Financials
What is Net Operating Income (or NOI)?
Revenue minus all operating expenses
What does the status "Research Status" mean on Copper?
Input on advisor side that notifies the interns/marketing analysts to search and find information from Reonomy on the Address/Owner provided.
What is common area maintenance (CAM)?
Shared operating expenses for common areas billed back to tenants (e.g., landscaping, parking lot, janitorial).
What are the three classes of buildings? What do they mean?
Class A, B, & C.
Class A buildings are the newest and highest quality. They tend to be less than ten years old and are typically located in or near the Central Business Districts and/or most desirable locations of major cities (like New York City). Their locations are highly visible and have high traffic counts for both vehicles and pedestrians.
Class A properties have the most luxurious finishes, newest technology, and strongest amenity packages. For example, a Class A office building may have marble floors, high speed internet, and outdoor patios with fantastic views. In addition, it may be highly energy efficient as evidenced by an LEED certification.
Building Class B are well maintained, but may be slightly dated and in need of light renovations. They are usually between 10 and 20 years old and typically located in good, but not great markets.
Class B properties have average finishes that may be slightly dated. For example, a Class B multifamily property may have tile floors, laminate counters, carpet in the bedrooms. and a slightly outdated fitness center.
Buildings in Class C are older vintage, dated, and in need of moderate to significant repairs. They are between 20 and 30 years old and are typically located in less desirable areas that are far from major highways, shopping districts, employment centers, and public transportation.
Class C properties have dated finishes that likely need to be replaced because they are either obsolete or non-functioning. They are in fair condition and likely require repairs or upgrades to mechanical systems like roofs, parking lots, HVAC, or plumbing. Buildings in Class C have lower rents than Class B and typically within reach for small companies and hourly workers.
What is an easement?
A legal right for someone to use another person’s property for a specific purpose (e.g., utilities, access).
What is the average length of a deal in commercial real estate from the moment of introduction to closing?
4-6 months.
When should you always cold call?
In the mornings, 9:00-12:00 AM.
What is a tenant improvement (TI) allowance?
Money the landlord gives the tenant to build out or improve their space.
What are balloon loans in Real estate?
A balloon mortgage is a real estate loan that has an initial period of low or no monthly payments, at the end of which the borrower is required to pay off the full balance in a lump sum. The monthly payments, if any, may be interest only, and the interest rate offered is often relatively low.
What is a shell condition?
An unfinished space delivered with minimal interior work. Typically concrete floors, open ceilings, and no partitions.
What are operating expenses?
Financial category that includes repairs and maintenance, utilities and cleaning expenses
What is the first thing you do when you get to a meeting and meet the LL?
Thank them for having you/for their time.
What is usable SF vs rentable SF?
Usable SF = space the tenant physically occupies; Rentable SF = usable SF + tenant’s share of common areas.
What is cap rate compression
A decrease in cap rates driven by rising demand or lower risk perception, which increases property values.
What is a right of first refusal (ROFR)
What are non-operating expenses?
Financial category that includes management fees, insurance and General and administrative expenses
What are hard costs in construction of commercial real estate? How do these compare to soft costs?
Hard costs - Referred to as the “brick and mortar costs” - costs of the physical construction of a space
Soft Costs - Examples include costs for architectural and engineers
What is lease escalation, and how does it work?
An annual rent increase, usually expressed as a fixed dollar amount or percentage.
What is eminent domain?
Eminent domain refers to the process by which the government may seize private property with proper compensation, but without the owner's consent.
What is redevelopment vs repositioning
Redevelopment involves major construction or rebuilding; repositioning focuses on improving operations, branding, or light renovation.
What is the difference between IRR and Equity Multiple?
IRR measures the annualized return over time. Equity multiple measures total cash returned relative to equity invested.
What is the name of BellStreets Podcast?
Chatting on BellStreet
What is the difference between a Full Service Lease, a Modified Gross Lease & a Triple Net lease?
Triple Net = Tenants pay all pass throughs separately/on-top of the base NNN rent
Modified Gross = Pass throughs are shared between landlord and tenant (Slightly higher "base" rents than typically seen with NNN)
Full Service = All pass throughs are paid for by the Landlord, therefore the base rent is the total expense that is paid by the tenant for their space. Full Service rents are significantly higher than the base of a NNN lease rent in a similar building.
What is adverse possession? When can somebody claim it in your state of operation?
- Under Georgia law, a person may be eligible to start an adverse possession claim if they have been living on the property for 20 years — or seven years with Color of Title.
- Colorado statutes define this statutory period as being 18 years, or 7 years if the adverse possessor, under a good faith claim and color of title, was paying taxes on the possessed real property.
– Under California law, a person may be eligible to claim adverse possession after 5 years of continuous, open, and hostile use of the property and only if they have paid all property taxes during that period.
– Under Illinois law, a person may be eligible to claim adverse possession after 20 years of continuous, open, and hostile use of the property or after 7 years if they have Color of Title and have paid all property taxes during that period.
What is done during the Environmental Phase I? How about Phase II? Why are these important?
A Phase I Environmental Site Assessment (ESA) or Phase I ESA, is short for a study conducted on a property to evaluate the likelihood of environmental contamination.
The Phase II ESA, also referred to as a “subsurface investigation” or more commonly “site investigation,” typically consists of collecting a series of soil, soil gas, which includes sampling for vapor intrusion, and groundwater samples and sending the samples to a laboratory to determine if dry cleaning operations have impacted the property negatively through environmental contamination.
It helps a purchaser determine potential liability.