Glossary of CRE Terms

There are an almost endless amount of CRE terms that we could probably fit in here, but we’ll focus on some of the most used/important ones. Are we missing some? Let us know and we’ll get it added and credit you!



Absolute Net Lease – A lease arrangement where the tenant is responsible for all property expenses, including maintenance and structural repairs, typically reserved for long-term agreements with financially stable tenants.

Absorption – This term refers to the rate at which vacant commercial spaces are occupied over a given period in a particular market.

Accrued Depreciation – The difference in value between the current cost to replace a property and its improved value, accounting for wear and tear up to the appraisal date.

Acquisition – The process of adding property to an investment portfolio, which may involve direct purchase, leasing, or construction.

Adjusted Basis – The value of a property for tax purposes, calculated by adding the price of capital improvements to the original purchase price and subtracting any depreciation claimed.

Adaptive Reuse – The conversion of a building to serve a purpose other than what it was originally designed for, often to preserve historical or architectural significance while accommodating new uses.

Agent – A person authorized to act on behalf of another, typically the property owner, in managing or negotiating real estate transactions.

Agreement of Sale – A legally binding contract that outlines the terms of a real estate transaction, including the sale price and conditions, agreed upon by both buyer and seller.

Appraisal – An expert assessment of a property’s market value, conducted by a certified appraiser based on current market trends and physical property evaluations.

As If Complete – An estimated market value of a property assuming all planned construction, conversions, or renovations are finished as of the appraisal date.

Asking Rental Rate – The price per square foot annually requested by landlords or brokers for a specific commercial space, often used as a starting point for lease negotiations.

Assignee (Lease Assignment) – The party who takes over the lease agreement from the original tenant, inheriting all rights and responsibilities under the lease.

Adverse Possession – The legal process by which someone can acquire ownership of a property by openly occupying it in a manner that conflicts with the original owner’s rights, over a period defined by law.

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Balanced Scorecard (BSC) – A strategic management tool that translates an organization’s mission and vision into actual (often quantifiable) strategic actions and objectives to measure performance across several perspectives such as financial, customers, internal processes, and learning and growth.

Base RentThe minimum monthly rent payable by a tenant, typically exclusive of additional charges such as taxes, insurance, and maintenance expenses.

Base Year – The reference year in a lease agreement from which a tenant’s share of operating expenses is calculated. Typically, the base year is the year the lease begins, and future expenses are compared against this year to determine additional tenant liabilities.

BOMA Standards – Guidelines established by the Building Owners and Managers Association (BOMA) for measuring and calculating rentable square footage in commercial properties, ensuring consistency across the industry.

Break-Even Occupancy Rate – The occupancy rate at which a commercial property generates enough income to cover its operating expenses and debt service, without producing a profit or loss.

Broker’s Opinion of Value (BOV) – An informal estimate of a property’s market value provided by a commercial real estate broker, typically based on local market knowledge and comparable property data.

Broom Clean Condition – A term used in real estate leases or during the sale of property referring to the condition in which a tenant must leave the premises upon moving out. It implies that the space should be emptied of all personal belongings, debris, and waste, swept clean, and in a condition ready for immediate use or inspection by the next occupant.

Build-Out – The process of customizing a leased space to meet the specific requirements of a tenant, often involving construction.

Build-to-Suit – A development approach where a property is designed and constructed to meet the specific requirements of a tenant or buyer.

Business Units (BU’s) – Distinct internal groups or departments within a company, often structured around specific products or market segments, that are responsible for managing their own profits and losses.

Business Continuity Planning – The process of creating systems of prevention and recovery to deal with potential threats to a company, ensuring that personnel and assets are protected and are able to function quickly in the event of a disaster.

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Capital Lease – A lease agreement where the lessee records the leased asset as a purchase, effectively treating it like an acquisition of an asset, because the lease transfers nearly all risks and benefits of ownership.

Capital Planning – The strategic process of managing a company’s long-term investments in real estate, including acquisitions, improvements, and equipment, to align with its financial goals.

Capitalization (Cap) Rate – A metric used to estimate the potential return on an investment property, calculated by dividing the property’s annual net operating income by its purchase price or current market value.

Class A, B, and C Properties – A classification system used to categorize commercial properties based on factors such as age, location, quality, and amenities, with Class A representing the highest-quality properties and Class C representing the lowest.

Cluster – A concentration of interconnected businesses or properties in a specific geographic area, often benefiting from their proximity by attracting more foot traffic and investment.

Co-location – The strategic placement of a company’s operations within a single facility or property to optimize logistics, reduce real estate costs, and foster a collaborative working environment.

Commercial Real Estate – Properties used exclusively for business activities, which can include office buildings, retail spaces, warehouses, and industrial sites.

Common Area – Parts of a property that are available for shared use by all tenants, or the public, typically including hallways, lobbies, restrooms, and other amenity spaces.

Common Area Maintenance (CAM) Expenses – Costs incurred by property owners for the upkeep and repair of the shared spaces in a commercial property, often passed through to tenants under the terms of their leases.

Comparative Method – Also known as the sales comparison approach, this valuation technique involves assessing the value of a property by comparing it to similar properties that have recently sold in the same area.

Compounding – In real estate finance, this refers to the process where the interest earned on an investment is reinvested to generate additional earnings over time.

Contingent Work Force – Temporary or part-time employees who may be used by real estate firms to manage properties, conduct maintenance, or provide administrative support during peak periods or for specific projects.

Corporate Social Responsibility (CSR) – Practices and policies undertaken by corporations to be socially accountable to their stakeholders and the public, which in CRE might involve sustainable building practices and ethical property management.

Cost Approach – A real estate valuation method that calculates the cost to replace the asset minus depreciation plus the land value, used primarily for new buildings or properties without many comparable market sales.

Cost of Capital – The rate of return that real estate investors require from an investment property to make the investment worthwhile, influencing how much a company can afford to spend on acquiring or improving its properties.

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Debt Coverage Ratio (DCR) – Also known as Debt Service Coverage Ratio (DSCR), it’s a financial ratio that measures a property’s ability to cover its monthly mortgage payments from its cash flow. It is calculated by dividing the property’s net operating income by its debt service.

Deferred Maintenance – Refers to necessary maintenance activities (repairs and replacements) that have been delayed or postponed, which can affect the property’s operational efficiency, aesthetic value, and overall safety.

Defeasance – A provision in a commercial loan agreement that allows the borrower to substitute collateral (typically U.S. Treasury securities) for the property securing the loan, effectively releasing the property from the mortgage lien.

Demising Wall – The partition wall that separates one tenant’s leased space from another or from common areas within a commercial building, crucial for defining the space leased to each tenant.

Depreciation Expense – In real estate, it refers to an accounting method of allocating the cost of a tangible asset over its useful life, which can provide tax benefits to property owners by reducing taxable income.

Direct Vacancy Rate – A measure of the proportion of all available rental space that is unoccupied and not under lease in a specified property or market area at a particular time.

Discount Rate – In real estate investment, the interest rate used to discount future income streams, such as rental income and resale value, to their present value, helping investors evaluate the profitability of an investment.

Discounted Cash Flow (DCF) – A valuation method used to estimate the attractiveness of an investment opportunity based on its future cash flows, which are discounted back to the present value using the property’s discount rate.

Disposition – The act of disposing of a real estate asset, typically through sale or lease termination, as part of a strategic corporate real estate management or investment strategy.

Due Diligence – The comprehensive appraisal of a business or property prior to signing a contract, to verify facts and details such as the condition of the property, lease terms, and legal compliance.

Deed – A legal document that represents the ownership of real estate, including rights, interests, and transfers from one party to another.

Density Bonus – An incentive given by municipalities that allow developers to increase the allowable density in exchange for public benefits, such as affordable housing or green space.

Development Rights – The legal rights to develop property for a particular use, often defined by zoning laws or development agreements with local governments.

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Easement – A legal right granted to a non-owner to use a specific part of another person’s property for a designated purpose, such as utility lines or access roads.

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) – A measure of a property’s operational performance, representing earnings before the deduction of interest payments, taxes, depreciation, and amortization.

Economic Development – Activities or initiatives aimed at improving the economic well-being of a community through efforts such as job creation, fostering business growth, and enhancing the vitality of a region.

Economic Life – The estimated period over which a property can generate income or be useful for its intended purpose before it becomes economically inefficient to continue operations due to age and wear.

Effective Age – An estimate of the age of a property that reflects its condition and utility as opposed to its actual chronological age, influenced by maintenance and upgrades.

Effective Gross Income (EGI) – The estimated total income generated by a property, including both primary rental income and additional income sources, adjusted for vacancy losses and additional income such as parking fees and service charges.

Effective Gross Income Multiplier (EGIM) – A tool used to assess the value of an income-producing property by comparing the sale price with the effective gross income, providing a quick valuation metric.

Effective Rent – The actual rental rate net of financial concessions, such as months of free rent or landlord-provided tenant improvements, providing a true cost of lease over the term.

Eminent Domain – The right of a government to expropriate private property for public use, with compensation, even if the property owner does not wish to sell.

Encumbrance – Any claim or liability attached to a property, such as a lien or mortgage, that may affect the transfer of the property or reduce its value.

Enterprise Leadership – A holistic approach to managing a company’s real estate assets that supports strategic business objectives and integrates real estate decisions with the broader business mission.

Environmental Remediation – The process of removing pollution or contaminants from environmental media such as soil, groundwater, or surface water for general health, safety, and to meet regulatory requirements, often necessary in real estate development.

Escalation Clause – A provision in a lease that allows for an increase in rent at predetermined intervals or based on certain conditions, such as increases in operational costs or inflation rates.

Estoppel Certificate – A document signed by a tenant that confirms the terms and conditions of their lease, often required by a lender or buyer during a property transaction to verify the lease’s validity and enforceability.

Exposure Time – The estimated length of time a property should be marketed before it is sold at a price that reflects market conditions, assuming that price is not abnormally affected by adverse conditions.

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Facility Management (FM) – The practice of coordinating the physical workplace with the people and work of an organization, integrating principles of business administration, architecture, and the behavioral and engineering sciences.

Feasibility Analysis – An assessment of the economic viability of a proposed development project, including analysis of the cost-benefit equation, potential market demand, and overall financial implications.

Fiduciary Role – A duty to act in the best interests of another party. In commercial real estate, this could refer to the relationship that property managers or real estate brokers have with their clients, where they are obligated to act in the best interests of the client.

Finance – In terms of CRE, it involves the sourcing of capital for real estate investments and managing the financial performance of real estate assets, including strategies for maximizing yield and managing risks.

Financial Accounting – The field of accounting concerned with the summary, analysis, and reporting of financial transactions related to a business, including those transactions related to real estate assets.

Financial Management – The strategic planning, directing, monitoring, organizing, and controlling of the monetary resources of an organization. In CRE, this involves managing the capital investment and financing aspects of real estate properties.

Floor Area Ratio (FAR) – A measure used in urban planning to control the size of buildings, calculated by dividing the total area of the building by the total area of the plot it is built on, thereby regulating building density.

Focus Spaces – Designated areas within larger open-plan offices that provide quiet and privacy for concentrated work. These spaces are essential in modern office layouts to accommodate different work styles and needs.

Functional Utility – The ability of a property to be useful and perform its intended function, which can significantly impact its market value. This includes considerations of layout, design, and amenities that meet current market standards.

Funds from Operations (FFO) – A measure used by real estate investment trusts (REITs) to define the cash generated by their operations. It is calculated by adding depreciation and amortization to earnings, excluding gains or losses from property sales.

Furniture, Fixtures, and Equipment (FF&E) – Movable furniture, fixtures, or other equipment that have no permanent connection to the structure of a building or utilities. These items depreciate over their useful life rather than the life of the building.

Future Value – The value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today. In CRE, this concept is used to predict the future worth of property investments under current market conditions.

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Government Incentives – Financial incentives provided by governmental entities to encourage the development of specific types of properties or to promote economic growth in certain areas, which can include tax breaks, grants, or other financial benefits.

Graduated Lease – A lease agreement in which the rent increases or decreases at specified intervals, based on predetermined factors such as market conditions, inflation, or tenant performance.

Grandfathered Property Lines – A term used in real estate and zoning that refers to property lines or land uses that were legally established before the enactment of new zoning laws.

Gross Absorption – A measure of the total square feet of space leased over a specific period without regard to space vacated in the same geographic area during the same period.

Gross Building Area (GBA) – The total surface area enclosed by the external walls of a building, including all space within, excluding unenclosed spaces.

Gross Lease – A lease agreement where the landlord pays all property expenses incurred through ownership, such as taxes, insurance, and maintenance, while the tenant pays a flat rent amount.

Ground Lease – A type of long-term lease agreement where the tenant is permitted to develop a piece of property during the lease period, after which the land and all improvements are turned over to the property owner.

Grantor vs. Grantee – In real estate transactions, the grantor is the individual or entity transferring an interest in real property, while the grantee is the one receiving that interest.

Gross Leasable Area (GLA) – The total floor area designed to be rented, including any basements or mezzanines, but exclusive of common areas such as stairwells and elevators.

Gross Rent Multiplier (GRM) – A simple measure used to estimate the value of an income-producing property by dividing the property’s sale price by its gross rental income.

Ground Improvement – Techniques implemented to enhance the properties of the site soil to support foundations and other infrastructure, important for real estate development on less stable lands.

Guaranteed Rent – An agreement where the landlord is assured a fixed rental income, sometimes underwritten by a third party, regardless of occupancy status or rent collection from tenants.

Guaranty – A contractual obligation by one party to assume responsibility for a debt obligation of another party if that party fails to pay or perform as contracted, often used in commercial leases to secure rental obligations.

Guideline Lease Terms – Standard terms and conditions proposed by a landlord at the beginning of lease negotiations, serving as a baseline from which adjustments can be made based on tenant negotiations.

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Hazard Insurance – A type of coverage that protects a property owner from damages caused by fires, storms, or other natural events that pose a risk to real estate assets.

Highest and Best Use – The most profitable legal use of a property based on its potential to provide the greatest return on investment or its ability to maximize its value, which may change over time due to economic or social conditions.

Holding Period – The duration for which a real estate investment is held by an investor before being sold. This period impacts the capital gains tax implications and the investment’s return.

Holdover Tenant – A tenant who continues to occupy a leased space after the expiration of their lease term, typically on a month-to-month basis, subject to the landlord’s approval and the terms of the original lease.

Hospitality Property – Real estate properties such as hotels, motels, resorts, and other types of lodging that provide facilities and services for travelers and tourists.

HUD-1 Settlement Statement – A standard form used to itemize all charges imposed upon a borrower and seller during a real estate transaction, required by the U.S. Department of Housing and Urban Development for residential property sales.

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Income Approach – A real estate valuation method that estimates the value of a property by considering the present value of expected future cash flows generated from the property, typically through rental income.

Income Capitalization – A process used in the income approach valuation method where future income is estimated and converted into a current capital value or investment amount, often used for properties that generate consistent revenue streams.

Industrial Property – Properties used for industrial purposes such as factories, warehouses, and distribution centers, which are characterized by their ability to accommodate heavy machinery, storage systems, and large workforce operations.

Ingress and Egress – The legal right to enter and exit a property, which is crucial for all properties but particularly for commercial sites where accessibility can impact business operations.

Inspection Clause – A provision in a real estate contract that allows the buyer or tenant the right to inspect the property within a certain time frame to ensure it meets their expectations and any agreed-upon standards before finalizing the purchase or lease.

Institutional Grade Property – High-quality commercial real estate properties that are typically large-scale, located in prime markets, and are of interest to institutional investors due to their size, stability, and potential for generating significant revenue.

Interest Rate Cap – A provision in loan agreements, particularly in adjustable-rate mortgages, that limits the amount the interest rate can increase during the loan term, protecting borrowers from rising rates.

Investment Grade Property – Properties that are considered a safe investment due to their location, quality, tenant profile, and potential for stable returns, often sought after by conservative investors and institutional funds.

IRR (Internal Rate of Return) – A financial metric used to evaluate the profitability of potential investments, calculated as the rate of growth an investment is expected to generate, commonly used to assess the desirability of investing in real estate properties.

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Joint Tenancy – A form of property ownership in which two or more parties hold equal shares and rights in a property. This arrangement includes the right of survivorship, meaning that if one owner dies, their share automatically passes to the remaining co-owners.

Judgment Lien – A lien placed on a property as a result of a court judgment against the property owner, which must be paid when the property is sold.

Just Compensation – A principle in eminent domain law requiring that when property is taken for public use, the owner must be compensated fairly based on the market value of the property at the time of taking.

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Key Money – An upfront payment made by a tenant to a landlord to secure a lease on a property, particularly in a competitive market or for a high-demand property. This term is more common in commercial leases.

Kick-Out Clause – A provision in a lease that allows either the tenant or the landlord to terminate the lease under specific conditions, which might include failure to meet sales targets or the desire to lease the space to another tenant under more favorable terms.

Knock-For-Knock Agreement – An agreement often used in commercial leases where tenants agree to pay for damages to their own premises regardless of who caused the damage, simplifying insurance claims and liability disputes.

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Landlord Rep (Landlord Representation) – A commercial real estate broker or agent who exclusively represents the interests of a landlord or property owner in lease negotiations and property marketing efforts.

Lease – A legal document outlining the terms under which one party agrees to rent property from another party. The lease ensures the tenant, also called a lessee, the right to use the property for a specified term and under agreed conditions, in return for payment to the landlord.

Leasehold Improvements – Enhancements made to a rental property by a tenant, often at their own expense. These improvements are usually specific to the tenant’s business needs and may not be removable at the end of the lease term.

Letter of Intent (LOI) – A non-binding document outlining the basic terms of a proposed lease agreement, used as a starting point for negotiation between a landlord and tenant.

Leverage – The use of various financial instruments or borrowed capital—such as debt—to increase the potential return of an investment. In real estate, leverage is often used to buy properties with a mortgage as opposed to paying the full price upfront.

Lien – A legal right or interest that a creditor has in the debtor’s property, lasting until the debt obligation is satisfied. In real estate, liens are typically used by contractors and other parties to ensure they are paid for services rendered.

Liquidity – The ability to quickly convert property or investment into cash without significant loss of value. In real estate, liquidity refers to how easily a property can be sold in the marketplace.

Listing – An agreement between a property owner and a real estate agent, granting the agent permission to advertise and handle the sale of a property. It also refers to the property itself being on the market.

Loan-to-Value Ratio (LTV) – A financial term used by lenders to express the ratio of a loan to the value of an asset purchased. In real estate, it is typically used by banks and other lenders to assess the risk of lending money for a mortgage compared to the value of the property.

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Market Analysis – A comprehensive examination and evaluation of a specific real estate market within a geographical area. This analysis helps determine trends, value, and viability of properties in that market based on current and projected economic conditions.

Market Comps (Comparables) – Recently sold or leased properties with similar characteristics, used to help determine the market value of a subject property by comparing their features, location, and transaction details.

Market Value – The most probable price that a property would fetch in a competitive and open market under all conditions requisite to a fair sale, with both buyer and seller acting prudently and knowledgeably.

Master Lease – A lease agreement between a property owner and a master tenant, who is then responsible for leasing individual spaces within the property to subtenants.

Mezzanine Financing – A hybrid of debt and equity financing that gives the lender the rights to convert to an ownership or equity interest in the company if the loan is not paid back in time and in full. It is often used to finance the expansion of existing companies.

Mixed-Use Development – A real estate project that combines residential, commercial, cultural, institutional, or entertainment uses, where those functions are physically and functionally integrated.

Mortgage – A loan secured by the collateral of specified real estate property that the borrower is obliged to pay back with a predetermined set of payments.

Mortgage Broker – An intermediary who brings mortgage borrowers and mortgage lenders together, but does not use its own funds to originate mortgages.

Multi-Family Residential – A classification of housing where multiple separate housing units for residential inhabitants are contained within one building or several buildings within one complex. Examples include apartments and condos.

Management Agreement – A contract between a property owner and a management company or individual property manager that outlines the scope of the manager’s authority and responsibilities.

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Net Lease – A type of lease agreement where the tenant is responsible for paying some or all of the property expenses that normally would be paid by the property owner. This includes costs such as property taxes, insurance, and maintenance.

Net Operating Income (NOI) – A fundamental calculation used to analyze real estate investments, measuring a property’s ability to produce income. It equals all revenue from the property minus all reasonably necessary operating expenses.

Non-Disturbance Agreement – A clause in a mortgage or lease that ensures tenants will not be disturbed if the landlord defaults on the loan and the property is foreclosed. It is an agreement between the tenant and the landlord’s lender.

Non-Recourse Loan – A type of loan secured by collateral, usually property, where the borrower is not personally liable. In real estate, if the borrower defaults, the lender can seize the collateral but cannot seek out the borrower for any further compensation, even if the collateral does not cover the full amount of the defaulted loan.

Notice Period – The time period required for one party to notify another about changes in the terms of the agreement or an intent to terminate a lease or contract. This period allows both parties to make necessary arrangements following the change.

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Occupancy Rate – A metric used in the real estate industry to measure the ratio of rented or used space compared to the total amount of available space. High occupancy rates indicate high demand and effective property management.

Offering Memorandum – A document issued to potential buyers or lessees detailing a commercial or residential property for sale or lease. It includes comprehensive information about the features and benefits of the property.

Operating Expenses – Expenses incurred through the normal operations of a property, including property management fees, utilities, repairs, and maintenance. These do not include capital expenditures or debt service costs.

Option to Buy – A clause in a lease that grants the tenant the right, but not the obligation, to purchase the leased property at a predetermined price during or at the end of the lease term.

Owner Financing – A property purchase transaction in which the property owner provides all or part of the financing. This can involve the seller carrying the mortgage for the buyer as an alternative to the buyer obtaining a traditional loan from a financial institution.

Owner-Occupied Property – A property that is owned and occupied by the owner, rather than leased from another entity. In commercial real estate, this can refer to a business that owns and operates out of the building they have purchased.

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Parcel – A specific piece of land, typically defined by boundaries recorded in a land registry. In real estate, a parcel may be subject to development or transaction as a unit.

Percentage Lease – A lease, commonly used in retail, where the tenant pays a base rent plus a percentage of their revenue. This arrangement aligns the tenant’s business success with the landlord’s revenue.

Performance Bond – A bond issued to one party of a contract as a guarantee against the failure of the other party to meet obligations specified in the contract. In real estate, this is often used in new developments to ensure project completion.

Plat – A map, drawn to scale, showing the divisions of a piece of land. It details the land’s size, boundary locations, nearby streets, flood zones, and other characteristics.

Pre-Leasing – The practice of signing lease agreements with tenants before the construction of a building or development is completed. This is common in commercial real estate to secure cash flow as soon as the building is operational.

Prime Rate – The interest rate that commercial banks charge their most credit-worthy customers, generally a large corporation. The prime rate influences interest rates given to individuals and smaller businesses, particularly in real estate loans.

Property Management – The administration of residential, commercial, and industrial real estate including apartments, detached houses, condominium units, and shopping centers. Property management typically involves the managing of property that is owned by another party or entity.

Property Tax – Taxes paid by the owner of the property, based on the value of the property. These taxes fund various public expenses like road maintenance and public schooling.

Pro Forma – An accounting statement that hypothesizes about some financial statements. In real estate, pro formas project future revenues, costs, and cash flows based on current and forecasted leasing, occupancy rates, and other factors.

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Quitclaim Deed – A legal instrument used to transfer interest in real property. The grantor terminates (“quits”) any right and claim to the property, thereby allowing the right or claim to transfer to the grantee, but without any warranty of title.

Qualified Intermediary – In the context of a 1031 exchange, this is an independent party who facilitates the exchange by holding the sale proceeds of the old property and then purchasing the new property on behalf of the investor to ensure the transaction meets the requirements of the IRS.

Quality of Earnings Report – A report that reviews a company’s financial statements to identify sustainable earnings, highlighting the quality and reliability of the earnings through adjustments and normalizations.

Quorum – The minimum number of members of a body that must be present at any of its meetings to make the proceedings of that meeting valid. In the context of real estate, this might relate to meetings of a homeowners’ association or board of directors.

Quasi Contract – An obligation that the court imposes despite there being no contract, to prevent one party from being unjustly enriched at the expense of another. In real estate, this can apply in situations where a service is rendered in expectation of a payment where no formal agreement exists.

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Real Estate Investment Trust (REIT) – A company that owns, operates, or finances income-producing real estate. REITs provide a way for individual investors to earn a share of the income produced through commercial real estate ownership without actually having to buy, manage, or finance any properties themselves.

Rent Abatement – A negotiated concession in a lease agreement that allows a tenant to forgo paying rent for a specified period of time, often in exchange for completing certain improvements or meeting other agreed-upon conditions.

Rent Roll – A document or spreadsheet containing details about the tenants leasing a property, such as their names, the size of the space leased, the amount of rent paid, and the duration of their leases. This is crucial for managing and valuing commercial real estate properties.

Rental Agreement – A contract between a landlord and a tenant that outlines the terms and conditions of rental property, distinct from a lease agreement primarily in terms of the duration (rental agreements are typically shorter and more flexible).

RevPAR (Revenue Per Available Room) – A performance metric used in the hotel and lodging industry, calculated by dividing the property’s total revenue by the number of available rooms, providing a measure of the property’s revenue-generating efficiency.

Reversionary Value – The estimated future value of a property at the end of a specified investment period, often used in discounted cash flow analysis to determine an investment’s potential return.

Right of First Refusal – A clause typically found in leases or other real estate agreements that gives a tenant or another party the first opportunity to buy a property before the owner can sell it to someone else.

Risk Assessment – The process of identifying and analyzing potential issues that could negatively impact key business initiatives or projects. In real estate, this involves evaluating factors that could affect property values, rental income, or development potential.

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Sale-Leaseback – A transaction in which the owner of a property sells the property and then leases it back from the buyer. This arrangement allows the original owner to free up capital while continuing to occupy and use the property.

Secondary Market – In real estate, this refers to the buying and selling of existing mortgages or mortgage-backed securities. These transactions occur among investors and are separate from where mortgages are originated.

Secured Loan – A loan backed by collateral, typically property, which the lender can seize if the borrower defaults on the loan. In commercial real estate, properties often serve as collateral for these loans.

Security Deposit – A sum paid by tenants to a landlord before moving in that is held to cover any damages incurred to the property during the lease term. It is typically returned to the tenant at the end of the lease if no damage is found.

Shadow Anchor – A large, high-profile tenant located near a shopping center but not within the property itself, whose presence can have a positive impact on the center’s foot traffic and overall performance.

Site Plan – A detailed architectural plan, often including landscape elements, that outlines the layout of improvements on a property. It shows building footprints, travelways, parking, drainage facilities, pathways, lighting, and landscaping.

Special Purpose Property – A type of real estate that is appropriate for one specific use, such as a church, school, or theater. These properties are more challenging to sell because they are designed for specific uses.

Stabilized Occupancy – The state where a property maintains a consistent level of occupancy that is sustainable over time. In commercial real estate, this term indicates that a property is performing close to its optimal capacity.

Sublease – An arrangement in which the original tenant of a property leases part or all of the property to another tenant. The original tenant retains some rights and responsibilities under the original lease.

Subordination Agreement – An agreement by which a creditor is placed in a lower priority for the collection of its debt in respect of other creditors. In real estate, this often occurs when a new mortgage is taken out and the new mortgage takes priority over an existing one.

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Tenant – An individual or entity that rents or leases space within a property owned by another party, referred to as the landlord. Tenants may occupy residential, commercial, industrial, or retail spaces based on the terms outlined in a lease agreement.

Tenant Improvement Allowance (TIA) – A monetary allowance provided by the landlord to the tenant to cover the costs of customizing a leased space to the tenant’s specific requirements.

Tenancy in Common – A form of co-ownership where each party owns a specific share of the property and can transfer this share to others without the consent of the co-owners. This type of ownership does not provide survivorship rights to the co-owners.

Title – The legal right to own, use, or sell a piece of property. Title is documented by records showing the history of ownership and transfers. Holding a title gives the holder legal rights to the property.

Title Insurance – Insurance that protects the holder from financial loss related to defects in title to real estate and from the invalidity or unenforceability of mortgage loans.

Title Search – A detailed examination of the historical records concerning a property. This includes deeds, court records, property and name indexes, and other documents to verify the seller’s right to transfer ownership, and to discover any claims, defects, and other rights or burdens on the property.

Triple Net Lease (NNN) – A lease agreement where the tenant agrees to pay all real estate taxes, building insurance, and maintenance (the three “nets”) on the property in addition to any normal fees that are expected under the agreement (rent, utilities, etc.).

Trophy Building – A prestigious, high-quality commercial property that is considered an iconic or landmark building within its market, often commanding premium rents and attracting high-profile tenants.

Turnkey Property – A fully developed and ready-to-use commercial property, often including furnishings, fixtures, and equipment, which requires minimal customization or improvement by the tenant.

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Underwriting – The process by which a lender or insurer evaluates the risk of a potential client. In real estate, this usually involves assessing the borrower’s ability to fulfill the mortgage requirements and evaluating the property value to determine the feasibility of the loan.

Unimproved Land – Land that has received no development, construction, or site preparation. Raw land that does not include buildings or any other structures is often considered unimproved.

Useful Life – The estimated duration for which a property or equipment is expected to be useful in business operations, used for calculating depreciation for accounting and tax purposes.

Usury – Charging interest at a rate that exceeds the maximum rate that is legally allowed. In real estate, this often relates to the interest charged on loans secured by mortgages on properties.

Utility Easement – A type of easement granted by the property owner that allows a utility company the right to use and access specific areas of the property for laying down pipes, wires, or other infrastructure necessary to provide services such as electricity, water, or telecommunications.

Umbrella Lease – A lease agreement that covers more than one property managed by the same landlord. This can be useful for businesses that lease multiple locations from the same property owner.

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Vacancy Rate – The percentage of all available units in a rental property, such as an apartment complex or office building, that are vacant or unoccupied at a particular time.

Valuation – The process of determining the current worth of a property or asset. In real estate, this is typically done by a professional appraiser who assesses the market value based on location, condition, improvements, and the recent sales of comparable properties.

Variable Interest Rate – An interest rate on a loan or mortgage that fluctuates over time with market conditions. Unlike fixed interest rates, variable rates can change and are often tied to an index or a benchmark rate.

Variance – An exception to the zoning laws granted by a local government for specific properties that allows uses or construction that deviates from the zoning regulations.

Vendor Take-Back Mortgage – A type of mortgage in which the seller acts as the lender. This occurs when the seller extends credit to the buyer to purchase the property, typically when the buyer cannot secure financing from a traditional lender.

Vested – Having a legal right to something. In real estate, vested rights refer to the legal rights to use property in a certain way, based on approvals or entitlements received from governmental jurisdictions.

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Waiver – The voluntary relinquishment or surrender of some known right or privilege. In real estate, a waiver may involve a landlord giving up the right to a specific lease requirement or a tenant surrendering the right to sue for a particular issue.

Walk-Through – A final inspection of a property before closing where buyers look for issues that need to be addressed before ownership transfers. This process helps ensure that all conditions of the sale have been met and that the property is in the agreed-upon condition.

Warranty Deed – A deed that guarantees clear title to the buyer of real property. The grantor of a warranty deed warrants that the property is free of any liens or claims and assures that they hold clear title, thus protecting the grantee against other title claims.

Working Capital – The amount of available capital that a company can readily use for day-to-day operations. In real estate, it refers to the liquid funds necessary to maintain property investments, manage buildings, and cover short-term expenses.

Wraparound Mortgage – A form of secondary financing for the purchase of real property. The new mortgage is “wrapped” around the existing mortgage because the new lender will make the payments on the old mortgage.

Write-Down – Reducing the book value of an asset because it is overvalued compared to the market value. In real estate, this could occur due to property devaluation, changes in market conditions, or damage to the property.

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Yield – The income return on an investment, such as the rental income generated by a property. It is often expressed as a percentage based on the cost or market value of the asset.

Yield Spread – The difference between the yield on a real estate investment and the yield on a risk-free alternative such as government bonds. This spread helps investors assess the risk premium associated with real estate investments.

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Zoning – Regulations established by local governments regarding the type of activities that can occur on a specific parcel of land. Zoning laws dictate how the land can be used, including residential, commercial, industrial, or recreational purposes.

Zoning Adjustment – A modification or variance granted by a zoning board that allows a property owner to deviate from established zoning requirements, typically due to unique property characteristics that make compliance with standard regulations impractical.

Zoning Ordinance – A law that defines how various geographic zones of a town or city can be used. It includes regulations concerning building size, placement, type, and other aspects that can affect a real estate development project.

Zero-lot-line – A type of building placement where the structure comes right up to the edge of the property line on one or more sides. This is common in commercial developments where space is at a premium and in urban townhouse developments.

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