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REAL ESTATE INVESTMENT GLOSSARY

Absolute NNN/Bonded Lease:  No landlord responsibilities. Tenant is responsible for taxes, insurance, maintenance (including roof & structure).

Absolute Net Lease:  A lease in which the tenant pays all expenses including structural maintenance repairs; usually a long-term lease to a credit tenant.

Absolute Net Bond Lease:  Tenant is responsible for all expenses, including casualty and condemnation.

Capitalization Rate (Cap Rate): Cap Rate is the percentage rate at which the net operating income is discounted to determine the value of a property. It is the net operating income divided by the sales price or value of a property expressed as a percentage.

Carrying Charges:  Costs incidental to property ownership that must be absorbed by the landlord during the initial lease-up of a building and thereafter during periods of vacancy.

Cash Flow: Revenue remaining after all cash expenses are paid.

Cash-on-Cash Return: Is the percentage of funds from the real estate investment that is returned to the investor annually, after any mortgage finance charges. This return is normally higher than the Cap Rate dependant on interest rates.

Gross Lease:  The tenant pays a set sum or “gross” amount for rent and the landlord pays all real estate expenses.

Net Lease:   Generally a lease in which the tenant pays for utilities, and property taxes in addition to rent or insurance. The landlord pays for maintenance, repairs, and the property taxes or insurance not paid by the tenant. Also referred to as a single net lease or modified gross lease.

NN (Net Net Lease):  Generally a lease in which the tenant pays for utilities, property taxes, and insurance in addition to the rent, and the landlord pays for maintenance and repairs. Also referred to as a double net lease, NN and modified gross lease.

NNN (Net Net Net Lease):  A net lease under which the lessee assumes all expenses of operating a property, including both fixed and variable expenses and any common area maintenance that might apply. However, the landlord is responsible for structural repairs. Referred to as a triple net lease or NNN and stated as a fully net lease.

Net Operating Income (NOI):  The gross revenue less operating expenses and an allowance for anticipated vacancy. It is a key indicator of financial strength.

Net Present Value(NPV):  The sum of the total present value of incremental future cash flows plus the present value of estimated proceeds from sale.

Net Purchase Price:  The Gross purchase price less associated debt financing.

Non Performing Loan: A real estate loan that is unable to meet its contractual principal and interest payments.

Non Recourse Debt: A real estate loan that, in the event of a default by the borrower, limits the lender’s remedies to foreclosure of the mortgage, realization on its assignment of leases and rents, and acquisition of the real estate including any recourse against the borrower.

Operating Expense: Any expensed and costs associated with operating the property, including maintenance, repairs, management, utilities, taxes and insurance.

Out Parcel: Individual retail sites in a shopping center, also referred to as Pad sites.

Performance Based Fees: Fees paid to advisers or real estate managers based on returns to investors, often packaged with a modest acquisition and asset-management fee structure.

Preferred Shares or Units: Shares that have prior claim on distributions (and/or assets in the event of dissolution) up to a definite amount before the common shareholders are entitled to anything. Preferred shareholders rank behind all creditors in dissolutions.

Private Equity Fund: A pooled investment fund vehicle targeting investors, typically structured as a private real estate investment trust (REIT), or other form of real estate operating company, that invests in direct equity real estate holdings on behalf of its shareholders or Unitholders.

Private Placement: A sale of a security in a manner that is exempt from the registration rules and requirements of the Securities and Exchange Commission (SEC).

Raw Land: Unimproved land that remains in its original state.

Real Estate Fundamentals: Factors that drive the value of real estate (i.e., the supply, demand and pricing for land and/or developed space in a given geographic or economic region or market).

Real Estate Investment Trust (REIT): A real estate trust or corporation that pools the capital of investors to acquire or provide financing for real estate. A real estate trust or corporation qualifies for REIT status i.e. does not pay corporate income tax to the IRS, by paying out at least 90 percent of its taxable income in the form of dividends to investors.

Real Estate Owned (REO): Real estate owned by a bank or financial institution as a result of default by borrowers and subsequent foreclosure by the institution.

Return on Equity (ROE): Income available to stockholders for the trailing 12 months divided by the average common equity, expressed as a percentage.

Return on Investment (ROI): Historical income after taxes divided by the average total long-term debt, other long-term liabilities and shareholders equity, expressed as a percentage.