gravitation
  • An approach to estimating the retail trade area (and sales/revenue potential) for a given establishment or center which holds that trade centers draw consumers from neighboring communities in proportion to the trade areas’ populations and in inverse proportion to the distances between the communities and the trade areas; in analogy with Isaac Newton's law of gravitation, the point of indifference is the point at which the "attractiveness" of two retail centers (postulated to be proportional to their size and inversely proportional to the square of the distance to them) is equal; utilized as the traditional means of trading-area delineation that establishes a point of indifference between two cities or communities, so the trading area of each can be determined; heuristic developed by William J. Reilly in 1931.
• Reinforced Concrete Construction
  • Construction in which reinforced concrete is used for foundation, frames, floors, roofs, and other structural members.
• Reinvestment Rate
  • An interest rate used to modify interim cash flows in a cash flow analysis to arrive at a future value estimate when calculating an adjusted rate of return.
• Related Party
  • An individual or entity that is related to the reporting entity; can include: (i) affiliates of the entity; (ii) an entity for which investments in their equity securities would be required, absent the election of the fair value option under the fair value option subsection of FASB section 825-10-15, to be accounted for by the equity method by the investing entity; (iii) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (iv) principal owners of the entity and members of their immediate families; (v) management of the entity and members of their immediate families; (vi) other parties with which the entity may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; (vii) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
• Related Party Transaction
  • A transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged.
• Relative Return
  • The return achieved by an asset over a specific time period contrasted to a benchmark; computed as the difference between the absolute return reached by the asset and the return reached by the benchmark.
• Relative Per Capita Sales (RPCS)
  • A measure of relative sales potential for a given product or retail category.
• Release Clause
  • Used in contracts such as a blanket mortgage, a provision that removes the lien from a particular property upon payment of a specified amount of money.
• Reliability
  • Refers to replication of estimates. Estimates are precise if they are close together. If the analyst uses two or more techniques to measure the same value (i.e., population) and the estimates are close together, the estimates are precise. Also known as “precision.”
• Remainder
  • A future possessory interest in real estate that becomes effective upon the termination of another estate in that property.
• Remaining Economic Life
  • The time period over which an improvement is expected to add value above the value of the land as if vacant and valued at its highest and best use.
• Remaining Physical Life
  • The estimated time period over which a building or structure is expected to remain in existence, given normal maintenance.
• Remedial Action Plan
  • A detailed summary of the environmental issues found on a property during a site characterization and outlines a plan of action that illustrates which remedies will be used to achieve cleanup goals.
• Remodeling
  • A type of renovation that changes property use by changing property design.
• Renewal Option
  • A clause giving a tenant the right to extend the term of a lease.
• Renovation
  • The remodeling, restoration, or modernization of a building.
• Renovation Costs
  • Expenses to improve or transform an existing property into one having greater utility. Also known as “rehabilitation costs.”
• Rent
  • The amount paid for the use of space or property as stated in a lease agreement.
• Rent (Rental) Growth
  • The expected trend in market rental rates over the period of analysis, expressed as an annual percentage increase.
• Rent 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.
• Rent Control
  • Legal regulation by a state or local government that specifies a maximum rent that is allowed to be collected by landlords from their tenants for specific properties; an exercise of the government's police power.
• Rent Escalation
  • An adjustment in rent or sale price (either up or down) based on some event or index.
• Rent Growth
  • The expected trend in market rental rates over the period of projection, expressed as an annual percentage increase.
• Rent Premium
  • Any portion of the price paid for a property above the fee simple value created by lease payments above market levels.
• Rent Roll
  • A report prepared periodically that lists units occupied, the tenant occupying each space, the rent paid for each space, and possibly other terms of each lease contract such as term of lease and specifications for overage rents; sometimes required by lenders.
• Rentable Area
  • A tenant’s pro rata share of the entire building, excluding elements of a building that penetrate through the floor to areas below (e.g., stairs and elevators); measurement varies with locality.
• Rental Agreement
  • A written contract between a building owner and a tenant that transfers the right to occupy a specific property to the tenant for a specific period of time in return for a specified rent. The rental agreement may also establish other rules, conditions, and terms regarding the use and occupancy of the property under which the lease will be valid. Also known as “lease.”
• Rental Concession
  • A discount or service given to prospective tenants to induce them to sign a lease.
• Rental Rate
  • A periodic expense paid by a tenant in exchange for use of a property. The rental rate may include a payment for tangible and intangible personal property in addition to real estate.
• Rental Requirement
  • In a commitment letter, a provision that states that a certain percentage of space must be leased before the full loan amount will be released.
• Rental Value
  • The rental income that a property would command if exposed for lease in a competitive market.
• Rented Area
  • The amount of space under lease in a building.
• 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.
• Repairs
  • Current expenditures for minor alterations required to keep a building in operating condition; does not include replacement or renovation of substantial parts of the building, or a change in material or form of a building.
• 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 Model
  • A hypothetical building or structure believed or intended to represent the optimum facility; in terms of current production technology, structural design and layout, and currently available materials; to replace the function of an existing building or structure under study.
• Report
  • According to the Uniform Standards of Professional Appraisal Practice, any communication, written or oral, of an appraisal, review, or analysis; the document that is transmitted to the client upon completion of an assignment.
• Reproduction Cost
  • The cost of constructing a building today with an exact duplicate or replica of a structure being appraised including all deficiencies, superadequacies and obsolescence that is in the current building.
• Resale
  • Sale of a property at the termination of the holding period. The resale price can be estimated by a growth rate or by a terminal cap rate applied to the NOI occurring the year following the holding period.
• Residential Area
  • Part of a city or region in which land is primarily used for dwelling purposes.
• Residential Mortgage-Backed Security (RMBS)
  • A debt-based security (similar to a bond), backed by the interest paid on loans for residences; constructed by one of two sources: a government agency such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), or by a non-agency investment-banking firm.
• Residential Property
  • Vacant sites or land improved with buildings devoted to or available for use for human habitation (e.g., single-family houses, rental apartments, residential condominium units, or rooming houses, but not hotels or motels).
• Residual
  • Value or income attributable to a component, such as financial, physical, or legal estate components, after deducting an amount necessary to meet a required return on the other component; used in capitalization procedures to determine a property value.
• Residual Capitalization (Cap) Rate
  • The estimated or actual cap rate used to estimate the resale value of a property at the end of the holding period; calculated by dividing the expected net operating income (NOI) by the expected sale price and expressed as a percentage. Also known as the “exit cap rate” or “terminal cap rate.”
• Residual Income
  • Income attributable to a component after the known income from other components is deducted from the total income.
• Residual Risk
  • The risk inherent to a particular investment or portfolio of investments that can be mitigated or reduced through diversification. Also known as “diversifiable risk,” “idiosyncratic risk,” “specific risk,” or “unsystematic risk.”
• Residual Techniques
  • Valuation techniques where one component of value (e.g., land or mortgage) is assumed to be known. Income is estimated for the known component and subtracted from net operating income to estimate values for the unknown component.
• Resolution Trust Corporation (RTC)
  • A federal government agency created by the Financial Institutions Reform, Recovery and Enforcement Act of 1989 for the purpose of selling troubled savings and loans and their assets.
• Restrictive Covenants
  • Private restrictions limiting the use of real property; restrictive covenants are created by deed and may “run with the land,” binding all subsequent purchasers of the land, or may be “personal” and binding only between the original seller and buyer.
• Restoration
  • Extensive repairs and renovations needed to resume the layout, appearance, and condition of a property as it was first built.
• Retail
  • Use of a property characterized by the sale of merchandise.
• Retail Investor
  • Any individual who purchases and sells securities for his or her own investment portfolio; may need to meet a certain level of accreditation to participate in some investments (e.g., private equity, hedge funds, and certain private placements).
• Retrofit
  • The addition of new technology or features to older systems in order that a property is in compliance with updated government ordinances, codes and/or environmental and energy conservation practices.
• Return of Capital (ROC)
  • A portion of an investor’s original investment amount, or capital, being returned to the investor; reduces an investor’s adjusted cost basis.
• Return on Capital (ROC)
  • The profit on an investment in relation to how much was invested; a ratio used in accounting, finance and valuation that shows how effective a company has been at turning capital into profits. Also known as “return on invested capital” or “return on total capital.”
• Return on Invested Capital (ROIC)
  • The profit on an investment in relation to how much was invested; a ratio used in accounting, finance and valuation that shows how effective a company has been at turning capital into profits. Also known as “return on capital” or “return on total capital.”
• Return on Total Capital (ROTC)
  • The profit on an investment in relation to how much was invested; a ratio used in accounting, finance and valuation that shows how effective a company has been at turning capital into profits. Also known as “return on capital” or “return on invested capital.”
• Reuse Appraisal
  • An appraisal that estimates the value of property in an urban renewal project area. It is subject to the regulations specified in the renewal plan for the area and in the National Housing Act of 1949 and its amendments.
• Revaluation
  • The revaluation of real property to assign new assessed values for tax purposes based on appraisals by local government officials.
• Revaluation Lease
  • A lease in which rent is adjusted periodically according to the revaluation of the real estate. Also known as “reappraisal lease.”
• Reverse Annuity Mortgage (RAM)
  • A mortgage, typically used by elderly people who have built up a significant amount of equity, in which the lender pays the homeowner periodic payments based on the accumulated equity in the real estate. Payments can be made directly or through an annuity purchase through an insurance company, and are not necessarily equal in amount. The loan becomes due at a specific date or occurrence of an event, such as sale of the property or death of the borrower.
• Reverse Leverage
  • A situation in which the rate paid on a mortgage is greater than the rate generated by an investment on an unlevered basis.
• Reversion
  • The lump sum payment received by an investor at resale of the investment.
• Reversion Capitalization Rate
  • The overall capitalization rate used to determine the reversion value based on the end of year net operating income or next year net operating income divided by a capitalization rate.
• Reversion Value
  • The amount of monies received by the owner when the real estate is sold or, for the purposes of evaluating a property's value, the amount of money it is anticipated that the owner would receive if the property were sold.
• Reversionary Right
  • The right to resume full occupancy and ownership of a property after the termination of a lease, easement, or interest or after certain other conditions are met; the abandonment of an easement, the end of a lease.
• Review
  • According to the Uniform Standards of Professional Appraisal Practice, the act or process of critically studying a report prepared by another.
• Review Appraiser
  • An appraiser who inspects the reports of other appraisers to determine the validity of the conclusions and data given in the report.
• Reward-to-Risk Ratio
  • A metric that divides a measure of portfolio holding-period return by a measure of portfolio risk; the higher the value, the more return an investment portfolio has generated per unit of risk.
• Rezoning
  • A change or amendment to a zoning map.
• Right
  • A legal stake in the title or interest of real property.
• Right of First Offer (ROFO)
  • A contractual right that permit the purchase of property, or the lease of space, upon the occurrence of certain events, often referred to as trigger events; commonly triggered when a property owner elects to make his or her property available for purchase or lease; the property owner must first offer to sell or lease (as applicable) the subject property to the holder of the ROFO on terms and conditions that are determined by the owner; if the holder of the ROFO does not timely exercise its right to purchase or lease the property, the property owner may proceed to offer the subject property for sale or lease to third parties.
• Right of First Refusal (ROFR)
  • A contractual right that permit the purchase of property, or the lease of space, upon the occurrence of certain events, often referred to as trigger events; commonly triggered when a property owner receives an acceptable offer to lease or purchase from a third party; prior to accepting the third party offer, the property owner must allow the holder of the ROFR to either lease or purchase (as applicable) the subject property either upon the same terms and conditions contained in the third party offer or upon terms otherwise specified in the parties’ ROFR agreement; the owner may only proceed with selling or leasing the property to the third party if the holder of the ROFR does not timely exercise its right to purchase or lease the property.
• Riparian Rights
  • A right of use (usufructuary right), held in common with other riparian owners, to use water on, under, adjacent, or abutting to one's land (e.g., rights of boating, swimming and irrigation).
• Risk
  • Uncertainty arising from the probability that events will not occur as expected.
• Risk Analysis
  • The study of real estate returns under different scenarios that represent different risk possibilities; most commonly used in association with investment analysis.
• Risk Factor
  • Any attribute or characteristic that increases the likelihood of negatively affecting an investment and/or portfolio. Also known as “risk premium.”
• Risk Parity
  • A portfolio allocation strategy using risk to determine allocations across various components of an investment portfolio; follows the modern portfolio theory (MPT) approach to investing; typically requires quantitative methodology that makes allocations more advanced than simplified allocation strategies.
• Risk Preferences
  • The behavioral approach and tolerance investors hold toward the inherent risk of investments.
• Risk Premium
  • Any attribute or characteristic that increases the likelihood of negatively affecting an investment and/or portfolio. Also known as “risk factor.”
• Risk-Adjusted Discount Rate
  • The rate based on the risk-free rate and a risk premium used in the calculation of the present value of a risky investment.
• Risk-Adjusted Return
  • The return of an investment relative to the amount of risk the investment has incurred over a given period of time.
• Risk-Free Rate
  • The rate of return of an investment with no risk of loss; in practice, it does not exist as even the safest investment carries a very small amount of risk; for US investors, the interest rate on a three-month US Treasury bill or other longer-term US Treasury bonds are often used as a representation of the risk-free rate.
• Rollover
  • With reference to debt: the paying off of existing debt, usually debt about to mature, through the issuance of new debt. With reference to an investment: the rolling over of an investment, such as a certificate of deposit at maturity, to another investment.
• Rollover Risk
  • The risk that a tenant's lease will not be renewed.
• Roof
  • The top of a structure. The frame of the roof is designed to support its own roof and is determined by the type of roof being built. Common roof types include: flat, gable, gambrel, hip, mansard, shed and salt box roofs.
• Roof Surfacing
  • In BUR roofing, a layer of waterproofing bitumen installed on the top surface of the membrane as a wearing surface. Additional protection may be provided by the addition of aggregates. In elastomeric systems, the ballasting aggregate.
• Roofing System
  • All components of the roofing assembly above the roof deck.
• Royal Institution of Chartered Surveyors (RICS)
  • A professional, representative, and independent body that establishes and enforces standards for the valuation, operation, and development of assorted types of property; accredits professionals involved in the valuation, management, and development of land, real estate, construction, and/or infrastructure worldwide.
• Rule 144A
  • Introduced in 2012, reduces the amount of time a qualified institutional buyer must hold privately placed securities from two years to six months for a company that reports to the Securities and Exchange Commission (SEC) or a year for a company that does not; the introduction of this rule has substantially enhanced liquidity in the market for private placement securities; the modification was introduced to acknowledge that sophisticated institutional buyers do not need the same protections an individual investor requires on the open market.

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• Safe Harbor
  • A legal provision to reduce or eliminate legal or regulatory liability in certain situations as long as certain conditions are met (see also “prohibited transactions safe harbor”).
• Safe Rate
  • The rate of return that can be obtained on a risk-free or relatively risk-free investment (e.g., the rate on U.S. treasury bills).
• 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. Also known as “leaseback.”
• Sales Adjustment Grid
  • A grid used in the direct sales comparison approach, in which the elements of comparison are listed by line for the subject property and comparable properties; it allows an easy comparison of different properties for adjustment to find the value of the subject property.
• Sales Area
  • In retail stores, rentable area minus storage space. The proportion of rentable store area devoted to sales varies among store types, and among stores of the same type, so that calculations of sales or rent are more uniform if made based on total store area.
• Sales Commission
  • A charge paid to a broker or salesperson who sold the property; typically calculated as a percentage of the sale price, and paid by the seller.
• Sales Comparison Approach (SCA)
  • One of three approaches to valuation; estimates a property’s value (or some other characteristic, such as its depreciation) by reference to comparable sales. Also known as the “market approach.”
• Sales Per Square Foot
  • Calculated by dividing the gross annual sales revenue by the square feet of floor area used to generate the revenue.
• Sales Price Per Square Foot of Building Area
  • The sales price of the property divided by the total square foot area (living area) of the structure.
• Sales Price Per Square Foot of Ground Floor Area
  • The sales price of the property divided by the total square foot area (living area) of the first floor of the structure.
• Sales Potential
  • Total retail spending by trade area residents, usually stated in terms of store type. This potential is the product of the multiplication of population and per capita expenditures. The sales potential provides the support base for the planned new facilities as well as for existing competitive facilities both within and beyond the trade area.
• Sales Ratio Analysis
  • A study that compares the assessed values to the sales prices of properties in a taxing jurisdiction; used to determine the fairness or accurateness of assessed values.
• Sales Risk
  • The risk of a decline in revenue due to sales failure.
• Salvage Value
  • The value of any improvements assuming they are moved from the site and sold for scrap.
• Sampling Error
  • In statistics, the difference between a number derived from a portion of a population as compared to what the number would be if derived from the entire population.
• Sandwich Lease
  • A lease created when an existing tenant sublets a space to another tenant.
• Sandwich Leasehold Estate
  • An estate that arises from a sandwich lease. The value of the sandwich leasehold can be estimated as the present value of the difference between the income from the sublease and the income from the lease.
• Sandwich Leaseholder
  • The lessor under a sandwich lease.
• Sanitary Sewer
  • A sewer that carries only sewage, not storm water runoff.
• Satellite City
  • Places within the metropolitan statistical area that are places of employment and centers of commerce as well as having status as a separate political entity.
• Satellite Tenant
  • A smaller tenant in a shopping center that is dependent on a larger tenant to attract business to the center (e.g., a candy store or specialty apparel store).
• Saturated Trading Area
  • A geographic area with the proper amount of retail facilities to satisfy the needs of its population for a specific good or service, as well as to enable retailers to prosper.
• Sawtooth Roof
  • A roof consisting of a series of single-pitch roofs, usually found on factory buildings, garages, or similar structures, allows abundant light and ventilation.
• Scarcity
  • An environment in which demand is greater than supply for a particular product; typically results in an increase in value for the good.
• Scenario Analysis
  • The process of estimating the expected value of a portfolio after a given period of time, assuming specific changes in the values of the portfolio's securities or key factors take place ( such as a change in the interest rate); commonly used to estimate changes to a portfolio's value in response to an unfavorable event and may be used to examine a theoretical worst-case scenario; can be used to examine the amount of risk present within a given investment as related to a variety of potential events, ranging from highly probable to highly improbable; output of analysis is only as good as the inputs and assumptions made by the analyst.
• Scheduled Rent
  • The actual rent income required through a lease.
• Scrap Value
  • The price expected for a part of a property that is old and removed from the premises to reclaim the value of the material of which it is made (e.g., plumbing fixtures sold for their metal content).
• Seasonality
  • The fluctuation of supply and/or demand for a product that occurs with a high degree of regularity at certain times throughout the year.
• Second Generation Space
  • Previously occupied space that becomes available for lease, either directly from the landlord or as sublease space. Also known as “secondary space.”
• Secondary Data
  • Data that is obtained from published sources and has not been collected by the appraiser (e.g., census information, demographic information, and published interest rates).
• Secondary Mortgage
  • A mortgage that is subordinate to the first mortgage; it is a type of junior mortgage.
• Secondary Mortgage Market
  • The interaction of buyers and sellers of existing mortgages; created by government and private agencies, it provides greater liquidity for the mortgage market.
• Secondary Space
  • Previously occupied space that becomes available for lease, either directly from the landlord or as sublease space. Also known as “second generation space.”
• Secondary Trade Area
  • A geographic area containing the customers of a particular firm or group of firms for specific goods or services; encompasses an additional 15 to 25 percent of a store's customers; located outside the primary trade area (or geographic core) with customers more widely dispersed.
• Section
  • In the rectangular survey method of legally describing land, it equals 640 acres, one square mile, or 1/36 of a township.
• Section 892 Exemption
  • Exempts from US income taxation certain qualified investments, including income from investments in financial instruments, derived by a foreign government.
• Sector Model (Theory)
  • A theory of land use development in which a city expands outwards in sectors that exist around the CBD and expand outwards. Each sector contains a particular land use and new growth occurs at the outer fringe of that sector. Also known as “Hoyt's sector theory.”
• Secular Trend
  • The long-time growth or decline occurring within the data. Ordinarily, the period covered should include not less than ten years.
• Secured Overnight Financing Rate (SOFR)
  • A broad measure of the cost of borrowing cash overnight collateralized by Treasury securities; utilized to price US dollar-denominated derivatives and loans.
• Securities Act of 1933
  • A US federal law designed to protect investors after the stock market crash of 1929; requires that investors receive financial and other significant information concerning securities being offered for public sale and prohibits deceit, misrepresentations, and other fraud in the sale of securities. Also known as the “truth in securities law.”
• Securities and Exchange Commission (SEC)
  • An independent federal government agency responsible for protecting investors, maintaining fair and orderly functioning of the securities markets, and facilitating capital formation; empowered under the Securities Exchange Act (SEA) of 1934 to register, regulate, and oversee brokerage firms, transfer agents, and clearing agencies as well as US securities self-regulatory organizations (SROs); generally, issues of securities offered in interstate commerce must be registered with the SEC before they can be sold to investors; financial services firms—such as broker-dealers, advisory firms and asset managers, as well as their professional representatives—must also register with the SEC to conduct business.
• Securities Exchange Act (SEA) of 1934
  • A US federal law that governs securities transactions on the secondary market, after issue, ensuring greater financial transparency and accuracy and less fraud or manipulation; authorized the formation of the Securities and Exchange Commission (SEC) and empowers the SEC with broad authority over all aspects of the securities industry.
• Securitization
  • The process of converting an illiquid asset, such as a mortgage loan, into a tradable form, such as mortgage-backed securities.
• Security Market Line (SML)
  • A graphical representation of the capital asset pricing model (CAPM); the SML is a linear depiction of the CAPM drawn on an axis chart, where the x-axis represents risk in terms of beta and the y-axis represents expected return.
• Seed Asset
  • The initial investment in a portfolio or commingled fund.
• Segmentation
  • (In economics) the process of classifying consumers or buyers into relatively homogeneous groups based on their economic, demographic and/or psychographic characteristics.
    
    (In market analysis) differentiates the potential users of the subject property from the general population according to defined consumer characteristics.
• Segregated Cost Method
  • A method of estimating building costs in which total building cost is estimated by summing prices for various building components as installed based on specific units of use such as square footage or cubic footage. Also called the “unit-in-place method.”
• Selection (in Attribution)
  • With reference to attribution: the value the portfolio manager adds by holding individual securities or instruments within the sector in different-than-benchmark weights.
• Seller Financing
  • A method of financing a purchase of real estate in which the seller takes back a secured note and provides the buyer with financing for the property.
• Selling Agent
  • The agent who obtains a buyer.
• Selling Costs
  • The expenses incurred when transferring property ownership (e.g., title fees, taxes, insurance premiums, legal fees, and broker's commission). They may be incurred by the buyer or the seller. Also known as “closing costs.”
• Senior Debt/Loan/Mortgage
  • A debt financing obligation issued to a company or an individual by a bank or similar financial institution that holds legal claim to the borrower's assets above all other debt obligations; in the event of a bankruptcy, it will be the first loan to be repaid before any other creditors, preferred stockholders, or common stockholders receive repayment; usually secured via a lien against the assets of the borrower.
• Sensitivity Analysis
  • The examination of how different values of an independent variable impact a particular dependent variable under a given set of assumptions. Also known as “what-if analysis”
• Separate Account
  • A relationship where an investment manager or adviser is retained by a single institutional investor to execute investment strategy, under stated investment guidelines, related to real estate equity or debt investment(s) exclusively for that institutional investor.
• Septic Tank
  • A tank in which sewage is held until it decomposes and flows into a septic field. Typically used in areas in which municipal sewage systems are not provided.
• Sequence Bias
  • Occurs when the questionnaire suggests or induces an idea or an opinion in the mind of the respondent as a direct consequence of questions on the questionnaire.
• Sequence of Adjustments
  • In the direct sales comparison approach, adjustments to comparable characteristics are sometimes preferred to be made in the following order to find the appropriate value of the subject property: property rights, financing terms, conditions of sale, market conditions, location, and physical characteristics. If all the adjustments are on either a percentage basis or if all the adjustment are on a dollar basis, then the sequence does not matter. However, the sequence could matter when mixing dollar and percentage adjustments.
• Servient Estate
  • The estate that provides a benefit to another estate (dominant estate) in an easement.
• Set-Off Rule
  • The rule followed by states in an eminent domain proceeding that specifies how special benefits are determined. Federal courts and some state courts allow benefits to be based on both the value of the land taken and the damages to the remainder. Other courts allow damages to be based on the remainder only.
• Severance Damage
  • In an eminent domain proceeding in which part of a real property interest is taken for public use, it is a loss in market value of the remainder that arises as a result of the taking. It is compensable to the owner.
• Sewer
  • An underground system of pipes or conduits that carries sewage and/or rainwater from a point of reception to a point of disposal.
• Shared Appreciation Mortgage
  • A participation mortgage in which the lender receives part of the increase in property value at the time of resale.
• Shared Business
  • Market appeal that is based upon the cumulative attraction of generative and complementary retail operations at a particular location. The individual business may not have sufficient drawing power but the combination of goods and services available attract customers to the general vicinity where the appeal of individual establishments can be offered.
• Share-of-the-Market Analysis
  • An analytical technique in which it is assumed that strong stores, capably and aggressively merchandised, will obtain their representative share of the total market in that category, notwithstanding the existence of competing units. Stores that have an identifiable name appeal and impact on shopping habits, such as department stores, are strong enough to attract a certain share of total business under normal operating conditions.
• Sharpe Ratio
  • The average return earned in excess of the risk-free rate per unit of volatility or total risk; generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.
• Shift-Share Analysis
  • An analytical technique that measures the following relationships for a local economy: 1. Share analysis: Employment in each industrial sector as a percentage of total employment in the local economy divided by employment in each industrial sector as a percentage of total employment in a geographically larger region such as the nation. This is the same as the location quotient. 2. Differential shift: Compares the local change in employment (growth or decline) of each industrial sector to the national change of that industrial sector to determine whether the industry is changing locally at a different rate from the nation. It compares the rate of change in the local industry's employment level to the rate of change in the same industry's employment at the national level.
• Shoppers Goods (or High Order Goods)
  • Refers to a category of consumer durable and non-durable products that are typically purchased frequently and by a large number of individuals for personal use or consumption. These goods are also known as "consumer goods" or "fast-moving consumer goods (FMCG)."
• Shopping Center
  • A group of retail and other commercial establishments that is planned, developed, owned, and managed as a single property; on-site parking provided; size and orientation generally determined by the market characteristics of the trade area served by the center; the two main configurations are malls and open-air strip centers.
• Short-Lived Item
  • A structural component with an expected remaining economic or useful life that is shorter than the remaining economic life of the structure.
• Short-Term Capital Gain
  • A term used prior to the 1986 tax law for a gain from the sale or exchange of a capital asset held one year or less. Short-term capital gains were taxed at the ordinary income tax rate. After the 1986 tax law, all gains are taxed at the ordinary income tax rate.
• Side Letter
  • Any letter or other agreement of any type that amends or supplements an investor’s subscription agreement and/or the partnership agreement or other applicable constituent document of a fund.
• Sidecar Fund or Investment
  • An investment vehicle used in a fund structure to provide for co-investment opportunities by one or more investors in the fund, which investments are generally made alongside investments by the main fund.
• Signage
  • Any visual representation which gives information about a business and its products and used to communicate a message to a specific group, usually for the purpose of marketing.
• Sill
  • 1. The horizontal piece directly under a window or door; it is usually slanted downward to allow water to run off. 2. The lumber resting on and around a foundation that provides a level surface for the exterior wall studs and ends of floor joists to be fastened.
• Simple Interest
  • Interest that is based only on the principal amount and not on accrued interest.
• Simple Random Sample
  • Selection of an item from a population by chance in such a way that each item in that population has an equal and known chance of being selected.
• Single Asset Deal
  • A transaction involving the sale of a single asset or building; transactions involving assets consisting of multiple buildings in one location also included.
• Single Family Structure
  • A structure intended and used for occupancy by one family.
• Single Purpose Industrial Building
  • An industrial building that is designed and built to serve a specific function so specialized and limited that it cannot be economically converted to an alternate use.
• Single Purpose Property
  • A property whose highest and best use is unique to that site; land value in this case is based on the highest and best use of the property, regardless of the most-likely use.
• Single Real Estate Operating Company (REOC) Fund
  • A fund offered by a fully or partially vertically integrated real estate operating company; the fund does not enter into joint ventures with third party operators, because the REOC sponsoring the fund is the operator of the assets.
• Sinking Fund
  • An account created into which periodic payments are made that when compounded at a rate of return will grow to a target lump sum value as of a specific date in the future.
• Site
  • A plot of land prepared for or underlying a structure or development; the location of a property.
• Site Analysis
  • Determines the suitability of a specific parcel of land for a specific use.
• Site Coverage
  • The total ground or land area covered by the foundation of a structure, measured from the outside dimensions. Also known as “foundation area.”
• Site Development
  • The installation of all necessary improvements made to a site before a building or project can be constructed on the site.
• Site Development Cost
  • Direct and indirect costs incurred to prepare a site for use (e.g., clearing, grading, installing utilities, etc.).
• Site Orientation
  • The relationship between a structure and its surroundings.
• Site Plan
  • A detailed plan that depicts the location of improvements on a parcel.
• Siting Factor
  • The origin of settlement in a city; the siting factor may relate to locational, climatic, commercial, political, or defensive reasons (e.g., cities near river ports were often established as trade centers or river crossings).
• Skewness
  • In statistics, the degree to which more data points lie on one end of a spectrum than another.
• Skin
  • A covering, outer coating, or surface layer; in construction, the covering of a structure.
• Skin Wall
  • An external wall covering of aluminum, porcelain, enamel, steel, or other material.
• Slab
  • (In construction) any flat, horizontal area made of reinforced concrete, wood or stone; usually refers to the interior floor of a building but can also refer to an exterior or roof area; a floor or foundation of concrete, either on the ground or supported above it.
• Slab on Ground Foundation
  • A permanent foundation built on footings, or a floating foundation made of concrete slabs reinforced with steel. The foundation is laid on a layer of sand or gravel and consists of a layer of insulation and reinforcing mesh covered by poured concrete.
• Social Characteristics
  • In appraisal theory, one of four forces thought to influence property value; refers to population characteristics such as population age and distribution. Also known as “social forces.”
• Social Responsibility
  • A theory that argues that businesses are obligated to function in a manner that benefits the broader society, whether that be a local community, region, or country.
• Social Forces
  • In appraisal theory, one of four forces thought to influence property value; refers to population characteristics such as population age and distribution. Also known as “social characteristics.”
• Social Investing
  • Investments driven in whole or in part by social or political (non-real estate) objectives.
• Soffit
  • The underside of a stairway, beam, arch, or other building member.
• Soft Costs
  • Construction expenses for items other than labor and materials (e.g., financing costs, taxes, administrative costs, contractor's overhead and profit, legal fees, interest payments, insurance costs during construction, and lease-up costs).
• Soft Goods
  • Merchandise, also known as softlines, of nondurable character, such as wearing apparel, domestics (including linen and towels, bedding, and yard goods).
• Solver Function (Excel)
  • A Microsoft Excel add-in program used for sensitivity analysis; the solver function finds an optimal (maximum or minimum) value for a formula in one cell, called the objective cell, subject to constraints, or limits, on the values of other formula cells in an Excel worksheet.
• Sophisticated Investor
  • An investor with special status under financial regulations and satisfying one or more requirements regarding income, net worth, asset size, governance status and/or professional experience. Also known as a “accreditor investor.”
• Sovereign Wealth Fund (SWF)
  • A state-owned investment fund or entity which comprises of pools of money derived from a country's reserves; reserves are funds set aside for investment to benefit the country's economy and its citizens; funding comes from central bank reserves which accumulate because of budget and trade surpluses, official foreign currency operations, money from privatizations, governmental transfer payments and revenue generated from the exporting of natural resources.
• Space Absorption
  • An estimate of the number of units or square feet per time period of a particular property type that can be successfully sold, leased, put into use, or traded in their market area at prevailing prices or rentals; typically arrived through an absorption analysis in a feasibility analysis and reported as the “absorption” or “absorption rate.”
• Space Market
  • The mechanism for the voluntary trading of the rights to use land and buildings; demand for space is created by those who are willing to pay for the use of space and supply for space is provided by those willing to sell the rights that they own to the users.
• Space Plan
  • A graphic representation of a tenant's space requirements, showing wall and door locations, room sizes, and sometimes furniture layouts.
• Spatial Gap Analysis
  • An analysis to determine if there is unsatisfied, unfulfilled, or unmet demand that the proposed site could satisfy.
• Special Assessment
  • A tax imposed only against those parcels of realty that will benefit from a proposed public improvement.
• Special Benefits
  • In an eminent domain proceeding, the betterment gained by the remaining property after a partial taking.
• Special Limited Partner
  • An Investor in a fund that is an affiliate of the fund’s sponsor; generally used to receive promote or other carried interest distributions and typically has no capital commitment to the fund and limited obligations under the fund’s constituent documents.
• Special Purpose Entity (SPE)
  • A subsidiary created by a parent company to isolate financial risk; its legal status as a separate company makes its obligations secure even if the parent company goes bankrupt; may be used to undertake a higher-risk venture while reducing any negative financial impact upon the parent company and its investors.
• Special Purpose Industrial Building
  • A type of limited purpose industrial building that may be economically adapted to a limited range of alternate uses. In some jurisdictions, courts have specifically defined this term.
• Special Purpose Property
  • A property that is appropriate for only one use or a very limited number of uses; its highest and best use will probably be continued at the current use or demolition.
• Specialty Goods
  • Items that shoppers will take more care and spend greater effort to purchase.
• Specialty Shopping Center
  • Centers that range from 40,000 to over 300,000 square feet, are developed around a special theme, and do not have major retail anchors.
• Specific Risk
  • The risk inherent to a particular investment or portfolio of investments that can be mitigated or reduced through diversification. Also known as “diversifiable risk,” “idiosyncratic risk,” “residual risk,” or “unsystematic risk.”
• Specifications
  • Construction details that supplement working drawings used by a builder to construct a property; includes details such as materials to be used, dimensions and colors.
• Specified Asset or Investment
  • A pre-defined asset for investment.
• 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.
• Speculative Use
  • Property that is held primarily for future sale; value is based on the future highest and best use.
• Split Financing
  • A method of financing the purchase of real estate in which land and improvements are financed separately; used by developers to obtain more financing than would otherwise be available through conventional financing.
• Split Rate Capitalization
  • A method of capitalizing cash flows to find property value in which different capitalization rates are used for different types of cash flows; also called fractional rate capitalization.
• Sponsor
  • The partner that sponsors a real estate investment; responsible for finding, acquiring, and managing the investment; generally, brings market and property type expertise and plays the primary management role, while third-party investors (limited partners) typically take on a more passive investment role.
• Spot Zoning
  • A type of zoning that is specific to a small area or particular parcel of land that is different and often incompatible with the surrounding land (e.g., a commercial zoning for a parcel of land in a residentially-zoned area). Spot zoning is generally not allowed in law.
• Sprinkler System
  • A fire protection system installed in buildings that consists of an overhead system of pipes that contain pressurized water and are fitted with valves, or sprinkler heads, that open automatically at certain temperatures.
• Square Foot Cost
  • The cost of one square foot of an improvement; obtained by dividing the actual, or estimated, cost of a building by its gross floor area, or by the actual, or estimated, cost of a land improvement by its square foot area; can also be multiplied by the number of square feet in a building or land improvement to produce the actual or estimated cost.
• Stabilized Income
  • Estimated future cash inflows that may change but have been adjusted to an equal amount per year.
• 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.
• Stack
  • A vertical vent pipe that extends above the roof or a vertical waste pipe.
• Stake Out
  • A process that takes place before construction begins, in which a surveyor marks site and building lines, marking elevations and building corner lines on stakes and batter boards. The process helps to ensure that building corners will be square, and that building lines will conform to setback requirements.
• Standard Deviation (σ)
  • A measure of the dispersion of a data set from its mean, calculated as the square root of variance by determining the variation between each data point relative to the mean.
• Standard Error
  • In statistics, a measure of the error caused when a sample is used to draw conclusions for a population. Different types of standard errors can be measured including the standard error of estimate, standard error of forecast, standard error of mean, and standard error of regression coefficient.
• Standard Error of the Estimate
  • In statistics, a measure of the unexplained variation occurring in a sample of numbers; a measure of the goodness of fit in a regression line.
• Standard Industrial Classification (SIC) Code
  • Industry groups defined by the U.S. Government. This very detailed classification system lists the types of major industries such as construction, manufacturing (durable), manufacturing (nondurable), retail trade, and wholesale trade, etc. Each of these one-digit SIC codes is further subclassified by identifying the various types of other groupings in each major category.
• Standard Metropolitan Statistical Area (SMSA)
  • An outdated term for Metropolitan Statistical Area (MSA).
• Standard of Living
  • The minimum of the necessities or luxuries of life to which a person or a group may be accustomed or to which they aspire.
• Standing Stock
  • The amount of real estate that has already been built; it is one indication of the supply of real estate.
• Stated Rent
  • The rental obligation, expressed in dollars, as specified in a lease. Also known as “contract rent” or “face rent.”
• Statistical Inference
  • The process of drawing a conclusion from a sample and applying it to the entire population from which the sample was drawn.
• Statistics
  • 1. A branch of mathematics that collects and evaluates data or samples of data. 2. A set of data.
• Steel Construction
  • A rigidly connected frame of steel that carries all external and internal loads and stresses to the foundations; enclosing walls are supported by this frame, usually at floor levels. If the steel frame has no fireproofing, it is known as unprotected metal construction.
• Step-Down Annuity
  • A type of annuity, typically resulting from a lease, in which a level series of payments decreases by a specified amount at a specific time and then remains level until the next adjustment.
• Step-Up Annuity
  • A type of annuity, typically resulting from a lease, in which a level series of payments increases by a specified amount at a specific time and then remains level until the next adjustment.
• Step-Up Lease
  • A lease in which rent graduates (usually increases) periodically during a lease term based on changes specified in the lease. Also known as “graduated rental lease.”
• Step-Up Provision
  • A clause specifying set increases in rent at set intervals during the term of the lease.
• Storm Sewer
  • A sewer that carries rainwater and sometimes industrial wastes.
• Story
  • A horizontal division of a structure; the portion between one floor and the floor above or below it.
• Straight-Line Recapture
  • A method of calculating recapture of wasting assets in which the recapture is deducted in an equal amount each year; typically calculated by dividing the asset value minus salvage value by the allowable useful life.
• Strategic Investment Decisions
  • Investment decisions made with a focus on long-term planning and implications.
• Stratification
  • The division of the market for urban real estate into many sub-markets.
• Stratified
  • (In geology) soil composed of, or arranged in, strata or layers, such as stratified aluminum. Those layers in soils that are produced by the process of soil formation are called horizons, while those inherited from the parent material are called strata.
    
    (In statistics) see "Stratified Random Sample."
• Stratified Random Sample
  • A statistical sample in which the population is divided into uniform groups or strata and then a random sample is drawn from each selected stratum.
• Strip Center
  • An attached row of stores or service outlets managed as a coherent retail entity, with on-site parking usually located in front of the stores; open canopies may connect the storefronts, but there are no enclosed walkways linking the stores; may be configured in a straight line, or have an "L" or "U" shape.
• Strip Shopping Center
  • A commercial use of real estate such as a neighborhood shopping center in which the buildings are adjoining and narrow in depth relative to their width.
• Structure
  • An edifice or building; an improvement (e.g., buildings, fences, kiosks, sheds, and gazebos).
• Structured Questionnaire
  • Structured questioning procedure that focuses upon a fixed list of predetermined questions. These questions are then asked, and there is no deviation from either the list of questions or the wording within those questions.
• Stud
  • In construction, the vertical metal or wood framing members to which horizontal pieces are attached; the supporting elements in walls and partitions that serve as the main support for the roof and/or second floor.
• Stumpage Value
  • On timberlands, the contributory value of the merchantable timber as it stands in the forest to the total value of the real estate.
• Style Drift
  • The divergence of a fund from its investment style or objective.
• Subadvisor
  • An investment management firm that typically partners with an investment advisor to help with the day-to-day management of the fund; often provide specialized expertise in a specific type of investment strategy.
• Subagent
  • A salesperson who works for an agent.
• Subdivision
  • A tract of land that has been improved with site improvements including streets, amenities, utilities, signage, etc., and divided into lots for sale as either residential or commercial sites.
• Subdivision Analysis
  • A method of valuing residential, commercial, or recreational land to be used for subdivision development; typically used in feasibility studies and when comparable sales are scarce.
• Subdivision Regulations
  • A local ordinance that establishes minimum standards that must be met before a subdivision will be approved for development; regulations include width of streets, size of lots and drainage requirements.
• Subflooring
  • In construction, the floor directly connected to the floor joists but below the finish floor; can be made of boards, plywood, or concrete.
• Subject Building
  • In appraisal, the building being appraised.
• Subject Property
  • In appraisal, the property being appraised.
• Subjective Distance
  • A concept that focuses on consumer perceptions about distance and travel time from one site to another. Consumers perceive the distance or time to be different from its actual figures. Pleasant circumstances can make subjective distance shorter than actual distance and time. Unpleasant circumstances have the opposite effect.
• Sublease
  • An agreement in which the tenant (lessee) leases the property or part of the property to a third party, thus becoming a lessor.
• Subleasehold Estate
  • The property interest associated with a sublease. The value of the subleasehold can be estimated as the present value of the difference between the market rent and the sublease rent.
• Sublessee
  • A tenant that leases space from another tenant and enjoys use of the property.
• Sublessor
  • A tenant that leases space to another tenant.
• Submarket
  • A portion of a total market that is differentiated by buyers and sellers who have similar preferences.
• Subordinate Debt/Loan/Mortgage
  • A debt financing obligation issued to a company or an individual by a bank or similar financial institution that is ranked behind that held by secured lenders in terms of the order in which the debt is repaid.
• Subordination
  • The process of sharing the risk of credit losses disproportionately among two or more classes of securities.
• Subordination Agreement
  • A legal document that establishes one debt as ranking behind another in priority for collecting repayment from a debtor; acknowledges that one party’s claim or interest is superior to that of another party in the event that the borrower’s assets must be liquidated to repay the debts.
• Subscription Agreement
  • The document pursuant to which an investor makes a capital commitment to a fund in exchange for an interest in the fund; sets forth the amount of an investor’s proposed capital commitment that is accepted by the general partner on behalf of the fund; includes various representations made by the investor that enable the fund to comply with applicable securities laws.
• Subscription-Backed Credit Facility
  • A loan or line of credit made by a bank or other credit institution to a fund that is secured by (i) the unfunded commitments of the investors to make capital contributions to the fund when called from time to time by the fund or the fund’s general partner, (ii) the rights of the fund or its general partner to make capital calls upon the commitments of the investors and the right to enforce payment of the same and (iii) the account into which investors fund capital contributions in response to a capital call.
• Substitution
  • The appraisal principle that states that a buyer will pay no more for a property than the cost of obtaining an equally desirable substitute; if several similar goods are supplied, the good with the lowest price will produce the greatest demand and quantity sold. It is one of the key principles for both the direct sales comparison approach and the cost approach to appraisal.
• Substructure
  • In construction, the foundation structure of a building located below or at ground level that provides the support base for the building (e.g., footings, piles, columns, piers, beams, and slabs are part of the substructure). Components such as parking garages that are not habitable may be considered as part of the substructure even though they are above ground.
• Subsurface Rights
  • The right to the use and profit from the land that lies below the surface of a property (e.g., the right to extract minerals or construct and maintain underground sewers and lines).
• Suburb
  • A community that contains relatively few places of employment. Its residents typically work in other portions of the region (e.g., such as the urbanized area or the central city).
• Super Regional Center/Mall
  • A retail property that is similar to a regional center, but because of its larger size has more anchors, a deeper selection of merchandise, and draws from a larger population base; usually enclosed and frequently multilevel with an inward orientation of the stores connected by a common walkway, with parking surrounding the outside perimeter.
• Superadequacy
  • A type of functional obsolescence that is caused by a structural component that is too large or of a higher quality than what is needed for the highest and best use of the property; an item in which its cost exceeds its value; an overimprovement (e.g., high ceilings in an office, built-in bookshelves in a building to be used as a restaurant).
• Super-Exempt US Investor
  • A public pension fund claiming an exemption from US federal income tax under US Code Section 115; not subject to unrelated business taxable income (UBTI) under US Code Section 511 because tax-exempt status does not derive from US Code Section 501©; also generally exempt from annual reporting requirements that apply to exempt organizations.
• Superfund
  • Sites managed under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) program.
• Supermajority
  • A majority (e.g., two-thirds or three-fifths) that is greater than a simple majority.
• Supermarket
  • A large retail store built on one level and in which goods are conveniently and conspicuously displayed so the customers may select what they want without the help of a clerk. Purchases are paid for at a checkout counter.
• Super-Regional Shopping Center
  • A shopping center that measures approximately 750,000 to greater than 1,000,000 square feet and contains a variety of general merchandise, apparel, furnishing, service and entertainment stores. It is typically anchored by three or more major department stores of at least 100,000 square feet each.
• Superstructure
  • (In construction) the part of a building that is above grade.
• Supply
  • The quantity of a product available on the market at a particular time as a function of different prices.
• Supply and Demand
  • An appraisal principle that states that the value of a property depends on the quantity and price of the property type available in the market, and on the number of market participants and the price that they are willing to pay.
• Supply and Demand Study
  • An analysis of the availability and desire for a specific type of property.
• Supply Risk
  • The risk that an inbound supply problem will disrupt a business; includes issues with suppliers, shipments, and markets that disrupt production, operations, sales, and/or projects; can also result in quality problems, liability, and reputational issues.
• Surplus Productivity
  • The net income remaining after the costs of labor, capital, and coordination have been deducted from total income.
• Survey
  • A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land.
• Survey of Competition
  • Identification of the properties in a market or trade area that have similar characteristics and attract the same potential buyers or space users.
• Suscipient Business
  • Market appeal from an independent source, such as a major public transportation facility, that attracts customers into an area where the retail operation can position itself and offer its goods or services.
• Syndication
  • A group of investors who have combined their financial resources with the expertise of a real estate professional for the common purpose of acquiring, developing, managing, operating or marketing real estate; it may take any type of business form, e.g., corporation, joint ownership, joint venture, or partnership.
• System
  • An integrated operation of units that may be related entities or may be property elements such as machinery, buildings, land and other property used in the performance of service(s) or the manufacture of product(s).
• Systematic Random Sample
  • A random sample drawn in such a way that a predetermined but random sequence of selection is established.
• Systematic Risk
  • The risk inherent to the entire market that cannot be mitigated or reduced through diversification. Also known as “market risk,” “non-diversifiable risk,” or “undiversifiable risk.”

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T

• Tactical Investment Decisions
  • Investment decisions made with a focus on short-term planning and implications.
• Tag-Along Rights
  • A contractual obligation used to protect a minority shareholder; if a majority shareholder sells its stake, then the minority shareholder has the right to join the transaction and sell its minority stake in the company.
• Tangible Property
  • Property that has a physical presence. It can be real property e.g., buildings, or personal property, e.g., furniture and equipment.
• Targeting Analysis
  • Sorts through the demographics and other characteristics of the user population to see who they are and what can be sold to them.
• Tax Abatement
  • An exemption or reduction of taxes granted by a local government for a particular project over a specific time period.
• Tax Assessment
  • The valuation of real property for tax purposes based on appraisals by local government officials.
• Tax Base
  • The total worth of all assessed properties in an assessment or tax district.
• Tax Book
  • The official list of all taxpayers subject to property tax, the amounts of their assessments, and the amounts of taxes due.
• Tax Bracket
  • A range of incomes subject to a certain income tax rate; results in a progressive tax system, in which taxation progressively increases as an individual’s income grows.
• Tax Depreciation
  • The loss in value of a building due to wear and tear that is allowed to be subtracted from income and sale proceeds under tax law.
• Tax District
  • The area under the authority of a taxing entity; it may be part of one or several assessment districts.
• Tax Efficiency
  • The process of organizing an investment so that it receives the least possible taxation.
• Tax Exemption
  • The state of not having to pay some or all of a government tax; granted to homesteads in some states and some non-profit organizations.
• Tax-Free Exchange
  • A trade of one property for another; not a sale; allows capital gains to be deferred.
• Tax-Free Income
  • Income that is not taxed as specified in federal income tax laws; income sheltered by losses is not tax free.
• Tax Liability
  • The dollar amount of taxes owed for a specific time period. The tax liability from operations equals the taxable income multiplied by the appropriate marginal ordinary income tax rate. The tax liability from sale of a property equals the capital gain multiplied by the appropriate marginal ordinary income tax rate. See also after-tax cash flow, taxable income, capital gain, adjusted basis. Also known as “income tax liability.”
• Tax Lien
  • A lien attached to a property for property taxes that have not been paid.
• Tax Map
  • A map that shows parcels of land in an assessment district.
• Tax Rate
  • An amount, usually expressed in dollars per one hundred dollars of assessed value, that is used to calculate the property tax. The tax rate is derived by dividing the total amount of tax levy by the total assessed value of all properties in the assessment district.
• Tax Roll
  • The official list of all taxpayers subject to property tax, the amounts of their assessments, and the amounts of taxes due.
• Tax Sale
  • The sale of a property to collect taxes that are due and have not been paid within the statutory period.
• Tax Shelter
  • The ability of real estate investments to reduce an investor’s tax liability through the use of cost recovery.
• Tax Status Date
  • The date on which, or as of which, the value estimate applies. This date establishes the market conditions in terms of which value is estimated. It is not necessarily the same as the date when the appraisal report is written.
• Tax Stop
  • In a lease, a provision that requires the lessee to pay taxes above a certain level.
• Taxable Income
  • Income that is taxable by law; calculated as the net operating income minus interest and depreciation. Taxable income from sale of a property equals the capital gain. Should not be confused with after-tax income or before tax cash flow.
• Taxable REIT Subsidiary (TRS)
  • A corporation that is owned directly or indirectly by a REIT and has jointly elected with the REIT to be treated as a TRS for tax purposes; may provide services other than customary services to tenants of the REIT’s property without disqualifying the amounts received by the REIT from treatment as rents from real property.
• Taxable Value
  • he value or worth of a property according to tax rolls on which ad valorem taxes are based.
• Tax-Exempt Investor
  • An investor, or any investor that is a flow-through entity for US federal income tax purposes that has a partner or member, that is exempt from US federal income taxation under Section 501© of the Internal Revenue Code (IRC) of 1986, as amended; generally, are not subject to US taxation, but they may be required to pay taxes on unrelated business taxable income (UBTI); examples include pension plans, universities, private foundations, and charitable endowments.
• Taxation
  • A government right to raise income for use of public property and projects by assessing goods and services.
• T-Distribution
  • In statistics, a continuous, symmetric, probability distribution in which the standard deviation for the population is not or cannot be determined. The t-distribution is not a normal distribution and depends on the size of the sample; thus, it is described by the degrees of freedom. The smaller the sample, the flatter the distribution curve is.
• Tear Sheet
  • With reference to marketing: a page torn from a publication to prove to a client that an advertisement has been published. With reference to finance: a short summary of key information about individual companies or funds.
• Temporary Financing
  • Any of several different methods of short-term financing.
• Tenancy
  • 1. The ownership of property by a title. 2. As conveyed in a lease, the right to use and occupy a space.
• Tenancy at Will
  • An estate that has no fixed term and may be cancelled at any time.
• Tenancy by the Entireties
  • An equal, indivisible estate held by a husband and wife in which neither has a disposable interest in the property during the lifetime of the other, except by joint action; the property passes to the survivor upon death of one spouse.
• Tenancy in Common
  • An indivisible estate held by two or more persons that may be equal or unequal interests; the property passes to the heirs, not the survivor(s), on the death of one.
• Tenancy in Severalty
  • An estate held by one owner.
• Tenant
  • The occupant of a building who has been given the right to possess the building or tenant space through the execution of a lease; the lessee.
• Tenant Alteration Costs
  • Preparation of leased premises prior to or during a tenant’s occupancy, which may be paid for by either the landlord, the tenant, or both. Also known as “tenant improvements.”
• Tenant Contributions
  • Costs paid by a tenant in excess of rent specified in a lease; e.g., utilities, common area maintenance.
• Tenant Finish Allowance
  • A negotiated sum a landlord is willing to spend to customize space for the needs of a particular tenant. Also known as a “tenant improvement allowance” or “upfit.”
• Tenant Improvement Allowance
  • A negotiated sum a landlord is willing to spend to customize space for the needs of a particular tenant. Also known as a “tenant finish allowance” or “upfit.”
• Tenant Improvements
  • Preparation of leased premises prior to or during a tenant’s occupancy, which may be paid for by either the landlord, the tenant, or both. Also known as “tenant alteration costs.”
• Tenant Mix
  • The selection and location of retail tenants to maximize the property’s income and stimulate business in general.
• Tenant Representative
  • Specializes in negotiating for tenants.
• Tenant Turnover
  • The frequency with which a space is leased to new tenants.
• Tenement
  • 1. Appurtenances affixed to the land; items of a permanent nature that are affixed to the land and pass with conveyance of the land, e.g., buildings and improvements. 2. Older apartment buildings in an urban area that have not been well kept.
• Term
  • 1. A length of time over which a cash flow or other event occurs, e.g., a mortgage term may be 15 years. 2. A contractual clause or provision.
• Terminal Capitalization (Cap) Rate
  • The estimated or actual cap rate used to estimate the resale value of a property at the end of the holding period; calculated by dividing the expected net operating income (NOI) by the expected sale price and expressed as a percentage. Also known as the “exit cap rate”; “residual cap rate” or “going-out capitalization rate.”
• Terrorism Risk
  • The risk of potentially extreme losses as the result of the unlawful use of force and violence against persons or property to intimidate or coerce a government, the civilian population, or any segment thereof, in furtherance of political or social objectives.
• Tertiary Trade Area
  • A geographic area containing the customers of a particular firm or group of firms for specific goods or services; includes customers not found in primary and secondary trading areas; these are the most widely dispersed customers.
• Test Boring
  • A process that takes place before construction begins, in which engineers drill into the soil of a site to determine the character of the subsoil and the location of bedrock. The process helps ensure that the soil is sufficient to prevent tilting, sinking, or buckling of the building foundation after it is constructed.
• Theme/Festival Center
  • A retail property that typically employ a unifying theme that is carried out by the individual shops in their architectural design and, to an extent, in their merchandise; normally cater to tourists and are anchored by restaurants and entertainment facilities; generally located in urban areas, tend to be adapted from older, sometimes historic, buildings and can be part of mixed-use projects.
• Theory
  • A statement setting forth an apparent relationship among observed facts that has been substantiated to a degree.
• Timberland
  • Agricultural property that periodically produces merchantable timber. Timber crops are typically harvested every 20, 50, or 80 years depending on the species and growing conditions.
• Time-Price Differential
  • The difference between a property's purchase price and the higher total price the same property would cost if purchased on an installment basis (including finance charges). Under the Truth-in-Lending laws, a lender must disclose the time-price differential as well as all finance charges of any kind in an installment contract.
• Time Series
  • A graphic presentation of a statistic as it changes through time; used to analyze cyclical, random and other variations over time.
• Time-Series Chart
  • A graphic representation of statistical data in which the independent variable, plotted along the horizontal axis, is time, and the values of the dependent variable, plotted along the vertical axis, are shown at various intervals of time, these values being connected by straight lines to form a continuous curve extending over the entire period covered by the chart.
• Time-Share Ownership Plan (TSO)
  • A type of timesharing in which owners receive a title to use the property for a specified time each year. Under an "interval ownership" plan, ownership terms last for a specified number of years, after which time, owners are free to enter into a new agreement.
• Time-Sharing
  • A sale of limited, undivided ownership interests in a property in which each purchaser receives a deed conveying title to the unit for a specific period of time.
• Times Interest Earned
  • The ratio of earnings of a business before deducting interest expense, to that interest expense. The ratio is used in identifying and measuring risk by purchasers of debt issues (especially bonds or notes) of a company.
• Time Value of Money
  • A financial principle based on the assumption that a positive interest can be earned on an investment and therefore money received today is more valuable than money received in the future.
• Time-Weighted Rate of Return (TWRR) or (TWR)
  • A return measure of an investment’s or fund’s compounded rate of growth over a specific period of time; does not consider the effect of investor cash moving in and out of the investment or fund; suitable for measuring the performance of investment or fund over which the investment manager has no control over investor capital entering or exiting the fund.
• Title
  • Lawful ownership of property; as generally used, the rights of ownership and possession of particular property.
• Title Insurance
  • An insurance policy that protects against losses arising from title defects such as forged or misfiled documents.
• Title XI
  • Real Estate Appraisal Reform Amendments that are included in the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) of 1989 that provide for state licensing and certification of appraisers.
• Topographic Map
  • A map that identifies locations by the features and contour of the land; e.g., rivers, land elevations and lakes.
• Topography
  • The physical characteristics of the contour of a parcel of land; details the nature and variation of the surface of land which might be level, rolling or mountainous; may document the influence of issues such as ease of access, runoff and flooding hazards as well as availability of land for development in naturally constrained markets.
• Total Cost of Construction
  • The cost to build a structure including direct costs of labor and materials, contractor's overhead and profit plus indirect costs such as taxes and construction loan interest. Distinguished from original cost, that is, the cost to the present owner who may or may not have paid at the cost of construction.
• Township
  • 1. In the rectangular survey system of legally describing land, an area six miles square containing 36 sections and 23,040 acres. 2. In some states, a political subdivision similar to a county.
• Township Lines
  • In the rectangular survey system, lines spaced 6 miles apart that run east and west to define a township.
• Tracking Error
  • A measure of the risk in an investment portfolio that is due to active management decisions made by the portfolio manager; indicates how closely a portfolio follows the index to which it is benchmarked; calculated as the standard deviation of difference in returns for fund or portfolio versus benchmark.
• Tract
  • A lot; often refers to a lot that will be subdivided into smaller parcels.
• Trade Area
  • A geographic area containing the customers of a particular firm or group of firms for specific goods or services.
• Trade Fixture
  • A type of personal property that is owned and attached to a rented space by the tenant and is used in conducting business; it is differentiated from a regular fixture that is part of the real estate by the manner in which it is affixed, the character of the item, and the intention of the tenant who attached the item. Whereas regular fixtures are real property, trade fixtures remain personal property.
• Traffic
  • The movement of people, vehicles, and such, along a way or past a point; the people and vehicles so moving along the way.
• Traffic Count
  • A count of vehicular or pedestrian traffic utilized for analytical purposes.
• Traffic Density
  • The number of vehicles occupying a unit length of the moving lanes of roadway at a given instant. Usually expressed in vehicles per mile.
• Traffic Survey
  • A survey made to obtain information, such as data on the quantity and composition, origin and destination, purpose of trip, means of transportation; and usually in relation to some specific time as of a certain day of the week.
• Transfer Costs
  • The inherent costs incurred by users of a site to travel to and from that site to other sites of interest such as home, school, doctor, etc., including monetary costs such as fuel, maintenance and repair, tolls and parking and non-monetary costs such as the value of time spent in transportation.
• Transfer Economies
  • Transfer economies are those cost reducing factors associated with a firm locating in an area where there are other firms who demand transport services and systems.
• Transferee
  • A person who receives property being transferred or conveyed.
• Transferor
  • A person who makes a transfer or conveyance of property.
• Transition
  • A period of time in which the use of an area changes; e.g., agricultural to residential.
• Transition Property
  • A property, most typically an improved property, whose highest and best use as vacant exceeds its highest and best use as improved but not by enough to cover the costs of demolition and clearing. The property will contain an interim use until the difference in highest and best use values is sufficiently large to make the change.
• Transparency
  • The extent to which investors have ready access to required financial information about a company or investment, such as price levels, market depth and audited financial reports.
• Trend
  • An arrangement of statistical data in accordance with its time of occurrence, usually over a period of years. A series of related changes that may be identified and projected into a probable future pattern.
• Trend Analysis
  • A study of changes in the environment of a property; it is used particularly in the income approach to help forecast future changes in property income, sale price and occupancy rates.
• Trended Cost
  • An estimate of current cost to produce or construct a building or facility, obtained by adjusting historic or original cost in each construction period (usually a year) in terms of the construction cost index applicable to each period.
• Treynor Ratio
  • A risk-adjusted measurement of return based on systematic risk; indicates how much return an investment earned for the amount of risk the investment assumed.
• Triple Net Lease (NNN)
  • 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.
• Truss
  • One of the various structural frames composed of three or more members so as to create a triangular structure that as a whole acts as a beam; used when the span or load is too great for the use of a single beam.
• Trust
  • An arrangement whereby property is transferred to a trusted third party (trustee) by a grantor (trustor); the trustee holds the property of the benefit of the beneficiary.
• Trustee
  • One who holds property in trust for another to secure performance of an obligation; the neutral party in a trust deed transaction.
• Trustor
  • One for whom property is held under a trust agreement.
• Truth in Securities Law
  • A US federal law designed to protect investors after the stock market crash of 1929; requires that investors receive financial and other significant information concerning securities being offered for public sale and prohibits deceit, misrepresentations, and other fraud in the sale of securities. Also known as the “Securities Act of 1933.”
• Turn Key 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.
• Turnover
  • The frequency with which property is sold or leased to a new owner or tenant.

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U

• UCIAR
  • Uniform Commercial-Industrial Appraisal Report.
• Umbrella Partnership Real Estate Investment Trust (UPREIT)
  • Organizational structure where a REIT's assets are owned by a holding company for tax purposes.
• Uncalled Capital Commitment
  • The portion of an investor’s capital commitment that is unfunded and may be subject to a capital call, excluding any amounts subject to a pending capital call that have not yet been funded as a capital contribution; the borrowing base in a subscription-backed credit facility is determined by reference to the uncalled capital commitments of the included investors.
• Underimproved Land
  • Land that, due to the fact that it is not being used under its highest and best use, does not generate the maximum amount of income that could be generated.
• Underimprovement
  • An improvement whose highest and best use does not match the highest and best use of the land as if vacant or whose size is not optimal for the site size.
• Understored Trading Area
  • A geographic area that has too few stores selling a specific good or service to satisfy the needs of its population.
• Undiversifiable Risk
  • The risk inherent to the entire market that cannot be mitigated or reduced through diversification. Also known as “market risk,” “non-diversifiable risk,” or “systematic risk.”
• Undivided Interest
  • An interest held by a co-owner for an entire property.
• Unencumbered Property
  • A property that does not have attached to it a lien, claim, liability or other unpaid charge; a property that is "free and clear", e.g., mortgages, taxes, and easements cause a property to be encumbered.
• Unfavorable Leverage
  • A situation in which the rate paid on a mortgage is greater than the rate generated by an investment on an unlevered basis.
• Uniform Commercial Code (UCC)
  • A uniform law created by the National Conference of Commissioners on Uniform State Laws (NCCUSL) and adopted in essentially identical form by all fifty of the US, governing goods and personal property transactions.
• Uniform Commercial-Industrial Appraisal Report (UCIAR)
  • An appraisal form developed to provide a consistent report of the value of commercial and industrial properties.
• Uniform Residential Appraisal Report (URAR)
  • An appraisal form requested by many federal agencies to value residential properties in a consistent manner.
• Uniform Standards of Professional Appraisal Practice (USPAP)
  • Valuation standards developed, interpreted, and amended by the Appraisal Standards Board; quality control standards applicable to real property, personal property, intangibles, and business valuation appraisal analysis and reports; includes rules of conduct for appraisers, the functions an appraiser must perform during an appraisal and opinions which interpret the standards; serve as a foundational standard within the NCREIF PREA Reporting Standards.
• Uniformity
  • In assessment, the equal distribution of assessed values as compared to market values; implies fairness in the levying of property tax.
• Unimproved Land
  • Land that is vacant or has not been developed to a useful state.
• Unit Cost
  • The price of a number of similar items divided by the total number of items, e.g., price per square foot; when multiplied by the total number of items it will give the total price.
• Unit-in-Place Method
  • A method of estimating building costs in which total building cost is estimated by summing prices for various building components as installed based on specific units of use such as square footage or cubic footage.
• Unit (Unitary) Method of Valuation
  • A technique of valuing a group of property items as "one thing" or as integrated parts of a system. In particular, the assessment or valuation of the combined properties of public utilities, railroads, pipeline companies and others that span several assessment or taxation districts, by valuing the operating property of the utility, or other enterprise, as a single unit or on the basis of the business enterprise as a whole. The value of non-operating assets or property is excluded.
• Unit Value
  • The market value of an entire property divided by a unit of measurement, e.g., value per square foot.
• Units of Comparison
  • The components into which a property may be divided for purposes of comparison.
• Unrelated Business Income Tax (UBIT)
  • The tax on unrelated business taxable income (UBTI).
• Unrelated Business Taxable Income (UBTI)
  • Income regularly generated by a tax-exempt entity by means of taxable activities and that is unrelated to an investor’s tax-exempt purpose, as generally defined under the Internal Revenue Code (IRC) of 1986, as amended; typically, not related to the main function of the entity but is needed to generate a small portion of income.
• Unsystematic Risk
  • The risk inherent to a particular investment or portfolio of investments that can be mitigated or reduced through diversification. Also known as “diversifiable risk,” “idiosyncratic risk,” “residual risk,” or “specific risk.”
• Upfit
  • A negotiated sum a landlord is willing to spend to customize space for the needs of a particular tenant. Also known as a “tenant finish allowance” or “tenant improvement allowance.”
• Urban Area
  • Typically defined as any incorporated settlement that contains a population of 2,500 or more. It can also refer to an unincorporated place of 2,500 or more people located away from a city, or a settled area whether incorporated or not located in proximity to a city of 50,000 or more.
• Urban Land Institute (ULI)
  • A nonprofit organization providing research and information on land use and development.
• Urbanization Economies
  • Urbanization economies are those cost reducing factors that arise when a firm locates in an area where there are firms in all other industrial categories, i.e. an urban or metropolitan area.
• Urbanized Area
  • 1. A geographic area that includes a central city plus the surrounding and densely populated areas that consist of: (a) contiguous incorporated places of 2,500 or more inhabitants (urban areas); (b) incorporated places with fewer than 2,500 inhabitants, providing each as a closely settled area of 100 dwelling units or more; (c) adjacent unincorporated areas with a population density of 1,000 or more inhabitants per square mile; (d) other adjacent areas with a lower population density but serve to link together otherwise separate densely populated areas. 2. A central city plus the surrounding densely populated area. 3. The developed or built-up area of an urban region. It is the area in need of urban services provided by municipal agencies such as police, fire, water, sewer, and solid waste departments.
• US Real Property Holding Corporation (USRPHC)
  • A US corporation whose fair market value of the US real property interests held by the corporation on any applicable determination date equals or exceeds 50 percent of the sum of the fair market values of its US real property interests, interests in real property located outside the US and certain business assets.
• US Real Property Interest (USRPI)
  • An interest in real property (including an interest in a mine, well, or other natural deposit) located in the US or the US Virgin Islands, as well as certain personal property that is associated with the use of real property (e.g., farming machinery).
• Usable Area
  • The amount of area that can be occupied by tenants; can vary over the life of a building.
• Use Classification
  • The type of use to which a property is put, e.g., agricultural, commercial, industrial, residential.
• Useful Life
  • A systematic analysis based on scientific methodology that seeks to identify and measure any effect on economic activity or market indicators resulting from the location, introduction or change of a major land use activity within the market area.
• Use Value
  • The value of a property based on a given use for an owner where specialized features may result in a limited market for the property.
• Use Value Assessment
  • An assessment based on the value of property as it is currently used, not on its market value considering alternative uses; may be used where legislation has been enacted to preserve farmland, timberland, or other open space land on urban fringes.
• User Value
  • The value of a property or space to a specific user. Sometimes more particularly the value of a property designed or adapted to fit the specific requirements of the user. In the latter case, such value often applies to the classification of "special purpose" property (not to be confused with "specialty").
• Usual Selling Price
  • The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.
• Usury
  • Charging more than the legal rate of interest for the use of money.
• Utilities
  • Operating services required by a developed area and provided by a public utility company (e.g., electricity, telephone, water, and gas).
• Utility
  • In economics, the enjoyment gained from a good in relationship to its risk and return.

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V

• VA Loan
  • A mortgage loan available through the U.S. Department of Veterans Affairs for service members, veterans, and their surviving spouses.
• Vacancy
  • Space available for rent that is not occupied.
• Vacancy Allowance
  • A deduction from potential income for current or expected future space not rented due to tenant turnover.
• Vacancy Analysis
  • A study of the vacancy levels and/or rates in the current market for a type of real estate as well as recent time periods in that market.
• Vacancy Loss
  • Loss of potential rent revenue attributable to unoccupied space, expressed as a total dollar amount per year
• Vacancy Rate
  • The ratio of the area of space that is not rented divided by the total leasable area; the ratio of the rent that could be collected from vacant space if it was rented divided by the total rent the building is capable of generating.
• Vacant Land
  • Land currently not being used.
• Vacate
  • To move out.
• Vacation Home
  • A dwelling used by the owner occasionally for recreational or resort purposes and which may be rented to others for a portion of the year.
• Valid
  • Having legally binding force; legally sufficient and authorized by law.
• Valuable Consideration
  • A sufficient price paid by a party in exchange for something in a contract or sale.
• Valuation
  • (In appraisal) the process of estimating value for a specific set of interests as of a specific point in time for a real estate property.
• Valuation Risk
  • The risk that an asset is overvalued and is worth less than expected when it matures or is sold.
• Value
  • The monetary worth of an entity or object.
• Value Added
  • (In appraisal) the anticipated increase in property value expected from correcting or "curing" a condition causing accrued depreciation.
    (With respect to investment style or strategy) a higher-risk strategy with returns mostly dependent on capital value growth via active asset management.
• Value After the Taking
  • In a partial taking through a condemnation proceeding, the market value of the entire property affected by the condemnation.
• Value Creation
  • The performance of actions that increase the worth of goods, services, and/or a business.
• Value in Exchange
  • The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.
• Value in Place
  • The value of an item in place based on the use it contributes to the whole.
• Value in Use
  • The value of a property based on a given use for an owner where specialized features may result in a limited market for the property.
• Value-Weighted Index
  • A type of market index with individual components, or securities, weighted according to their total market capitalization; components with larger market capitalization exert a greater impact on the index value while components with a smaller market capitalization carry less significance; also known as a “capitalization-weighted index.”
• Variability
  • (In statistics) a measure of the dispersion of data points from the measure of central tendency, such as range, standard deviation, variance.
• Variable
  • A quantity that may take any one of a specified set of values.
• Variable Annuity
  • A series of cash flows in which payments occur at regular intervals but in differing amounts.
• Variable Expense
  • An operating expense that varies with the occupancy level or intensity of use of a property, e.g., utilities, management, and maintenance.
• Variable Interest Rate
  • An interest rate on a mortgage that changes throughout the term of the mortgage; usually tied to an index, e.g., treasury bills, prime rate.
• Variable Rate Mortgage
  • A long-term mortgage loan under which the interest rate may be adjusted periodically over the term of the loan.
• Variance
  • (In statistics) a measure of the spread between numbers in a data set; measures how far each number in the set is from the mean.
    (In zoning) the permission granted by a zoning authority to a property owner to allow for a specified violation of zoning requirements.
• Vendee
  • A buyer.
• Vendee’s Lien
  • A lien against property under a contract of sale to secure the deposit paid by the buyer.
• Vendor
  • A seller.
• Veneer
  • An ornamental or protective material used as an exterior to cover a less attractive or less expensive surface.
• Vent
  • An opening or pipe that allows for the passage of air or gas to the outside of a building.
• Ventilation
  • The process of supplying or removing air by natural or mechanical means to or from a space.
• Venture Capital
  • A form of private equity capital invested in a project or real asset in which there is a substantial element of risk.
• Venture Capital Operating Company (VCOC)
  • A term used in the context of a fund that is relying on the operating company exception to holding plan assets under ERISA.
• Vernacular Architecture
  • Architectural design without reference to specific aesthetic and functional criteria of formal styles; styles that are not formally studied by architectural historians, e.g., mass produced homes in modern subdivisions and traditional barns.
• Vertical Division
  • The separation of real property into air, ground, and subsurface rights.
• Vest
  • To create an entitlement to a privilege or right.
• Vested Interest
  • A right or estate that grants possession and use of a property at some later date, but does not grant current use of the property.
• Vineyard
  • A planting of uniformly spaced grapevines to produce income.
• Vintage Year
  • The legal inception date as noted in a fund’s financial statement; the year of first drawdown of capital for investment purposes, which generally coincides with the first year of a fund’s term.
• Visibility
  • The degree to which a property has exposure and can be seen by the public through location and/or signage.
• Visibility Analysis
  • A process examining those elements that provide potential site users with the required information about the activities and conditions available on the site to result in a continued decision to use it. The study concentrates specifically on such areas as effective views of the full spectrum of the site's principal and supporting uses, specific activities and points from which visibility must be effective, signs and information about such activities, and information regarding access conditions and internal site connections.
• Visitation Rate
  • (In retail trade analysis) the frequency of trips to the property per week, month or other appropriate time period.
• Visual Rights
  • The right to maintain a clear space so that a property may be seen.
• Void
  • Having no legal force or effect; unenforceable.
• Voidable
  • Capable of being voided, but not void unless action is taken to void it.
• Volatility
  • A statistical measure of the dispersion of returns for a given security or market index.
• Volitional Fallacy
  • A misconception occurring when an analyst becomes overly optimistic about a project. This occurs when the analyst is swayed by the client's enthusiasm for the product and begins to believe that the project is unjustifiably unique in character.
• Volume of New Construction
  • The amount of property that has recently been built; it is one indication of the supply of real assets.
• Voluntary Lien
  • A debt that the property owner agrees to have recorded.

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W

• Wainscot
  • Wall material used in the lower portion of a wall that is different from the material in the rest of the wall.
• Waiver
  • The voluntary renunciation, abandonment, or surrender of some claim, right, or privilege.
• Wall-Bearing Construction
  • Construction in which the roof and floors are carried directly by exterior walls of plain brick, plastered brick, or other masonry; posts and columns are used only when the length of the interior span requires intermediate support for a roof or floor.
• Wall Covering
  • The exterior wall skin consisting of panels or sheets and their attachments, trim fascia, and weather sealants.
• Warehousing (Loan)
  • The packaging of a number of mortgage loans for sale in the secondary mortgage market by a financial institution or mortgage banker who has originated the loans.
• Warranty
  • A promise contained in a contract.
• Warranty Deed
  • A deed that conveys to the grantee title to the property free and clear of all encumbrances, except those specifically set forth in the document.
• Warranty of Habitability
  • An implied assurance given by a landlord that an apartment offered for rent is free from safety and health hazards.
• Wasting Asset
  • Something of value that deteriorates over time; a substance that is depleted through drilling, mining, or exploitation, such as timber or oil.
• Water Rights
  • The right to make use of the water from a stream, lake, or irrigation canal.
• Water Table
  • The upper level at which underground water is normally encountered in a particular area.
• Waterfall
  • (With reference to a debt obligation) the priority of payment of amounts received from or on account of the borrower among creditors to the borrower. (With reference to a fund) the economic agreement between the investors and the general partner as to the priority of payment of distributions of fund assets as between the investors and the general partner; also known as “distributions waterfall.”
• Watershed
  • A watercourse that parts and ultimately drains into a bordering body of water.
• Wear and Tear
  • Physical deterioration of property due to weathering, aging, and use.
• Wetlands
  • Areas where water covers the soil, or is present either at or near the surface of the soil all year or for varying periods of time during the year, including during the growing season.
• What-If Analysis
  • The examination of how different values of an independent variable impact a particular dependent variable under a given set of assumptions; also known as “sensitivity analysis.”
• Whistleblower
  • An individual who has and reports insider knowledge of illegal activities occurring in an organization; can be employees, suppliers, contractors, clients, or any individual who becomes aware of illegal business activities; protected from retaliation under various programs created by the Occupational Safety and Health Administration (OSHA), Whistleblower Protection Act of 1989, Sarbanes Oxley Act, and the Securities and Exchange Commission (SEC).
• Wholly-Owned Subsidiary
  • A company whose stock is entirely owned by another company (the parent company).
• Window
  • Window types vary widely; most are constructed with wood, aluminum, or steel. Types include fixed, sliding, double-single hung, casement, awning, hopper, center pivot, and jalousie.
• Without Recourse
  • Words used in endorsing a note or bill to denote that the holder is not to look to the debtor personally in the event of nonpayment; the creditor only has recourse to the property.
• Working Capital
  • (In accounting) current assets minus current liabilities.
    (In business) the liquid assets a company uses to conduct business.
• Work Letter
  • An addition to a lease that specifies what services, equipment and interior finishes will be provided by the landlord to the tenant, and what will be provided by the tenant.
• Workout
  • A mutual effort by a property owner and lender to avoid foreclosure or bankruptcy following a default.
• Wraparound Mortgage
  • A mortgage in which the lender takes over payments of a previous mortgage, and in turn provides a mortgage in the amount of the previous mortgage plus an additional amount. It is subordinate to the previous loan.

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X

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Y

• Yield
  • A form of cluster housing development in which individual dwelling units are placed on separately platted lots; An improved property in which one or more sides of the building are located directly on a boundary line of the lot.
• Yield Rate
  • The return on an investment; it considers income received over time; the discount rate that equates the present value of future cash flows with the initial investment. Same as “internal rate of return.”
• Yield to Maturity
  • The internal rate of return on an investment; see “internal rate of return” or “yield rate.”

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Z

• Zero Lot Line
  • A form of cluster housing development in which individual dwelling units are placed on separately platted lots; An improved property in which one or more sides of the building are located directly on a boundary line of the lot.
• Zip Code Area
  • A geographic area established by the postal service. The boundaries are not stable and the areas do not represent demographic and economic homogeneity.
• Zone
  • An area set off by local ordinance for specific use, subject to certain restrictions or conditions.
• Zoning
  • An application of police power by a local government that provides a legal mechanism for the government to regulate land use and density of development for privately owned real property. Zoning establishes areas with uniform restrictions regarding property characteristics such as property use (residential, commercial, etc.), improvement height, specifications for signs and billboards, and density of development.
• Zoning Map
  • A map of the local jurisdiction that indicates current zoning designations.
• Zoning Ordinance
  • The act of an authorized local government establishing regulations for property land usage, type of use, density, and set-backs.