Offer: Term used to describe a stated price or spread to sell whole loans or securities.

Open Listing: A listing agreement which provides that a broker will be paid if he sells the property, but will not get paid if sold by another including other brokers. Owners sometimes enter into multiple open listings.

Open space: An area of land or water dedicated for public or private use or enjoyment.

Open-end fund: A commingled fund that does not have a finite life, continually accepts new investor capital and makes new property investments.

Operating cost escalation: Although there are many variations of escalation clauses, all are intended to adjust rents by reference to external standards such as published indexes, negotiated wage levels, or expenses related to the ownership and operation of a building.

Operating expense: The actual costs associated with operating a property, including maintenance, repairs, management, utilities, taxes and insurance.

Opportunistic: A phrase generally used by advisers and managers to describe investments in underperforming and/or undermanaged assets that hold the expectation of near-term increases in cash flow and value. Total return objectives for opportunistic strategies tend to be 20 percent or higher. Opportunistic investments typically involve a high degree of leverage – typically 60 percent to 100 percent on an asset basis and 60 percent to 80 percent on a portfolio basis.

Option: In finance, an option is a contract whereby the contract buyer has a right to exercise a feature of the contract (the option) on or before a future date (the exercise date). The ‘writer’ (seller) has the obligation to honour the specified feature of the contract. Since the option gives the buyer a right and the seller an obligation, the buyer has received something of value. The amount the buyer pays the seller for the option is called the option premium.

Original Basis: The total amount paid for a property, including equity capital and the amount of debt incurred.

Originator: A company that sources and underwrites commercial and/or multifamily mortgage loans.

Out-parcel: Individual retail sites in a shopping center.

Overallotment: A practice through which underwriters offer and sell more shares than they have agreed to buy from the issuer.

General partner: A member of a partnership who has authority to bind the partnership and shares in the profits and losses of the partnership.

General Warranty Deed: A deed which conveys not only all the grantor’s interests in and title to the property to the grantee, but also warrants that if the title is defective or has a “cloud” on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic’s liens against it) the grantee may hold the grantor liable.

Going-in capitalization rate: The capitalization rate computed by dividing the projected first year’s net operating income by the value of the property.

Graduated lease: A lease, generally long-term in nature, in which rent varies depending upon future contingencies.

Grant: To bestow or transfer an interest in real property by deed or other instrument.

Grantee: One to whom a grant is made.

Grantor: The person making the grant.

Gross building area: The sum of areas at each floor level, including basements, mezzanines and penthouses included within the principal outside faces of the exterior walls and neglecting architectural setbacks or projections.

Gross Domestic Product (GDP): As the barometer of the nation’s total output of goods and services, GDP is the broadest of the nation’s economic measures. The GDP is the aggregated monetary value of all the goods and services produced by the entire economy during the quarter.

Gross investment in real estate (historic cost): The total amount of equity and debt invested in real estate investments, including the gross purchase price, all acquisition fees and costs, plus subsequent capital improvements, less proceeds from sales and partial sales.

Gross leasable area: The portion of total floor area designed for tenants’ occupancy and exclusive use, including storage areas. It is the total area that produces rental income.

Gross lease: A lease in which the tenant pays a flat sum for rent out of which the landlord must pay all expenses such as taxes, insurance, maintenance, utilities, etc.

Gross real estate asset value: The market value of the total real estate investments under management in a fund or individual accounts. It typically includes the total value of all equity positions, debt positions and joint venture ownership positions, including the amount of any mortgages or notes payable related to those assets.

Gross real estate investment value: The market value of real estate investments held in a portfolio without regard to debt, equal to the total of real estate investments as shown on a statement of assets and liabilities on a market-value basis.

Gross Rent Multiplier (GRM): The quotient of the sale price divided by the gross rent. It is generally expressed as the monthly gross rent in a single family residential property and the yearly gross rent in multifamily units and commercial, office, or industrial property.

Purchase Price = GRM
Gross Rents

Gross returns: Returns generated from the operation of real estate without dilution for adviser or manager fees.

Ground rent: Rent paid to the owner for use of land, normally on which to build a building. Generally, the arrangement is that of a long-term lease (e.g. 99 years) with the lessor retaining title to the land.

Guarantor: One who makes a guaranty.

Guaranty: Agreement whereby the guarantor assures satisfaction of the debt of another or performs the obligation of another if and when the debtor fails to do so.

Capital appreciation: The change in market value of a property or portfolio adjusted for capital improvements and partial sales.

Capital expenditures: Investment of cash or the creation of a liability to acquire or improve an asset, as distinguished from cash outflows for expense items that are considered part of normal operations.

Capital gain: The amount by which the net proceeds from the sale of a capital item exceeds the book value of the asset.

Capital improvements: Expenditures that arrest deterioration of property or add new improvements and appreciably prolong its life.

Capital markets: Public and private markets where businesses or individuals can raise or borrow capital.

Capitalization: The total dollar value of various securities issued by a company

Capitalization rate (Cap Rate): The rate at which 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. The CAP rate provides a quick analysis of a properties income potential. Buy at a high CAP, and sell at a low CAP rate.

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.

Case Law: Reported cases as a body of jurisprudence; one of the sources of law.

Cash flow: The revenue remaining after all cash expenses are paid.

Cash Flow Model: The framework used to determine cash flow from operations and the cash proceeds from sale.

Cash-on-cash yield: The relationship, expressed as a percentage, between the net cash flow of a property and the average amount of invested capital during an operating year. Measures the initial profitability of the property. This is expressed as a percentage, calculated by “Before Tax Cash Flow” divided by “Cash Equity”.

“Before Tax Cash Flow” / “Cash Equity”.

Cash Value: What property would sell for at a private, non-installment sale; market value.

Caveat emptor: A Latin term meaning “let the buyer beware.” A legal maxim stating that the buyer takes the risk regarding quality or condition of the property purchased, unless protected by warranty.

Certificate of Judgment: Legal instrument enabling judgment holder to file a lien against a debtor’s real estate.

Certificate of occupancy: A document presented by a local government agency or building department certifying that a building and/or the leased area has been satisfactorily inspected and is in a condition suitable for occupancy.

Certificate of Title: A document provided by a qualified source (such as a title company) that shows the property legally belongs to the current owner; before the title is transferred at closing, it should be clear and free of all liens or other claims.

Chain of Title: The history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.

Chapter 7: That portion of the federal bankruptcy code that deals with business liquidations.

Chapter 11: That portion of the federal bankruptcy code that deals with business reorganizations.

Circulation factor: Interior space required for internal office circulation not accounted for in the net square footage.

Class “A”: A real estate rating generally assigned to properties that will generate the highest rents per square foot due to their high quality and/or superior location.

Class “B”: Good assets that most tenants would find desirable but lack attributes that would permit owners to charge top dollar

Class “C”: Buildings that offer few amenities but are otherwise in physically acceptable condition and provide cost-effective space to tenants who are not particularly image-conscious.

Clear-span facility: A building, most often a warehouse or parking garage, with vertical columns on the outside edges of the structure and a clear span between columns.

Closed-end fund: A commingled fund that has a targeted range of investor capital and a finite life

Closing: A period of time, usually less than seven days, after a registration statement is effective and the offering commences, giving the underwriters time to receive payment for the securities.

Cloud on Title: An invalid encumbrance on real property which, if valid, would affect the rights of the owner. Example: “A” sells Lot 1, Tract 1 to “B”. The deed is mistakenly drawn to read Lot 2, Tract 1. A cloud is created on Lot 2 by the recording of the erroneous deed. The cloud may be removed by quitclaim deed, or, if necessary, by court action.

CMBS (commercial mortgage-backed securities): Securities backed by loans on commercial real estate.

CMO (collateralized mortgage obligation): Debt obligations that are collateralized by and have payments linked to a pool of mortgages.

Coexclusive: Two real estate companies sharing an exclusive right to sell on a piece of property.

Co-investment: Co-investment occurs when two or more pension funds or groups of funds share ownership of a real estate investment. In co-investment vehicles, relative ownership is always based on the amount of capital contributed. It also refers to an arrangement in which an investment manager or adviser co-invests its own capital alongside the investor.

Co-investment program: An investment partnership or insurance company separate account that enables two or more pension funds to co-invest their capital in a single property or portfolio of properties. The primary appeal for investors is to achieve greater diversification or invest in larger properties typically outside the reach of small- to mid-sized tax-exempt funds, with a greater measure of control than is afforded in typical commingled fund offerings.

Collateral: Asset(s) pledged to a lender to secure repayment of a loan in case of default.

Commingled fund: A pooled fund vehicle that enables qualified employee benefit plans to commingle their capital for the purpose of achieving professional management, greater diversification or investment positions in larger properties.

Common area: For lease purposes, the areas of a building and its site that are available for the non-exclusive use of all its tenants, e.g., lobbies, corridors, etc.

Common area maintenance: Rent charged to the tenant in addition to the base rent to maintain the common areas. Examples include snow removal, outdoor lighting, parking lot sweeping, insurance, property taxes, etc.

Common Assessment: An amount of money paid by each unit owner in a condominium of the maintenance and repair of common areas. The stipend per owner is based on their prorate ownership in the condominium property.

Comparables: Used to determine the fair market lease rate or asking price, based on other properties with similar characteristics.

Compensatory Damages: The award, usually monetary, that is intended to compensate the claimant for injury sustained.

Compound Interest: Interest which is calculated not only on the initial principal but also the accumulated interest of prior periods.

Community Property: In some western and southwestern states, a form of ownership under which property acquired during a marriage is presumed to be owned jointly unless acquired as separate property of either spouse.

Concessions: Cash or cash equivalents expended by the landlord in the form of rental abatement, additional tenant finish allowance, moving expenses or other monies expended to influence or persuade a tenant to sign a lease.

Condemnation: The process of taking private property, without the consent of the owner, by a governmental agency for public use through the power of eminent domain.

Conduit: An alliance between mortgage originators and an unaffiliated organization that acts as a funding source by regularly purchasing loans, usually with a goal of pooling and securitizing them.

Construction loan: Interim financing during the developmental phase of a property.

Construction management: The act of ensuring the various stages of the construction process are completed in a timely and seamless fashion.

Consultant: Any company or individual that provides the following services to institutional investors: definition of real estate investment policy; adviser/manager recommendations; analysis of existing real estate portfolios; monitoring of and reporting on property asset, commingled fund and portfolio performance; and review of specified property and portfolio investment opportunities. Consultants are distinguished from investment advisers or investment managers in that a consultant does not source or execute transactions and does not directly manage assets.

Consumer Confidence: Measures confidence about state of the economy and spending power.

Higher Confidence = More Purchases.

Consumer price index (CPI): Measures inflation in relation to the change in the price of goods and services purchased by a specified population during a base period of time. The CPI is commonly used to increase the base rent periodically as a means of protecting the landlord’s rental stream against inflation or to provide a cushion for operating expense increases for a landlord unwilling to undertake the record-keeping necessary for operating expense escalations.

Contiguous space: Multiple suites/spaces within the same building and on the same floor that can be combined and rented to a single tenant, or a block of space located on multiple adjoining floors in a building.

Contract documents: The complete set of design plans and specifications for the construction of a building.

Contract rent: The rental obligation, expressed in dollars, as specified in a lease. Also known as face rent.

Contract for Deed: A contract for the sale of real estate where the deed (title) of the property is transferred only after all the payments have been made. Also known as a land contract, conditional sales contract, or installment contract.

Conventional Loan: A mortgage or deed of trust not obtained under a government insured program (such as FHA or VA).

Convertible debt: A mortgage position that gives the lender the option to convert to a partial or full ownership position in a property within a specified time period.

Convertible preferred stock: Preferred stock that is convertible to common stock under certain formulas and conditions specified by the issuer of the stock.

Conveyance: Most commonly refers to the transfer of title to property between parties by deed. The term may also include most of the instruments with which an interest in real estate is created, mortgaged or assigned.

Cooperative: A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

Core properties: The major property types – specifically office, retail, industrial and multifamily. Core assets tend to be built within the past five years or recently renovated. They are substantially leased (90 percent or better) with higher-credit tenants and well-structured long-term leases with the majority fairly early in the term of the lease. Core assets generate good, stable income that, together with potential appreciation, is expected to generate total returns in the 10 percent to 12 percent range.

Cost-approach improvement value: The current cost to construct a reproduction of, or replacement for, the existing structure less an estimate for accrued depreciation.

Cost-approach land value: The estimated value of the fee simple interest in the land as if vacant and available for development to its highest and best use.

Cost-of-sale percentage: An estimate of the costs to sell an investment representing brokerage commissions, closing costs, fees and other necessary disposition expenses.

Coupon: The nominal interest rate charged to the borrower on a promissory note or mortgage.

Covenant: A written agreement inserted into deeds or other legal instruments stipulating performance or non-performance of certain acts, or use or non-use of a property and/or land.

Credit enhancement: The credit support needed in addition to the mortgage collateral to achieve a desired credit rating on mortgage-backed securities. The forms of credit enhancement most often employed are subordination, over-collateralization, reserve funds, corporate guarantees and letters of credit.

Cross-collateralization: A grouping of mortgages or properties that serves to jointly secure one debt obligation.

Cross-defaulting: Allows the trustee to call all loans in a group into default when any single loan is in default.

Cumulative discount rate: Expressed as a percentage of base rent, it is the interest rate used in finding present values that takes into account all landlord lease concessions.

Cumulative Zoning: A system for zoning that begins with a low-intensity land use, such as a large-lot, single-family detached home and permits more intensive uses with each step up the ladder. At each step of the ladder not only are the uses for that step allowed but so are the uses for the steps below. The most intense zone, at the top of the ladder, would permit all uses below.

Current occupancy: The current leased portion of a building or property expressed as a percentage of its total area or units.

Current yield: For CMBS, the coupon divided by the price.