Real Estate Terms

Click on a link below for an alphabetized list of Real Estate and Mortgage Terms.

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Implied cap rate
Net operating income divided by the sum of a REIT's equity market capitalization and its total outstanding debt.

Improvements
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.

Incentive fee
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.

Income property
Real estate that is owned or operated to produce revenue.

Income return
The percentage of the total return that is generated by the income from operations of a property, fund or account.

Indirect costs
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 financing costs.

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.

Inflation
The annual rate at which consumer prices increase.

Inflation hedge
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.

Institutional-grade property
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 parks.

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.

Interest
The price paid for the use of capital.

Interest-only strip
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.

Inventory
All space within a certain proscribed market without regard to its availability or condition.

Investment committee
The governing body overseeing corporate pension investments. Also, the subcommittee of a board of trustees charged with developing investment policy for board approval.

Investment manager
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.

Investment policy
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 professionals.

Investment strategy
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.

Investment structures
Unleveraged acquisitions, leveraged acquisitions, traditional debt, participating debt, convertible debt, triple-net leases and joint ventures.

Investment-grade CMBS
Commercial mortgage-backed securities with ratings of "AAA," "AA," "A" or "BBB".

Investor status
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 capital.