Real Estate Terms
Click on a link below for
an alphabetized list of Real Estate and Mortgage Terms.
Implied cap rate
Net operating income divided by the sum of a REIT's
equity market capitalization and its total outstanding
In the context of leasing, the term typically refers
to the improvements made to or inside a building but
may include any permanent structure or other development,
such as a street, sidewalk, utilities, etc.
Applies to fee structures where the amount of the fee
that is charged is determined by the performance of
the real estate assets under management.
Income capitalization value
The indication of value derived for an income-producing
property by converting its anticipated benefits into
property value through direct capitalization of expected
income or by discounting the annual cash flows for the
holding period at a specified yield rate.
Real estate that is owned or operated to produce revenue.
The percentage of the total return that is generated
by the income from operations of a property, fund or
Development costs other than direct material and labor
costs that are directly related to the construction
of improvements, including administrative and office
expenses, commissions, architectural, engineering and
Individual account management
Accounts established for individual plan sponsors or
other investors for investment in real estate, where
a firm acts as an adviser in acquiring and/or managing
a direct real estate portfolio.
The annual rate at which consumer prices increase.
An investment that tends to increase in value at a rate
greater than inflation and helps contribute to the preservation
of the purchasing power of a portfolio.
Initial public offering (IPO)
The first time a private company offers securities for
sale to the public.
Various types of real estate properties generally owned
or financed by tax-exempt institutional investors. Core
investments typically include office, retail, industrial
and apartments. Specialty investments include hotels,
congregate care facilities, land beneath existing improvements,
vacant land, mixed-use properties (i.e., a property
containing at least two property types) and mobile home
Insurance company separate account
A real estate investment vehicle that may only be offered
by life insurance companies. This ownership arrangement
enables an ERISA-governed fund to avoid the creation
of unrelated taxable income for certain types of property
investments and investment structures.
The price paid for the use of capital.
A derivative security consisting of all or part of the
interest portion of the underlying loan or security.
Internal rate of return (IRR)
A discounted cash-flow analysis calculation used to
determine the potential total return of a real estate
asset during an anticipated holding period.
All space within a certain proscribed market without
regard to its availability or condition.
The governing body overseeing corporate pension investments.
Also, the subcommittee of a board of trustees charged
with developing investment policy for board approval.
Any company or individual that assumes discretion over
a specified amount of real estate capital, invests that
capital in assets via a separate account, co-investment
program or commingled fund, and provides asset management.
A document that formalizes an institution's guidelines
for investment and asset management. An investment policy
typically will contain goals and objectives; core and
specialty investment criteria and methodology; and guidelines
for asset management, investment advisory contracting,
fees and utilization of consultants and other outside
The investment parameters used by the manager in structuring
the portfolio and selecting the real estate assets for
a fund or account. This includes a description of the
types, locations and sizes of properties to be considered,
the ownership positions that will be used, and the stages
of the investment lifecycle.
Unleveraged acquisitions, leveraged acquisitions, traditional
debt, participating debt, convertible debt, triple-net
leases and joint ventures.
Commercial mortgage-backed securities with ratings of
"AAA," "AA," "A" or "BBB".
In reporting to clients and consultants, all investors
are divided into two categories: taxable and tax-exempt.
The tax-exempt category includes all qualified pension
and retirement accounts. The taxable category includes
all other accounts under management, including off-shore