Acquisition & Disposition
Activities performed by a buyer during the period before purchasing a property
Due Diligence
| Maximizing the value of a portfolio of properties, from acquisition to disposition, within the objectives of the owner. |
Asset Management
| A system of accounting that assumes income is received and expenses are spent, even though the timing of actual receipts and disbursements may vary. |
Accrual basis accounting
| The percentage add-on factor used to convert usable square footage to rentable square footage. Also called load factor |
Rentable/usable (R/U) Factor.
| Difference between the interest paid to borrow money and the rate of interest that could have been earned for making low-risk investments (like T bills). Usually measured in basis points |
Spread
| The value of an investment at the end of the holding period Also called terminal value |
Residual Value
| A floor/by floor layout of a building. It shows a cross section through a building, indicating the proportion of space on each floor occupied by each dept. of a company |
Stacking plan.
Phrase used that means contingent on conditions stated in an offer being satisfied or removed
Subject to
| The preliminary study of an environmental assessment that focuses on identifying possible contamination from historical and current uses of a site. |
Phase 1 Environmental Assessment.
| This is a report that compares budget vs actual performance |
Budget Comparison Report
| One one-hundredth of a percent. These are often applied to interest rates, real estate transaction fees and mgmt. fees |
Basis Point - BP
| This is a fixed-rate loan of short duration, typically 5-10 years. But is amortized over a longer period of time, such as up to 30 years |
Bullet loan
| Three types of Managements companies |
Top-tier, mid-tier, specialty firms.
| A cited exception on the title report that may impede the sale or financing of property; since it does not have a clear title |
Cloud
FA formulated plan of training, cleaning, work practices and surveillance to successfully manage a hazardous substance or situation.
Operations & Maintenance Plan (O&M)
| A non performing asset (AKA a troubled asset) owned by a lender as a result of a borrower's default under the terms of the loan |
REO Real Estate Owner
| A record of every financial transaction associated with each property |
Audit Trail
| Total Project, less local state and federal rebates = net project cost/ divided by annual savings = this |
Payback Period
| A form of loan used for additional financing. It provides a much higher return to the second lender while offering the borrower a way to borrow money at a less than current rate |
Wraparound Loan
| Let the buyer beware. A principal of law that states that a purchaser of an item is responsible for examining and judging for himself the acceptability of the item. |
Caveat Emptor
| A broker who represents the tenant |
Tenant Rep or Co Broker
A buyer who traditionally purchases one type of property but may be interested in diversifying.
Cross over buyer
| Highest and best use is the lawful use of a property that produces the greatest net income to its owner. Four criteria for establishing this are physical possibility, financial feasibility, maximum profitability and this |
Legal Permissabiity
| Three reasons why a tenant might audit the LL include 1) proper allocation of LL's expenses, inappropriate administrative expenses and this |
Reasonable efforts to minimize expenses.
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NOI
| DAILY DOUBLE: Foreclosure process depends on the state and the lending instrument used. A mortgage must go through a court of equity and obtain a judicial foreclosure. But this document uses a trustee who has the right of sale |
Deed of Trust
| A tenant's right to lease a specific space for a certain period of time |
Fixed Option
| Original cost plus cost of capital improvements less capital disposals less depreciation plus income earned less cash received is |
Book value.
The time period beginning on the day the offer is accepted by both parties and the escrow is opened and ending on the date the escrow or title company distributes proceeds or title.
Escrow period
| Process by which financial markets (most commonly Wall Street) convert real estate into a security that can be readily traded by investors and sold in a secondary market |
Securitization
| A formal letter from an auditor that lists deficiencies in a company's accounting records or controls |
Audit Points
Value Formula
V-I/R where I=NOI and R= Cap Rate
| A certificate signed and delivered by a tenant to a LL to certify that the lease term has commenced, the LL and T are not in default and the basic terms of the lease. |
Estoppel certificate.
| Any claim or interest in real property that is held by a person other than the owner and that diminishes the value of the property without preventing title to the property to pass from the owner |
Encumbrance
| A contract requiring the tenant to pay only base rent with out any additional rent or operating expenses. |
Gross lease.AKA turnkey, fixed, or flat lease.
DAILY DOUBLE - A monetary amount typically in cash, that the buyer provides to the seller as a prerequisite for creating a binding and enforceable contract.
| This is a leasing arrangement in which a LL is responsible only for paying any debt on the building and for major structural repairs. The tenant is responsible for paying separately for property taxes, insurance, minor repairs, housekeeping and general maint in addition to base rent. The rent payments cover owner's debt service and basic profit. |
Triple-net lease
| Experimentation with different assumptions to determine what value-impact occurs when those assumptions are changed |
Sensitivity Analysis
| The actual rate of return of a series of cash flows generated by an investment |
Internal Rate of Return
| A contractual arrangement in which a party with a claim to certain assets agrees to make his or her claim junior to the claims of another party |
Subordination
| The estimated or appraised value of an asset pledged as collateral to obtain a loan. Lenders base this on the asset's liquidation (fire sale) value and not on it's actual cost book or even current market value |
Collateral value
Three ways to value property.
Income Capitalization Approach, Market Comparison Approach, Cost Approach.
| A written agreement by a title company to issue a title insurance policy to the buyer of a property as well as to the lender making the loan in order to facilitate the purchase |
Title Commitment
| There are three things that institutional investors look at other than just yield. These objectives include 1) long term appreciation, 2) hedge against inflation and this |
Protection against currency changes.
| A written statement concerning a company's financial records. The financial statements present fairly, in a material respects, the financial position of the company and the results of it's operations |
Financial opinion.
| A ratio derived by dividing the actual income received from an enterprise by the actual cash invested in the enterprise |
Cash-on-cash return - aka equity dividend ratio
| Which form of bankruptcy wipes out all debts and which is a reorganization? |
| Chapter 7 many or all debts are wiped out in exchange for giving up property. Chapter 11 is reorganization of business affairs and assets. |
| The act of compensation or reimbursement given to a person or party. |
Indemnification.
| A lease in which a tenant leases a parcel of vacant land and pays for all improvements made on the site |
Ground Lease
A lease clause that protects the tenant from the foreclosing of the lease in the event of a foreclosure on the property.
Non disturbance clause.
| There are 7 common forms of ownership. They are: REIT, Joint venture, Master Limited partnership, pension fund, corporation, syndication, and |
Tenant in Common
| A process used by auditors to gather data needed to conduct an audit |
Sampling
| A financial analysis tool that gives the present value of an investment and is used for calculating comparable evaluators for investments with future cash flows |
Discounted Cash Flow
| A debt coverage ratio is a measure of the ability of property to meet it's debt service requirement. It's also called a debt service coverage ratio. This is considered a good ratio |
| NOI of $1.25 to $1.30 or 1.25: 1 or 1.30:1. The higher the ratio the lower the risk |
| A deed that expressly includes one or more covenants of title |
| The most probably price as of a specific date, in cash, terms equivalent to cash, or in other precisely revealed terms for which the specified property should sell, after reasonable exposure in a competitive market |
Market Value.