Glossary
Absolute Net Lease: A type of lease where the tenant is responsible for all property expenses, including taxes, insurance, and maintenance.
Amenities: additional features in a commercial property that are provided to attract and retain tenants, such as gyms, coffee shops, or rooftop terraces.
Anchor tenant: A major tenant in a shopping center or mall that attracts customers and helps to stabilize the property's occupancy and rental income.
Appraisal: A professional assessment of the value of a commercial property, typically conducted by a licensed real estate appraiser.
Assignment of lease: The transfer of a tenant's lease to another party without the consent of the landlord.
Base Rent: The minimum rent that a tenant must pay under the terms of a lease, typically before any additional charges such as taxes and maintenance.
Bridge loan: A short-term loan used to finance the purchase of a property before long-term financing is secured.
Brokerage: The business of buying and selling commercial properties, typically conducted by real estate brokers or agents.
Building class: A classification system used to distinguish commercial buildings based on their construction, amenities, and location.
Build-to-Suit: a type of commercial property development where a landlord builds a property to the specific needs of a tenant.
CAM charges (Common Area Maintenance): Additional rent charges that tenants may be responsible for covering, such as for the maintenance and upkeep of common areas in a building.
Capitalization Rate (Cap Rate): a measure of the return on investment for a commercial property, calculated by dividing the property's NOI by its purchase price.
Class A, B, and C properties: A grading system used to classify commercial properties based on their age, condition, and location. Class A properties are typically newer and in prime locations, while Class B and C properties are older and in less desirable locations.
Depreciation: a systematic allocation of the cost of an asset over its useful life, usually calculated for tax purposes.
Discussion Paper: A document outlining the preliminary terms and conditions of a commercial real estate transaction, used to indicate a buyer's intent to purchase a property. Can also be referred to as a Term Sheet or Letter of Intent.
Due diligence: The process of researching and verifying information about a commercial property before making a purchase or investment.
Easement: A legal right to use someone else's property for a specific purpose, such as access to a road or utility lines.
Equity: The value of a property after all liabilities are subtracted.
Escalation clause: A provision in a lease that specifies how the rent will increase over time, typically based on factors such as inflation or changes in operating expenses.
Fair market value: The value of a property based on what a willing buyer would pay to a willing seller in an open market.
Feasibility study: An analysis of the potential profitability and viability of a commercial real estate development project.
Gross Leasable Area (GLA): the total square footage of a commercial property that can be leased to tenants.
Gross lease: A type of lease where the landlord is responsible for paying all operating expenses, and the tenant pays only a single fixed rent.
Ground Lease: a type of lease where a tenant leases land from a landlord, typically for the purpose of building a commercial property.
Leasehold interest: the tenant's right to use a property for a specified period of time.
LOI (Letter of Intent): A document outlining the preliminary terms and conditions of a commercial real estate transaction, used to indicate a buyer's intent to purchase a property. Can also be referred to as a Term Sheet or Discussion Paper.
Mezzanine financing: A type of loan that is used to finance the development of a commercial property, and is typically secured by a junior lien on the property.
Net Operating Income (NOI): the income generated by a commercial property after operating expenses are subtracted.
Occupancy Rate: the percentage of a commercial property's Gross Leasable Area that is currently leased to tenants.
Operating expense: expenses associated with the operation of a commercial property, such as electricity, cleaning, and security.
Option to renew: A clause in a lease that gives the tenant the right to extend the lease for an additional term.
Pass-through expense: expenses that the landlord charges the tenant in addition to rent, such as property taxes and insurance.
Private Loan: A type of short-term loan that is typically used to finance real estate investments, and is secured by the property being purchased.
Proforma: A financial projection of the expected income and expenses of a commercial real estate property, typically used in the underwriting process for a loan or investment.
REIT (Real Estate Investment Trust): A type of investment vehicle that allows individuals to invest in commercial real estate properties, similar to how mutual funds allow investors to invest in stocks.
Sublease: A lease agreement in which the original tenant (the sublessor) leases the property to a new tenant (the sublessee).
Tenant improvement allowance (TI allowance): An amount of money provided by the landlord to a tenant to make improvements to a commercial property, such as for build-out or renovations.
Term Sheet: A document outlining the preliminary terms and conditions of a commercial real estate transaction, used to indicate a buyer's intent to purchase a property. Can also be referred to as a Letter of Intent or Discussion Paper.
Triple Net Lease (NNN): a type of lease where the tenant is responsible for paying property taxes, insurance, and maintenance in addition to rent.
Zoning: The regulations set by local government that determine how a piece of land can be used and developed.