Glossary of Real Estate Terms...
This Glossary has
been provided as a courtesy to assist you in gathering
information relative to real estate.
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1031
Exchange:
Section 1031
of the Internal Revenue Code allows for the disposition
of interests in commercial real estate assets on
a tax free basis so long as the proceeds from sale
are transferred into "like kind" assets within a
time period certain in compliance with section 1031.
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AAA Tenant:
A tenant with a top credit rating. This type
of tenant is often critical to the developer’s ability
to arrange both construction and permanent financing
for a major commercial project, such as a shopping
center or office building.
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Abandonment:
The voluntary
relinquishment of rights of ownership or another
interest (such as an easement) by failure to use
the property, coupled with intent to abandon (give
up the interest).
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Abatement:
A reduction or decrease.
Usually applies to a decrease of assessed valuation
of ad valorem taxes after the assessment, and levy
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Above Building Standard:
Upgraded finishes and specialized designs necessary
to accommodate a tenant’s requirements
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Absorption
Rate:
The rate (speed) at which vacant space is either
leased or sold to users in the marketplace. This
rate is usually expressed in square feet per year
or in the case of multi-family
housing, in the number of units per year.
"Market
Absorption".
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Abstract of
Judgment:
A
summary of money judgment obtained in court. (When
this summary or abstract is recorded in the county
recorder's office, in some states the judgment becomes
a lien on the debtor's property, both presently
owned and/or after-acquired.)
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Abstract of
Title:
A summary prepared by a licensed abstractor of all
documents recorded in the public records of the
political subdivision where the land is located.
An abstract in some states or areas is reviewed
by an attorney or other experienced title examiner
to determine the status of title. Virtually every
abstractor today provides actual copies of the records
rather than an abstract of each document.
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Acceleration
Clause:
A
cause in a deed of trust or mortgage, which "accelerates,"
or hastens, the time when the indebtedness becomes
due. For example, some deeds of trust contain a
provision (an acceleration clause) stating that
the note shall become due immediately upon the sale
of the land or upon failure to pay interest or an
installment of principal and interest
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Accommodation
Recording:
Recording of instruments with the county recorder
by a title company merely as a convenience to a
customer and without assumption of responsibility
for correctness or validity
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Acknowledgment:
A
formal declaration before a duly authorized officer
(such as a notary public) by a person who has executed
an instrument that such execution is his own act
and deed. An acknowledgment is necessary to entitle
an instrument (with certain specific exceptions)
to be recorded, to impart constructive notice of
its contents and to entitle the instrument to be
used as evidence without further proof. The certificate
of acknowledgment is attached to the instrument
or incorporated therein
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Acquisition
and Development
Loan (A&D Loan):
Debt financing for
the purchase and preparation of raw land for development.
Usually a construction loan or land sale is the
source of repayment.
Acre:
A measure of land equal to 43,560 square feet.
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Ad Valorem:
According to value. This is a tax imposed on
the value of property (references a general
property tax), which
is typically based on the local government’s valuation
of the property. |
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Advisory Services:
Outsourced professional services
provided to commercial real estate practitioners
in order to assist them with areas in which they
don't have the internal skill sets or where they
need third party impartiality. Typical areas of
service include:
Advisory
Services for Mezz Lenders and Equity Providers
Capital Formation
and Acquisition Services
Capital
Partner Services
Corporate
Real Estate Services
Development
Advisory Services
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Add-On Factor:
Often
referred to as the Loss Factor or Rentable/Usable
(R/U) Factor, it represents the tenant’s pro-rata
share of the Building Common Areas, such as lobbies,
public corridors and restrooms. It is usually expressed
as a percentage which can then be applied to the
usable square footage to determine the rentable
square footage upon which the tenant will pay rent.
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Allowance
Over
Building Shell:
Most often used in a yet-to-be constructed property,
the tenant has a blank canvas upon which to customize
the interior finishes to their specifications. This
arrangement caps the landlord’s expenditure at a
fixed dollar amount over the negotiated price of
the base building shell. This arrangement is most
successful when both parties agree on a detailed
definition of what construction is included and
at what price.
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Amendment:
A change to either alter, add to, or correct
part of an agreement without changing the principal
idea or essence.
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American
Land Title Association
(ALTA):
An association representing more than 2,100 title
abstractors, title insurance companies, title insurance
agents, and associate members that was founded in
1907. Members of the association use standardized
title insurance forms developed by ALTA to provide
uniformity within the industry. ALTA’s national
headquarters is located at
1828 L Street, N.W., Suite
303,
Washington,
D.C.
20036; (202) 296-3671.
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Amortization:
The repayment of a mortgage debt over a period
of time in a series of periodic installments. It
should be noted that a portion of each payment consists
of a blend of interest and amortization of principal.
Specifically, this is the payback of the principal
portion of the loan owed to the lender. The effect
of amortization is to build up the paper value of
the owner's equity while reducing the debt obligation.
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Anchor Tenant:
A well-known commercial retail business such as
a national chain store or regional department store
(AAA Tenant) strategically placed in a shopping
center so as to generate the most customers for
all of the stores located in the shopping center.
This term usually applies in reference to a retail
property.
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Anchored Centers:
A shopping center
with at least one anchor tenant.
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Annual Loan
Constant:
The ratio of the annual debt payment on a loan
to the original amount borrowed. The loan constant
is also referred to as a mortgage constant.
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Annual Percentage
Rate (APR):
The actual cost of borrowing money, expressed
in the form of an annual interest rate. It may be
higher than the note rate because it represents
full disclosure of the interest rate, loan origination
fees, loan discount points, and other credit costs
paid to the lender.
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Appraisal:
An estimate of opinion and value based upon
a factual analysis of a property by a qualified
professional who preferably possesses an MAI designation.
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Appreciation:
The increased value of an asset.
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"As-Is" Condition:
The acceptance by the tenant of the existing condition
of the premises at the time the lease is consummated.
This would include any physical defects.
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Assessment:
A fee imposed on property, usually to pay for public
improvements such as water, sewers, streets, improvement
districts, etc.
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Assignment:
A transfer by lessee of lessee’s entire estate
in the property. Distinguishable from a sublease
where the sub lessee acquires something less than
the lessee’s entire interest.
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Average Daily
Rate
(ADR):
The average rate charged by a hotel for one
(1) room for one (1) day; arrived at by dividing
the total room revenue by the actual rooms occupied.
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Average Life:
It is a way to look at the term of a loan or
bond that accounts for principal pay downs. If a
loan is interest only with a full balloon at the
end, the average life will equal the maturity. If
there is amortization, principal is being paid over
the life of the loan, decreasing the balloon payment
and the average life. This number is then used to
find the treasury that has the closest remaining
term, but is not shorter. For example, a 10/25 loan
has an average life of 9 years. 9 years from today
is October 2008. The current list of outstanding,
non-callable
US
treasury securities with maturities in 2008 includes
March 2008, June 2008, September 2008 and a December
2008. The lender would choose the December 2008
because it is longer than the actual due date |
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