Abatement: Often referred to as free rent or early occupancy and may occur outside or in addition to the primary term of the lease.

Above building standard: Upgraded finishes and specialized designs necessary to accommodate a tenant’s requirements.

Absentee Landlord: An owner of an interest in income producing property who does not reside on the premises and who may rely on a property manager to oversee operations.

Absolute Fee Simple Title: A title that is unqualified. Fee simple is the best title that can be attained and conveys the highest bundle of rights.

Absorption analysis: A study of the number of units of real property that can be sold or leased over a period of time.

Absorption rate: The rate at which rentable space is filled. Gross absorption is a measure of the total square feet leased over a specified period with no consideration given to space vacated in the same geographic area during the same time period. Net absorption is equal to the amount occupied at the end of a period minus the amount occupied at the beginning of a period and takes into consideration space vacated during the period.

Abstract: A condensed history of the title to a property, consisting of a summary of the original grant and all subsequent conveyances and encumbrances relating to the particular parcel of real estate.

Abstraction: Method of finding land value by deducting all improvement costs from the sales price.

Accessibility: The relative ease of entrance to the property by various means, a factor that contributes to the probable most profitable use of a property.

Accretion: Land buildup resulting from the deposit by natural action of sand or soil washed up from a river, lake or sea.

Accrual Basis: A system in accounting of allocating revenue and expense items on the basis of when the revenue is earned or the expense occurred, not on the basis of when cash is received or paid out.

Accrued Depreciation: Total depreciation taken from an asset from the time of acquisition. In an appraisal, the difference between reproduction or replacement cost and the appraised value as of the date of appraisal.

Accumulated cost recovery: Total cost recovery deductions taken throughout the holding period of a property.

Active income: Income from salary, wages, tips, commissions, and activities in which the taxpayer materially participates. Also see passive income.

Add-on factor: The ratio of rentable to useable square feet. Also known as the load factor and the rentable-to-useable ratio. Also see efficiency percentage. Formula:

Add-on factor =  Rentable square feet / Useable square feet

Ad valorem: Meaning “according to value,” this is a tax imposed on the value of property that is typically based on the local government’s valuation of the property.

Adjustable Rate Mortgage (ARM): A loan with an interest rate that fluctuates according to the movements of a predetermined index.

Adjusted basis: The original cost basis of a property plus capital improvements, less total accumulated cost recovery deductions, and partial sales taken during the holding period.

Adjusted funds from operations (AFFO): A measure of REIT performance or ability to pay dividends used by many analysts with concerns about quality of earnings as measured by funds from operations (FFO). The most common adjustment to FFO is an estimate of certain recurring capital expenditures needed to keep the property portfolio competitive in its marketplace.

Administrative fee: Usually stated as a percentage of assets under management or as a fixed annual dollar amount.

Advances: Payments made by the servicer when the borrower fails to make a payment.

Adviser: A broker, consultant or investment banker who represents an owner in a transaction. Advisers may be paid a retainer and/or a performance fee upon the close of a financing or sales transaction.

Adverse Land Use: A land use that has detrimental effect on market value of nearby properties.

Aesthetic Value: Value relating to beauty, rather than functional considerations.

Agglomeration economies: Cost reductions or savings that come about from efficiency gains associated with the concentration or clustering of firms/producers or economic activities and the formation of a localized production network.

Aggregation risk: Risk associated with warehousing mortgages during the pooling process for future securitization.

Alpha: A coefficient which measures risk-adjusted performance, factoring in the risk due to the specific security, rather than the overall market. A high value for alpha implies that the stock or mutual fund has performed better than would have been expected given its beta (volatility).

Alternative or specialty investments: Property types that are not considered conventional institutional-grade real estate investments. Examples include congregate care facilities, self-storage facilities, mobile homes, timber, agriculture and parking lots.

Amenities: The qualities of being pleasant and agreeable. Features of a property from which the owner derives benefits other than monetary; satisfaction of possession and use arising from architectural excellence, scenic beauty, convenience, and social environment.

Amortization: The liquidation of a financial debt through regular periodic installment payments. For tax purposes, the periodic deduction of capitalized expenses such as organization costs.

Anchor: The tenant that serves as the predominant draw to a commercial property, usually the largest tenant in a shopping center.

Annual debt service (ADS): The total amount of principal and interest to be paid each year to satisfy the obligations of a loan contract.

Annual percentage rate (APR): The actual cost of borrowing money. 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.

Annuity: Regular fixed payments or receipts over a designated period of time. Appreciation. An investment’s increase in value.

Appraisal: An estimate of a property’s fair market value that is typically based on replacement cost, discounted cash flow analysis and/or comparable sales price.

Appreciation: An increase in the value or price of an asset.

Appreciation potential: The possibility or probability that a real estate investment will increase in value during the holding period.

Appreciation return: The portion of the total return generated by the change in the value of the real estate assets during the current quarter, as measured by both appraisals and sales of assets.

Arbitrage: Buying securities in one market and then selling them immediately in another market to make a profit on the price discrepancy.

As-is condition: The acceptance by the tenant of the existing condition of the premises at the time a lease is consummated, including any physical defects.

Assessed value: The value of real property established by the tax assessor for the purpose of levying real estate taxes.

Assessment: A fee imposed on property, usually to pay for public improvements such as water, sewers, streets, improvement districts, etc.

Asset management: The various disciplines involved with managing real property assets from the time of investment through the time of disposition, including acquisition, management, leasing, operational/financial reporting, appraisals, audits, market review and asset disposition plans.

Asset management fee: A fee charged to investors based on the amount invested into real estate assets for the fund or account.

Asset turnover: Calculated as total revenues for the trailing 12 months divided by the average total assets.

Assets under management: The current market value of real estate assets for which a manager has investment and asset management responsibilities.

Assignee name: The individual or entity to which the obligations of a lease, mortgage or other contract have been transferred.

Assignment: A transfer of the lessee’s entire stake in the property. It is distinguishable from a  sublease where the sublessee acquires something less than the lessee’s entire interest.

Attorn: To agree to recognize a new owner of a property and to pay him/her rent.

Average annual effective rate: The average annual effective rent divided by the square footage.

Average annual effective rent: The tenant’s total effective rent divided by the lease term.

Average common equity: Calculated by adding the common equity for the five most recent quarters and dividing by five.

Average downtime: Expressed in months, the amount of time expected between the expiration of a lease and the commencement of a replacement lease under current market conditions.

Average free rent: Expressed in months, the rent abatement concession expected to be granted to a tenant as part of a lease incentive under current market conditions.

Average occupancy: The average occupancy rate of each of the preceding 12 months.

Average total assets: Calculated by adding the total assets of a company for the five most recent quarters and dividing by five.

Averaging method: A simple technique used to forecast next period’s/year’s vacancy rate by averaging previous years’ vacancy rates; especially effective where vacancy rates have remained relatively flat or show little variability over time.