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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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Balloon Payment:
A large principal payment that typically becomes
due at the conclusion of the loan term.
Generally, it reflects a loan amortized over a
longer period than that of the term of the loan
itself (i.e. payments based on a 25 year
amortization with the principal balance due at
the end of 5 years). |
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Bankrupt:
The condition or
state of a person (individual, partnership,
corporation, etc.) who is unable to repay it's
debts as they are, or become, due. |
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Bankruptcy:
Proceedings under
federal statures to relieve a debtor who is
unable or unwilling to pay its debts. After
addressing certain priorities and exemptions,
the bankrupt’s property and other assets are
distributed by the court to creditors as full
satisfaction for the debt. |
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Base Rent:
A set amount used
as a minimum rent in a lease with provisions for
increasing the rent over the term of the lease.
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Base Year:
Actual taxes and
operating expenses for a specified base year,
most often the year in which the lease
commences. Once the base year expenses are
known, the lease essentially becomes a
dollar stop lease. |
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Basis Points:
One-100th of 1 percent. Used
primarily to describe changes in yield or price
on debt instruments including mortgages and
mortgage-backed securities. |
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Below-grade:
Any structure or a portion of a structure
located underground or below the surface grade
of the surrounding land. |
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Bridge Loan:
A loan which enables a buyer to purchase a
property, then allow for time to rehab and/or
increase NOI prior to placement of permanent
financing or enables buyer to get financing to
make a down payment and pay closing costs before
selling the present property. Also called “gap”
financing. |
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Building Classifications:
Building classifications in most markets refer
to Class "A", "B", "C" and sometimes "D"
properties. While the rating assigned to a
particular building is very subjective, Class
"A" properties are typically newer buildings
with superior construction and finish in
excellent locations with easy access, attractive
to credit tenants, and which offer a multitude
of amenities such as on-site management or
covered parking. These buildings, of course,
command the highest rental rates in their
sub-market. As the "Class" of the building
decreases (i.e. Class "B", "C" or "D") one
component or another such as age, location or
construction of the building becomes less
desirable. Note that a Class "A" building in one
sub-market might rank lower if it were located
in a distinctly different sub-market just a few
miles away containing a higher end product. |
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Building Code:
The various laws set forth by the ruling
municipality as to the end use of a certain
piece of property and that dictate the criteria
for design, materials and type of improvements
allowed. |
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Building or "Core" Factor:
Represents the percentage of Net Rentable Square
Feet devoted to the building's common areas
(lobbies, rest rooms, corridors, etc.). This
factor can be computed for an entire building or
a single floor of a building. Also known as a
Loss Factor or Rentable/Usable (R/U) Factor, it
is calculated by dividing the rentable square
footage by the usable square footage. |
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Building Owners & Managers Association (BOMA):
An organization of practitioners who own and
manage buildings, most often office space. Sets
the basis by which most regional expense
standards are established. Address: Building
Owners and Managers Association 1221
Massachusetts Avenue NW Washington, DC 20005.
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Building Standard:
A list of construction materials and finishes
that represent what the
Tenant Improvement (Finish) Allowance/Work
Letter is designed to cover while
also serving to establish the landlord's minimum
quality standards with respect to tenant finish
improvements within the building. Examples of
standard building items are: type and style of
doors, lineal feet of partitions, quantity of
lights, quality of floor covering, etc.
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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. |
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Build-out:
The 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. |
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Build-To-Suit:
An approach taken to lease space by a property
owner where a new building is designed and
constructed per the tenant’s specifications. |
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Bullet Loan:
Any short-term, generally five to seven years,
financing option that requires a balloon payment
at the end of the term and anticipates that the
loan will be refinanced in order to meet the
balloon payment obligation. Essentially,
should the refinancing not be available, often
due to the property not performing as
anticipated, the borrower is "shot" and the
property is subject to foreclosure. An example
of this is when a developer borrows to cover the
costs of construction and carry-costs for a new
building with the expectation that it would be
replaced by long-term (or "permanent") financing
provided by an institutional investor once most
of risk involved in construction and lease-up
had been overcome resulting in an
income-producing property. |
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