Global Definitions Database

A-Note (Senior Debt/Loan)

The highest tranche of an asset backed security (ABS) or other structured financial product; during bankruptcy, default, or other credit proceedings, an A note is senior to other notes, such as B notes; the senior status allows the payment from the underlying assets of A note debt before others; an A note can be rated, or labeled, into AAA, AA or A categories, depending on the credit quality of the underlying asset; also known as a “class A note”.

Absolute energy

The total amount of energy consumed by an entity and those deemed to be within its organisational boundaries.

Absolute Return Attribution

Identifies the contributions of portfolio components to the total return of a portfolio; also known as “return contribution analysis”.  

Absorption or Absorption Rate

The rate at which rentable space is leased within a market or submarket over a given period of time, typically reported as the “absorption rate” or “space absorption”.  

Account Pledgor

A loan party that has the right to receive capital contributions from Investors and that pledges the deposit account or securities account into which investor capital contributions are to be funded to the lender.  

Accounting Standards Codification (ASC) 820

Codification that defines fair value, provides a framework for measuring fair value in generally accepted accounting principles (GAAP), discusses acceptable valuation techniques and inputs to valuation techniques, establishes a fair value hierarchy that prioritizes the inputs, and requires extensive financial statement disclosures about the valuation of plan investments.  

Accounting Standards Update (ASU)

A document issued by the Financial Accounting Standards Board (FASB) in the United States, which details accounting standards and guidance on selected accounting policies set out by FASB. See www.fasb.org

Accounts

Commingled funds, both open-end funds and closed-end funds, and separatley managed accounts (SMAs).  

Accredited Investor

An investor with special status under financial regulations and satisfying one or more requirements regarding income, net worth, asset size, governance status and/or professional experience; also known as a “sophisticated investor”.  

Acquisition

Purchase of an interest in an asset in exchange for consideration paid.

Acquisition Fee

A fee charged by an investment manager or operating partner to acquire new buildings, usually charged as a percent of the acquisition cost.  The fee compensates for costs of sourcing, underwriting, negotiating and closing the investment.  

Acquisition-Date Cohort

Similar investments with the same acquisition date over the same period of time as subject; also known as an “inception-date cohort”.

Activity and Use Limitation (AUL)

A legal document required for land that has been remediated for environmental contamination but in which there are conditions that must be maintained in order to prevent potentially hazardous exposure; restricts possible land use for the future and alerts future property owners that the property has potential risk for exposure; often an option used by landowners who are required by law to remediate their property, but who do not wish to incur the costs related to achieving a permanent solution without any limitation.  

ADC Arrangements

An ADC arrangement is an arrangement in which a bank (lender) provides financing for real estate acquisition, development, or construction purposes and has virtually the same risks and potential rewards as those of owners or joint ventures. There is often little risk in such arrangements to the borrower. The lender may advance all or substantially all the necessary funds to complete a project (including fees and interest), may have a share in the residual profits of the project (an equity "kicker"), and must look to the eventual sale or refinancing of the property for repayment of the advances. Such transactions are often structured in a manner that makes default unlikely because there is no requirement for the borrower to make payments while the project is in progress. ADC arrangements should be reported as loans, real estate ventures, or direct investments in real estate in accordance with guidance presented by the AICPA in a Notice to Practitioners issued in February 1986.

Additional Contingent Interest

Lender participation in the appreciation in value of the underlying property in a participating loan (REIS)

Additionality

The positive impact that would not have occurred without the investment. Real Estate impact investment strategies may ensure additionality by creating additional affordable housing, social housing, healthcare or education or by investing in real estate to improve its environmental performance.

Adjustable-Rate Debt/Loan/Mortgage (ARM)

A debt financing obligation issued to a company or an individual by a bank or similar financial institution for which the interest rate (coupon rate) is adjusted periodically to reflect changes in a previously selected index rate; may have interest rate caps and floors that limit the annual and/or the lifetime change in the coupon rate.  

Adjusted Basis

The original purchase price of an asset plus its acquisition costs plus any capital improvements less the cumulative depreciation deductions.

Advisory Board or Committee

A body of individuals and/or representatives of entities that advises the board of directors and/or management of a fund or organization but does not have authority to vote on corporate matters or investment management decisions of the respective fund or organization; appointed advisory committee members bring unique knowledge and skills that augment the knowledge and skills of the board of directors and/or management in order to more effectively guide the organization or fund.

Affiliate Agreement

A document through which two parties, the company and the affiliate, form a relationship whereby the affiliate receives funds for certain qualified actions.

Affordable Housing

Affordable housing refers to housing units that are affordable to buy or rent by the low-income section of a society (for example, whose income is below median household income). Affordability is defined with a maximum percentage of gross income which may differ from country to country and also depending on whether this is a percentage of net, gross, individual or household income. 

After-Tax Cash Flow

The amount of money an investment generates after payment of any tax liabilities.

After-Tax Internal Rate of Return (ATIRR)

An internal rate of return (IRR) calculated using after-tax net cash flows.

Alignment of Interest

A series of factors that determine if the GP has similar investment motivations as LP(s) and influenced by factors such as fee structure, allocation policies, investment exclusivity and other factors.  Legal agreements aim to create alignment of interest.  When the GP is perceived to be motivated to act in ways that are not aligned with LP interests, the vehicle is deemed to have a Conflict of Interest issue.  

All Appropriate Inquiries

The process of evaluating a property's environmental conditions, which may be relevant to assessing potential liability for any contamination.

All-in Interest Rate

The percentage rate charged by a Lender which includes the reference rate (e.g. LIBOR / EURIBOR / SONIA) plus a margin.

Allocated Loan Amount

The amount of Loan attributed to a particular portion of the underlying collateral, usually a single property within a portfolio of underlying assets.

Allocation (in Attribution)

With reference to attribution:  the value the manager adds by having different sector weights in the portfolio than the sector weights in the benchmark; a sector weight in the portfolio greater than the equivalent  benchmark sector weight would be described as overweight and a lesser weight would be described as underweight.

Allocation by Abstraction

A method of separating a whole property value into land and improvement components; the appraiser estimates replacement cost new, subtracts an appropriate amount for depreciation, and subtracts the remainder from the whole property value to estimate the land value.

Allocation by Ratio

A method of separating a whole property value into land and improvement components, in which the appraiser develops proportions of land and improvement values for comparable properties and applies those proportions to the subject’s whole property value.

Allocation Method

A method used to value land, in the absence of vacant land sales, by using a typical ratio of land to improvement value; also known as “land ratio method”.

Allocation Policy

A policy used by a General Partner to allocate investments to different investment vehicles in a fair manner when the investment vehicles do not have Exclusivity rights.  

Allowances

A balance sheet contra-account linked with another account that has an opposite value to that account, and is reported as a subtraction from the linked account's balance.

Alpha (α)

The excess return of an investment relative to the return of a benchmark index; often considered the active return on an investment; gauges the performance of an investment against a market index or benchmark that is considered to represent the market's movement as a whole.

Alternative Investment Fund (AIF)

The European Securities and Markets Authority (ESMA) defines AIF as any collective investment undertaking, including investment compartments thereof, which raises capital from a number of investors with a view to investing it in accordance with a defined investment policy for the benefit of those investors and which does not require authorization pursuant to European regulation (see https://www.esma.europa.eu)

Alternative Investment Fund Manager (AIFM)

A specific form of a management company authorized to manage an alternative investment fund (AIF) in the context of European regulation (see https://www.esma.europa.eu).

Alternative Investment Risk

The risk of loss associated with investment in alternative investments or alternative investment vehicles.

Alternative Investment Vehicle (AIV)

An investment structure created to facilitate one or more specific investments; typically, a fund is permitted to establish an alternative investment vehicle to accommodate the tax, legal and/or regulatory concerns of any partner or the partnership as a whole.

Alternative Lender

An individual, entity or organization that provides loans, lines of credit, or cash advances to others, outside of the traditional forms of credit offered by a commercial bank or credit union.

Amenities

A desirable or useful feature of a building or place, amenities look to provide comfort and convenience for tenants occupying the property; Amenities encompass additions that are in excess of the basic needs of an individual, and usually include features such as pools, workout facilities, and internet.

American Institute of Certified Public Accountants (AICPA)

A national trade association that represents certified public accountants in business and industry, public practice, government, and education.

Amortization Period

Number of months used to calculate the amount of monthly payments for principal and interest which could be longer than the loan term.

Amortizing/Amortization

The liquidation of a financial debt through regular periodic installment payments; for tax purposes, the periodic deduction of capitalized expenses.

Anchor Tenant

The tenant that serves as the predominant draw to a commercial property, usually the largest tenant in a shopping center or retail development.

ANREV

ANREV is the Asian Association for Investors in the Non-Listed Real Estate Vehicles. The platform for sharing knowledge on the non-listed real estate industry and to improve transparency, professionalism and best practices across the sector to make the asset class more accessible and attractive to investors. See www.anrev.org/en.

Anti-Dilution Clause/Covenant/Provision

An adjustment mechanism for preferred stock, options, or convertible securities that provides the holder the right to receive additional securities in the event of a future financing in which securities are sold at a lower price than originally paid by the holder of the right; typically, there are exceptions for the adjustment mechanism that carve out situations such as the issuance of certain employee options or existing convertible securities.

Appraisal

An estimate of a property’s fair market value by an authorized person with applicable knowledge and expertise.

Appraisal Institute

An international real estate trade organization representing professional real estate appraisers.  

Appreciation

An increase or decrease in value of an asset. Appreciation may be attributable to improvement or deterioration in the financial performance of the asset or changes in the market value for the asset.

Arbitrage

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

Arbitration

A form of alternative dispute resolution process conducted out-of-court whereby the dispute between parties to a contact is decided by an impartial third party arbitrator.

ARGUS

A computer program utilized to analyze portfolio performance and purchase opportunities.  

Arithmetic Mean

A mathematical representation of the typical value of a series of numbers, computed as the sum of all the numbers in the series divided by the count of all numbers in the series; also known as “average” or “mean”.

Arm’s Length Transaction

A sale between a willing buyer and a willing seller that are unrelated and are not acting under duress, abnormal pressure or undue influences.

Arrears

A financial and legal term that refers to the status of payments in relation to their due dates.

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.

As-Is Value

The estimate of the market value of real property in its current physical condition, use, and zoning as of the appraisal date.

Asking Rent

The list price for rent.

Assemblage

The assembling of adjacent parcels of land into a single unit.

Assessed Value

The monetary value assigned by government assessors to a property and act as the basis for property values.

Assessor

A local government official who determines the assessed value of taxable property in a county or municipality; this valuation is used to determine the tax basis for a property in a given area.

Asset Allocation

An investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an investor’s goals, risk tolerance, and investment horizon.

Asset Backed Security

A debt security collateralized by assets created from the securitization of any loans; may describe the broad category that includes named subcategories, such as securitized residential mortgage backed securities (RMBS) and securitized commercial mortgage backed securities (CMBS).

Asset Class

A grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations; made up of instruments which often behave similarly to one another in the marketplace.

Asset Liability Matching (ALM)

A form of risk management which entails managing assets and cash flows to satisfy liabilities.

Asset Management Company

A legal entity that specialises in the tactical management of a vehicle's assets on behalf of the owner of the real estate. Services may include strategic input and production of asset level business plans, appointment of third party service providers at asset level as well as reporting activities at asset level.

Asset management fee

Fee typically charged by investment advisors, or managers, for their services regarding the management of the vehicle’s assets. Asset management fees generally cover services such as: • strategic input and production of asset level business plans; • management of assets including refurbishment; • appointment of third party service providers at asset level; • reporting activities at asset level. Occasionally, asset management fee and fund management fee are combined.

Asset Manager

The tactical management of investments and their related properties, within an overall portfolio. The asset manager will commonly oversee the work of the property manager, manage the overall relationship with tenants, and develop and monitor specific business, investment and financial plans related to individual investments within a portfolio.

Asset Originator

The party that has created a loan asset or group of assets by extending credit to one or more creditors. 

Asset weighted

An averaging technique whereby numerical characteristics (such as interest rates or rents) of a group of assets are averaged in proportion to each asset's common characteristic (such as asset value or square feet).

Asset weighting methodology

Asset weighting of the portfolio returns within a composite using beginning-of-period weightings, beginning of period market values plus weighted cash flows, or by aggregating portfolio assets and cash flows to calculate performance as a single master portfolio.

Asset-backed securities (ABS)

A security issued as part of a securitisation, which is backed by a portfolio assets, which may or may not be income generating. 

Asset-weighted composites

An aggregation of individual portfolios representing a similar investment objective or strategy, weighted by the beginning-of-period market values of the constituent portfolios.

Assets under Management (AUM)

Assets under Management (AUM) refers to the market value of real estate as well as non-real estate related assets (including any cash in the vehicle or mandate) with respect to which a company provides oversight and investment management services (for internal client capital and third-party capital), and which generally consist of:   •  direct real estate investments (investment property) at fair value and gross of leverage; •   investment property under construction at fair value; •   % share owned by JVs and co-investments, gross of leverage; •   debt investments at fair value and gross of leverage; •   % share owned by investments in underlying funds (fund of funds) and securities at net asset value; •   undrawn investor commitments without any gross-up for leverage, both at property and vehicle level, contractually locked in, non-revocable, and not subject to expiration.   Note: Going forward this definition will be used by INREV, NCREIF, and ANREV for research purposes (and referenced within the INREV DDQ). This may be adopted by investment managers and investors at their discretion. 

Assignment / Transfer clauses

Typically an assignment is an agreement to transfer all of the rights (but not the obligations) under a contract to a new lender evidenced by an assignment agreement. The specific definition will be governed by local law. 

Attachment Point LTV

The LTV point at which the Senior loan ends and Junior loan starts, for example 55% LTV would typically be the detachment point of a senior loan and the attachment point at which the junior loan would start.

Attribution Analysis

The decomposition of the total investment performance into additive components so as to attribute the total performance to sources that may reflect various investment management functions.

Audit costs

Costs associated with annual external audit engagements and other audit services provided (both paid to independent third party firms or manager/advisor).

Authorised Management Company

A type of management company which is authorised and regulated to manage investment vehicles in respective domiciles as required. Examples include and RIA in the US and AIF in Europe.

Average

A mathematical representation of the typical value of a series of numbers, computed as the sum of all the numbers in the series divided by the count of all numbers in the series; also known as “arithmetic mean” or “mean”.

B Note (Junior Debt/Loan)

The secondary tranche of an asset backed security (ABS) or other structured financial product; a B note carries a higher risk and potential higher return when compared to the investment grade A note; during bankruptcy, default, or other credit proceedings, the payment of a B note is junior or secondary to that of an A note.

Bad Boy Acts/Carve-Out

An exception to the non-recourse nature of a loan that provides for a loan party to have full or partial personal recourse liability for the loan in the event certain events occur, such as filing a voluntary bankruptcy action); In a traditional subscription-backed credit facility:  typically apply to the general partner of the fund borrowers/guarantors and are limited to actual damages of the lender arising as a result of the fraud, willful misrepresentation or willful misappropriation of loan or capital contribution proceeds on the part of such general partner.

Bank / loan / overdraft / debt interest

See definition Bank Charges.

Bank Charges

Costs charged by a financial institution to manage and maintain the cash accounts of the vehicle, or in relation to overdrawing an account.

Base Interest

Contractually stated fixed or floating rates in a participating loan (REIS)

Base Rent Income

Income derived strictly from leased space, i.e., not including percentage rents which is a separate data field.

Before-Tax Cash Flow (BTCF)

For a property, the result of calculating the effective rental income, plus other income not affected by vacancy, less total operating expenses, less annual debt service, funded reserves, leasing commissions, and capital addition; also known as “cash flow before tax (CFBT)”.

Before-Tax Internal Rate of Return (BTIRR)

An internal rate of return (IRR) calculated using before-tax net cash flows.

Benchmark

A point of reference against which an Account's performance and/or risk is compared.

Benchmark Cohort

A universe of similar investments by competing managers or investors, measured from the same inception date.

Benchmarking

The formal (quantitative) comparison of a given investment agent’s (or portfolio’s) investment performance with that of a suitably defined index or peer group over a specified time period.

Beta (β)

A measure of the volatility (or systematic risk) of an investment or a portfolio in comparison to the market as a whole.

Bitesize

A range of money that an investor looks to commit to each investment vehicle in which it invests.

Blind Pool

A commingled fund accepting investor capital without prior specification of property assets or investments.

Block Group-Based Trade Area

A geographic area containing the customers of a particular firm or group of firms for specific goods or services based upon census block groups (BGs).

Block Groups (BGs)

Statistical divisions of census tracts, generally defined to contain between 600 and 3,000 people; used to present data and control block numbering.

Blocker or Blocker Corporation

An entity, often a C-corporation, through which tax-exempt investors invest in a  fund so as to shield such tax-exempt investors from having to file a US federal tax return and/or to pay US income tax; also known as “corporate blocker”.

Borrower

The party borrowing money from a Lender. (CREFC, CRE Glossary of Terms, EU Version)

Borrower sustainability credentials

Data that reflects the sustainability performance of a borroweror sponsor and can include, but is not limited to, a corporate ESG rating and benchmarking scheme such as CDP or GRESB, among others.

Borrower sustainability scorecard

Document that outlines key sustainability attributes and risks of a borrower/sponsor.

Borrowing Base

Used in asset-based lending facilities to calculate the borrowing value of a borrower’s assets; determines the maximum borrowing availability under the line of credit; typically, a calculated by applying a discount factor to each asset class (often, though not always, constituting the collateral) against which the lender will advance funds, such as uncalled capital contributions, accounts receivable, inventory, loan assets, or the like.  

Bottom-Up Investing

An investment approach that focuses on the analysis of individual investments and de-emphasizes the significance of macroeconomic cycles and market cycles; assumes individual investments can do well even in an sector that is not performing, at least on a relative basis.

Boundaries

The boundaries that determine the direct and indirect emissions associated with operations owned or controlled by the reporting company. This assessment allows a fund manager to establish which operations and sources cause direct and indirect emissions, and to decide which indirect emissions to include which are a result of its operations. See also the following definitions on financial control, operational control and equity share.

Branch Profits Tax

Taxation under Internal Revenue Code (IRC) Section 884(a) that treats a US branch of a foreign corporation as if it were a US subsidiary of a foreign corporation for purposes of taxing profit repatriations; puts the earnings and profits of a branch of a foreign corporation deemed remitted to its home office on equal footing with the earnings and profits of a US subsidiary paid out as a dividend to its foreign parent; applies regardless of whether the US trade or business of the foreign corporation is substantial compared to its worldwide operations.

Break Costs

The cost payable by a borrowerfor early repayment of all or a portion of a loan as outlined in the break clause of the loan agreement. 

Bridge Loan

A short term loan used as interim financing, pending the arrangement of larger or longer-term financing

Brinson-Fachler (BF) Attribution Analysis

A return attribution model based upon a breakdown of the arithmetic excess return assuming a two-step investment decision process in which the portfolio manager seeks to add value through both allocation and selection decisions; differs from the Brinson-Hood-Beebower (BHB) attribution analysis model only in how individual sector allocation effects are calculated.

Brinson-Hood-Beebower (BHB) Attribution Analysis

A return attribution model based upon a breakdown of the arithmetic excess return assuming a two-step investment decision process in which the portfolio manager seeks to add value through both allocation and selection decisions.

Broker-Dealer

A firm that is in the business of buying and selling securities, including private real estate funds.  Broker-dealer licensing is required for functions such as providing investment advice to customers, market making activities, facilitating trading activities, and raising capital for companies.    

Brownfield

Land previously developed for other purposes that may not necessarily be available for immediate use without intervention (e.g. environmental contamination or existing buildings infrastructure to be demolished first).

Build-Out

Space improvements put in place per the tenant's specifications; takes into consideration the amount of tenant finish allowance provided for in the lease agreement.

Build-to-Suit

A method of leasing property whereby the developer/landlord builds to a tenant's specifications.

Building energy intensity

The amount of energy used per unit of an appropriate denominator (e.g. floor area, persons).

Building GHG intensity

The amount of carbon used per unit of an appropriate denominator (e.g. floor area, persons).

Building Lines

A line usually set with respect to the frontage of a plot of land which is fixed by statute or by deed or contract and beyond which the owner of the land may not build.

Building Owners and Managers Association (BOMA)

An international real estate trade organization representing owners and managers of commercial real estate; promotes, provides advocacy and develops various research publications in support of its members.

Building Standard Plus Allowance

The landlord lists, in detail, the building standard materials and costs necessary to make the premises suitable for occupancy; a negotiated allowance is then provided for the tenant to customize or upgrade materials.

Building types

Categorisation based on the function or form of a building for example: offices, shopping centres, retail warehouses, industrial, multi-family housing, hotels.

Building water intensity

The amount of water used per unit of an appropriate denominator (e.g. floor area, persons).

Bullet Repayment

A facility where the repayment (principal or principal and interest) is made in one amount on the final maturity date of the loan agreement. 

Business Enterprise

A commercial, industrial, or service organization pursuing an economic activity.

Business Enterprise Value

A term applied to the concept of an intangible, non-realty component of a property’s value probably ascribable to superior management competence; different from goodwill and going-concern value.

Business Risk

The risk associated with the possible profit outcomes of a business venture.

Business Value

The entire value of a business; the total sum of all tangible and intangible elements.

Calibration

The selection of parameters in a stochastic process so as to make the prices on financial instruments generated by the process replicate observed market prices.

Capital Allocator

A company or manager that distributes and invests financial resources in ways that seek to generate as much wealth as possible for its shareholders or investors through the reliance on third-party operators, who may perform any number of roles, including sourcing, executing, operating, and/or disposing of assets or investments.

Capital Asset Pricing Model (CAPM)

A financial model that describes the relationship between systematic risk (i.e., beta) and expected return for assets.

Capital call

The legal notice granted to a vehicle, based upon the capital commitment made by an investor, to request all or a portion of the investor's outstanding commitment. This may include funding for fees and other expenses outside of capital commitements.

Capital call notice

A notice issued by a vehicle instructing investors to make a capital contribution to the vehicle; sometimes referred to as a “drawdown”.

Capital commitment

The obligation of an investor in a vehicle to fund the total agreed capital contributions to the vehicle over a specified period of time, as defined in the vehicle documentation.

Capital contribution

Amount of capital called or drawndown from the investor in accordance with the vehicle documentation or other documents such as a subscription agreement.

Capital distribution

Also known as return of capital, it is the amount of capital returned to investors in accordance with the vehicle documentation. Along with capital distribution, there are other types of distributions that may be present. See the definition of distributions.

Capital expenditure (Capex) Facility

A loan that must be used for capital expenditure (i.e. investment in physical assets such as land, buildings and equipment).

Capital expenditures (CAPEX)

Costs related to capital improvements for an asset that lengthen its life and increase its value. This is an addition to any maintenance operating expenses. 

Capital Gain

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

Capital Market Line (CML)

A graphical representation of all the portfolios that optimally combine risk and return; a theoretical concept that gives optimal combinations of a risk-free asset and the market portfolio; the slope of the CML is the Sharpe ratio of the market portfolio.

Capital Market Risk

The risk associated with investing; the potential of experiencing losses following a fluctuation in security prices; also known as “investment risk”.

Capital Markets

Venues where savings and investments are channeled between the suppliers who have capital and those who are in need of capital; the entities that have capital include retail and institutional investors while those who seek capital are businesses, governments, and people; composed of primary and secondary markets.

Capital Structure

The structure as defined in the vehicle documentation describing the various components of an investments's equity and debt. Also known as "capital stack".

Capitalization

With reference to accounting:  a method by which a firm expenses the costs associated with the acquisition of an asset over the useful life of the asset rather than at the time it is acquired; With reference to finance:  a measure of a firm’s book value (the sum of its stock, long-term debt, and retained earnings) or its market value (the product of the number of outstanding shares and the stock price).

Capitalization (Cap) Rate

The rate at which net operating income is discounted to determine the value of a property; calculated as the net operating income divided by the sales price or value of a property expressed as a percentage.

Capitalization-Weighted Index (CWI)

A type of market index with individual components, or securities, weighted according to their total market capitalization; components with larger market capitalization exert a greater impact on the index value while components with a smaller market capitalization carry less significance; also known as a “value-weighted index”.

Caps (Interest)

An interest hedging instrument that provides for maximum increases allowed in interest rates, payments, maturity extensions and negative amortization on reset dates.

Capture Rate

The sales or leasing rate of a real estate development compared to the sales or leasing rate of all developments in the market area.

Carbon Disclosure Project

The Carbon Disclosure Project (CDP) works with shareholders and corporations to disclose the greenhouse gas emissions of major corporations.

Carbon trading

Carbon emissions trading (also known as cap and trade) is a market-based approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants.

Carried interest

A re-allocation of profits from the investor's capital account to the investment manager capital account based on the ability of the latter party to outperform a certain predetermined benchmark. Carried interest is structured as a re-allocation of equity within the capital accounts rather than a straight charge to the investment manager generally due to tax purposes. 

Carve-outs (lending)

Provisions within nonrecourse commercial real estate loans where the borrower may become personally liable in the event of certain egregious acts (e.g. fraud). Recently, lenders have expanded the scope of carve outs to include risks of exposure to the property's economic deterioration or neglect.

Cascading Pledge

An alternative tiered-collateral structure employed when tax, regulatory or ERISA concerns prevent a feeder fund from guaranteeing and directly pledging collateral to the lender to support a fund borrower’s obligations under a subscription-backed credit facility.

Cash Flow Before Tax (CFBT)

For a property, the result of calculating the effective rental income, plus other income not affected by vacancy, less total operating expenses, less annual debt service, funded reserves, leasing commissions, and capital addition; also known as “before-tax cash flow (BTCF)”.

Cash management fee third party

See definition Bank charges.

Cash Sweep

The right to redirect cash from an underlying asset to meet debt service obligations where the borrower is unable to fulfil its debt service obligations.

Catch-up

A special distribution, as agreed beween investors and the investment manager, meant to compensate the investment manager once the investors' pre-established hurdle has been achieved (thus allowing the investment manager to "catch-up"). A common structure where investors receive distributions up to a pre-established level of preferred return, at which point the investment manager receives a percentage of distributions therafter (this could be up tp 100% of distributions) until a pre-established balance between the investors and investment manager is reached. 

Census Tracts

Small, relatively permanent statistical subdivisions of a county or equivalent entity that are updated by local participants prior to each decennial census; generally have a population size between 1,200 and 8,000 people, with an optimum size of 4,000 people; usually cover a contiguous area, but the spatial size varies widely depending on the density of settlement.

Certificate of Occupancy (CO)

A document issued by a local government agency, certifying that a building meets certain requirements and codes that indicate its fitness to house tenants; these requirements differ across building types, as well as cities and states, and are usually required to be met by new developments.

CFA Institute

The CFA Institute is a global not-for-profit association of investment professionals. The Institute awards the CFA (Chartered Financial Analyst designation). See www.cfainstitute.org. The Institute established and interprets the Global Investment Performance Standards (GIPS®). See www.gipsstandards.org.

Chain Linking Returns

The geometric compounding of returns by taking returns over a single-holding period and combining or linking those returns over multiple periods, resulting in the cumulative return of an investment.

Class A

A subjective division of buildings by desirability among tenants and investors; generally high quality, well designed, using above-average materials, workmanship, and finish; sought by investors and prestigious tenants; excellently maintained and very well managed, especially if the building is more than 10 years old; attractive and efficient, the most desirable in their markets.

Class B

A subjective division of buildings by desirability among tenants and investors; generally offer useful space without special attractions; have functional layout and design, though not unique; average to good maintenance; typically 10 to 50 years old.

Class C

A subjective division of buildings by desirability among tenants and investors; generally older buildings that offer space without amenities; average to below-average maintenance and management, average to poor mechanical, electrical, and ventilation systems; attracts moderate to low-income tenants who need affordable space.

Claw back

A reduction to previously received or allocated / accrued performance fees or carried interest due to investment performance falling below a predetermined level or benchmark, and whereby the investment manager may be obligated to return a portion / all of its previously received performance fee or carried interest payments. 

Climate Risk

Climate risks result from the impacts of climate change and comprise 'Physical Risk' and 'Transition Risk'. Both components of climate risks might have significant impact on  real estate assets and investments as real estate is a location-bound and a long-term investment. (In line with TCFD Definition)  

Closed End Vehicle

An investment Vehicle with a fixed amount of capital and a finite life. Limited liquidity, with the redemption of units provided for at the end of the life of the Vehicle.

Club Deal

Informal industry term used to describe an investment Vehicle or structure (often a fund) with generally a limited number of investors investing in a common strategy. Typically investors have more discretion and control than in a typical fund, and have veto rights over major decisions.

Co-Investment

An ownership interest in an investment alongside a fund, typically by an investor in the fund but also potentially by an investor not invested in the fund; When two or more pension funds or groups of funds share ownership of a real estate investment; relative ownership is always based on the amount of capital contributed; 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

A property or asset that a borrower pledges to a lender in the event of default.

Collateral Account/Package

A deposit or securities account into which collateral in the form of capital contributions is deposited and over which a lender has a perfected security interest.

Collateralized Mortgage Obligation (CMO)

A specific class of commercial mortgage backed security issued against a pool of mortgages pass-through securities for which the cash flows have been allocated to different classes or tranches, each having a different claim against the cash flows of the pool.

Collection Loss

A deduction from potential gross income due to current or expected future space not rented due to tenant turnover and/or loss from uncollected rent due from delinquent tenants.

Commercial

A term often used to refer to any income-producing real estate, including multifamily.

Commercial mortgage-backed securities (CMBS)

A security which is backed by a portfolio of mortgages secured against commercial properties.

Commingled Fund

A term applied to all open-end and closed end pooled investment vehicles. A Commingled Fund may be organized as a group trust, partnership, corporation, insurance company separate account, or other multiple-ownership entity.

Commitment

The total agreed capital an investment manager can draw down from an investor, with a specified notice as outlined in the vehicle documentation.

Commitment fees

A commitment fee is a charge to investors on undrawn committed capital for the duration of the commitment period. This is seen to be part of the fund management fee.

Commitment period

The commitment period is the period of time as defined in the vehicle documentation during which an investor is obliged to contribute capital upon receiving a drawdown/capital call notice from the Investment Manager / General Partner (GP).  

Common Area

The areas of a building (and its site) that are available for the nonexclusive use of all its tenants, such as lobbies, corridors, and parking lots.

Common Area Maintenance (CAM) Charges

Charges paid by a tenant for the upkeep of areas designated for use and benefit of all tenants; tenants usually pay as determined by a negotiated agreement or the tenant’s pro rata share; costs vary but common items may include janitorial services, landscaping, common area electricity, security, trash removal, and snow removal.

Common parts

Areas which are shared with other occupants in multi-let buildings, including entrance areas, corridors, lifts, staircases, waste storage stores, communal kitchen or breakout facilities and any other parts within the asset and outside which are intended for the use of the occupiers of that asset.

Community Center

In addition to convenience goods, provides for the sale of goods such as apparel or furniture. Typical area is 100,000 to 350,000 square feet with two or more anchor tenants.

Community Development

(Related to Impact Investing) Community development is a process for generating solutions to common problems that involves a community coming together to take collective action. The aim is to build stronger and more resilient local communities by focussing on participative democracy, sustainable development, rights, economic opportunity, equality and social justice. Impact investment strategies focussed on sustainable communities may choose to actively involve community members in decision making and focus on the organisation, education and empowerment of people within their communities. 

Comparables (Comps) or Comparable Sales

Recently sold properties that are similar in important respects to a property being appraised; the sale price and the physical, functional, and locational characteristics of each of the properties are compared to those of the property being appraised in order to arrive at an estimate of value; by extension, sometimes used to refer to properties with rent or income patterns comparable to those of a property being appraised.  

Compensation Prepayment Proceeds

Payments which are required to be used in mandatory Prepayment.

Compliance

A series of policies and processes that an investment advisor implements to meet requirements specified by the Securities and Exchange Commission.

Composite

A composite is an aggregation of one or more portfolios into a single group that represents a particular investment objective or strategy. See www.gipsstandards.org.

Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) or Superfund

The federal Superfund program, administered by the US Environmental Protection Agency (EPA) is designed to investigate and cleanup sites contaminated with hazardous substances; sites managed under this program are referred to as "Superfund" sites.

Concessions

A benefit given by a buyer, seller, landlord or tenant in order to help facilitate a real estate transaction; can be given in both residential and commercial real estate, and are often predetermined during the negotiation period; often included in closing costs, but come in various forms: covering moving expenses and repair costs, rent reduction, or even cash back to the buyer.

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.

Conditions Precedent

Conditions of a loan facility agreement which must be fulfilled prior to a borrower being able to drawdown principal amounts under the loan.

Conditions Subsequent

Conditions which cannot be satisfied prior to entering into a loan and which have to be satisfied within a certain period of time following entry into the loan. Failure to satisfy these conditions, within an agreed timeframe, is typically an event of default.

Conduit

The financial intermediary that functions as a link between the lender(s) originating loans and the ultimate investor(s).

Consent Rights

Certain class rights that require certain pre-defined actions that cannot be undertaken by a company or fund without the approval of the holders of a majority (or other specific percentage) of their class or series of shares.

Constitutional Documents

See definition Vehicle Documentation

Construction Completion Guarantee/Guaranty

A guarantee granted by a project sponsor or a contractor to ensure a development project will achieve final completion; In the case of the project sponsor:  an agreement to provide subordinated financing or equity contributions to the project company if required to complete the construction of the project; In the case of the contractor:  an agreement to complete the project in accordance with agreed specifications, which is usually secured by performance bonds or liquidated damages.

Construction Loan

Any loan where the proceeds are used to finance construction of some kind. In the United States Financial Services industry, however, a construction loan is a more specific type of loan designed for construction and containing features such as interest reserves, where repayment ability may be based on something that can only occur when the project is built. Thus, the defining features of these loans are special monitoring and guidelines above normal loan guidelines to ensure that the project is completed so that repayment can begin to take place

Construction Risk

The risk associated with construction and the potential of experiencing losses due to a variety of controllable and uncontrollable factors.

Consumer Behavior

The study of individuals, groups, or organizations and all the activities associated with the purchase, use and disposal of goods and services, including the consumer's emotional, mental and behavioral responses that precede or follow these activities.

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; 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.

Consumption Per Household

All purchases made by a household (home or abroad) to meet its everyday needs:  food, clothing, housing services (rents), energy, transport, durable goods (notably cars), spending on health, on leisure, and on miscellaneous services.

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.

Contingent Interest

A percentage of property net income or cash flow after debt service in a participating loan.

Contingent liabilities

An existing condition, situation, or set of circumstances involving uncertainty as to possible outcome (such as Guarantees and/or Carve-Outs) to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur.

Contingent Rent

It is a rental payment which is triggered by meeting a certain condition precedent defined in the lease agreement.

Continuous Operations Clause

A clause commonly written in retail leases that requires a tenant to continuously operate at a property for the entire term of the lease; as anchor tenants may act as a demand driver for a retail center, landlords may enforce this clause to minimize the risk of a major tenant “going-dark”.

Contract Rent

The rental obligation, expressed in dollars, as specified in a lease; also known as “face rent” or “stated rent”.

Contractual Interest

The base or minimum interest rate paid exclusive of amounts payable as a result of the participation feature.

Contractual Principal

The nominal principal of a loan exclusive of amounts payable as a result of any participation feature.

Contributory Value

The amount a component of a property contributes to the total market value; for improvements, contributory value must be distinguished from cost.

Controlled Commercial Entity (of Section 892)

Any entity engaged in commercial activities as defined in the Internal Revenue Code (IRC) (whether conducted within or outside the US) for which a foreign government directly or indirectly owns at least 50% of the economic or voting interests in, or otherwise exercises effective practical control over, the entity.

Controlling Equity Interest

An ownership position that meets the requirements of control according to the governing accounting literature.

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 Debt/Loan/Mortgage

A debt financing obligation issued to a company or an individual by a bank or similar financial institution 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.

Core (INREV Style)

A fund which invests mainly in income producing investments. The fund will use low leverage, have no or very low development exposure and generate a high proportion of return through income.

Core (RS Style)

An Account that includes a preponderance of core attributes; the Account as a whole will have low leasing exposure and low leverage. A low percentage of noncore assets is acceptable. As a result, such portfolios should achieve relatively high-income returns and exhibit relatively low volatility.

Core Plus

High quality assets, often with slightly more leverage than core assets and perceived to have slightly more risk than Core assets.

Core-Based Statistical Area (CBSA)

Statistical area that consists of the county or counties or equivalent entities associated with at least one core (urbanized area or urban cluster) of at least 10,000 population, plus adjacent counties having a high degree of social and economic integration with the core as measured through commuting ties with the counties associated with the core; represents a core area containing a substantial population nucleus, together with adjacent communities having a high degree of economic and social integration with that core; refers collectively to metropolitan statistical areas and micropolitan statistical areas.

Corporate Blocker

An entity, often a C-corporation, through which tax-exempt investors invest in a  fund so as to shield such tax-exempt investors from having to file a US federal tax return and/or to pay US income tax; also known as “blocker” or “blocker corporation”.

Corporate Governance

Corporate governance is a cornerstone for the success of non-listed real estate Vehicles. Corporate governance defines how responsibility for key decisions is allocated, and impacts the structure, processes, policies and legal framework that determine how a Vehicle is managed and controlled. Corporate governance frameworks work alongside and are complementary to the external legal and regulatory environment at both international and national levels.  Corporate governance includes principles, such as transparency, accountability, and acting in the best interest of investors and other stakeholders.

Corporate Housing

A furnished apartment, condo, or home rented on a temporary basis to individuals, military personnel, intern groups, or corporations as an alternative to a traditional hotel or an extended hotel stay.

Correlation

A measure of  the degree to which two variables move in relation to each other; computed into what is known as the “correlation coefficient”.

Correlation Coefficient ( )

A measure of the degree to which two variables’ movements are associated with a range of values from -1.0 (i.e., perfect negative correlation) to 1.0 (i.e., perfect positive correlation).

Cost Approach (valuation technique)

Based on the amount that currently would be required to replace the service capacity of an asset (often referred to as current replacement cost).

Cost Index

An index showing the variations in construction costs over time; sometimes, by extension, a set of similar numbers showing the relative costs of construction in different geographic areas.

Cost of development portfolio

All costs paid up in relation to all assets under development.

Costs of Sale

An estimate of the incremental direct costs to transact the sale of the property. These costs generally include brokerage commissions, closing costs and fees, and other necessary disposition expenses.

Counter Party Risk

The likelihood that another entity involved in a transaction may not be able to complete its legal obligations.

Country Risk

The risk that a foreign government will default on its bonds or other financial commitments.

Covariance

A measure of the degree to which returns on two investments move in tandem; a positive covariance means that investment returns move together, while a negative covariance means investment returns move inversely.

Covenant

A legally-binding clause that requires an investment to meet certain conditions, e.g. a loan may have covenants that require the borrower to have certain Debt Yield, Debt Service Coverage Ratio or Loan-to-Value ratios. If the condition is breached, default remedies are specified.  

Credit Committee

The committee that assesses the credit risk of making a Loan to a Borrower. The credit committee ultimately approves the terms on which a Loan is made to that Borrower and the Security it requires from the Borrower. 

Credit Default Swap (CDS)

A financial derivative product that transfers credit risk from one counterparty to another. 

Credit enhancements

Additional collateral, insurance, or third party guarantee required by the borrower generally in exchange for a lower interest rate or cost of capital.

Credit Facility

A short-term loan arrangement provided by a bank to a fund secured again the investors’ commitments in the fund.

Credit Rating

Assessment of the creditworthiness of a Borrower in general terms or with respect to a particular debt or financial instrument, usually issued by an independent rating agency such as S&P, Moods or Fitch.

Credit Risk

The risk of loss that may occur from the failure of any party to abide by the terms and conditions of any financial contract, principally the failure to make required payments on loans due to an entity.

Credit Tenant

A tenant with the size and financial strength worthy enough of being rated as investment grade by one of the major credit agencies.

Cross Collateralization

The act of using an asset that is currently being used as collateral for a loan as collateral for a second loan

Cross-Over Demand

Space that is flexible in terms of what it can be used for (for example, space that could be utilized for industrial or office activities); also known as “flex space”.

Cumulative TWR returns

Returns for periods longer than a single period, calculated by geometrically linking all periods in the measurement period.

Cure Period

A specified timeframe during which a borrower that has gone into technical default on a contractual payment is permitted to submit payment without further prejudice, and without being considered to have defaulted.

Cure Rights

Cure Rights are designed to remedy a breach of a financial covenant and, within an agreed timeframe, avoid the occurrence of an event of default as a result of such breach.

Currency exposure

Net amount of balances denominated in currencies other than the vehicle reporting currency expressed as a percentage of NAV.

Currency Risk

The potential risk of loss from fluctuating foreign exchange rates when an investor has exposure to foreign currency or in foreign-currency-traded investments, also known as “exchange rate risk”.

Current Capital Closing Period

As defined in the Vehicle Documentation, it is the current period during with the Vehcile remains open to new Subsription Agreements prior to the Final Closing. Generally, this period begins following the Initial Closing and continues until the Final Closing. 

Current development exposure as percentage of Gross Asset Value (GAV)

The percentage of vehicle Gross Asset Value (GAV) that is invested in development projects. This equals fair value of development portfolio/ GAV of vehicle.

Current Expected Credit Losses (CECL)

An expected credit loss accounting standard issued by the Financial Accounting Standards Board (FASB) in 2016, which introduced new methodology for estimating allowances for credit losses; under the accounting standard, financial institutions are required to use historical information, current conditions and reasonable forecasts to estimate the expected loss over the life of a loan; effective for most Securities and Exchange Commission (SEC) filers in fiscal years and interim periods beginning after December 15, 2019, and for all others it takes effect in fiscal years beginning after December 15, 2022.

Current Occupancy

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

Custodian costs

Also known as depository costs, these are charged by a fiduciary entity entrusted with holding and safeguarding securities or assets, deposit transactions and keeping records for institutional clients.

Customer Spotting Technique

An approach to estimating the retail trade area (and sales/revenue potential) for a given establishment or center based on the location of existing customers via point-of-sale information (by obtaining customer address or zip code data) or customer surveys (by interviewing customers as they enter the store); data which can later be mapped to determine the extent of the trade area.

Dark Space

Any space or suite which is physically vacant or “dark”, but for which the tenant is still contractually obligated to pay rent; typically results from a tenant ceasing operations at an unprofitable location, in hopes of saving cash on employee wages and other operating expenses.

Dead deal costs

Costs usually charged by third parties concerning work undertaken for acquisition/disposition projects which do not ultimately close. Such costs cannot be capitalised, and thus must be expensed. Services undertaken by the advisor/manager are passed through as an expense.

Deadlock Provision

A contractual clause or series of clauses in a shareholders' agreement or other form of joint venture agreement which determines how disagreements on key issues are to be resolved in relation to the management of the enterprise.

Deal-by-Deal Carry (Waterfall)

A distribution of Carried Interest in which the GP receives distribution of profits as investments are monetized through refinance or sale.  Gains from investments are not offset by losses or write-downs from unprofitable investments until last in the fund life.  A Clawback provision is generally used to require the GP to return profits if LPs do not receive their Preferred Return and return of capital during the fund life.  Also known as Interim Carry or American-style Carry or Waterfall.  See also Full Pool Carry.  

Debenture

A debenture is a type of instrument which usually contains charges and assignments over all assets and rights of the chargor.

Debt arrangement costs

Debt arrangement costs paid to a lender, broker, or other third party, in connection with obtaining debt financing for asset purchase or financing at the vehicle or other special purpose entity level of the holding structure. 

Debt arrangement fee

Also known as financing fee, this represents a fee charged by the investment manager for services rendered in arranging debt financing for asset purchases or financing at the vehicle or other special purpose entity level of the holding structure. This fee is separate from any arrangement costs paid to the debt provider or external party such as a broker.

Debt Fund

See definition Debt Vehicle

Debt Interest

The ownership of a mortgage note or other note receivable secured by real estate assets owned by another party

Debt Service Coverage Ratio - DSCR (INREV)

Projected NOI over the following four quarters as a ratio of projected interest and scheduled amortization payments on bank (not shareholder) loans over the same period. This is a portfolio metric which may not reflect precisely the varying stipulations of each loan facility of the vehicle but which aims to give an indication of the vehicle’s general ability to service its debt; for the avoidance of doubt, the DSCR calculation does not take into account cash in bank. Calculation: DSCR = projected annual NOI for next four quarters / projected annual interest expense and amortization payments over next four quarters.

Debt Service Coverage Ratio - DSCR (RS)

Used to measure the amount of cash flow from the property/ investment's operations that is available to meet annual interest and principal payments on debt. A DSCR of greater than 1 would mean there is a positive cash flow and conversely less than 1 would imply a negative cash flow.

Debt Vehicle

A fundor similar entity that has been set up for the purposes of issuing or investing in loans.

Debt Yield

Property’s operating income as a percentage of the total principal loan amount

Default Covenant

A Financial Covenant, the breach of which is an Event of Default.

Defaulting Investor

An investor in a fund that has breached the fund’s constituent documents, namely by failing to make a capital contribution when required pursuant to a capital call notice.

Deferred Maintenance

Repairs and similar improvements that normally would have been made to a property but were not made to the property in question, thus increasing the amount of its depreciation.

Deferred taxes

Tax on taxable/deductible temporary differences between the tax value and the book value of assets/liabilities of the vehicle. The main source of deferred taxes are the tax on capital gains payable at the time a property is sold. 

Defined Benefit Pension Plan

A company pension plan in which an employee's pension payments are calculated according to length of service and the salary they earned at the time of retirement with a specified monthly benefit paid at retirement.

Defined Contribution Pension Plan

A retirement plan in which the employee and/or the employer contribute to the employee’s individual account under the plan; the amount in the account at distribution includes the contributions and investment gains or losses, minus any investment and administrative fees; the value of the account will change based on contributions and the value and performance of the investments; examples 401(k) plans, 403(b) plans, employee stock ownership plans and profit-sharing plans.

Delinquency Rate

The percentage of loans within a financial institution's loan portfolio whose payments are delinquent.

Delivered

The total square footage or number of properties in a particular asset class that have been completed (status changing from under construction to inventory) and received a certificate of occupancy during a given period of time.

Demand Driver

An element or force that influences the demand for goods and services in a given market area.

Denominator

The number below the line in a common fraction; a divisor.

Dependent Variable

A variable that measures the effect of (a) independent variable(s) on a data point within a statistical model.

Deposit Account

This is one of the accounts the borrowers may be required to maintain. If relevant, it is principally used for holding amounts to be applied in prepayment.

Derivative Security

A security that is created artificially (derived from another financial instrument).

Design/Amenity Attributes

The natural and/or physical qualities and characteristics of a property that contribute to people's appreciation of its pleasantness, aesthetic coherence, and cultural and recreational attributes.

Developer Profit

The value created by the developer; the difference between value upon stabilization and construction costs, including land purchase.

Development

The process encompasses activities that range from preparation of an area of vacant land and installation of infrastructure to the construction of a property. Sometimes referred to as "ground up" development period.  Development includes the predevelopment phase and generally involves risks such as leasing risk, permissions/entitlement risk, construction risk, financing risk and zoning risk.

Development Facility

A loan provided to finance the development of a real estate asset

Development fee

A fee charged to the vehicle by the investment manager for the construction processes of a development project. These costs may be expensed or capitalised at the property level.

Development Margin

Margin applied to a development loan for the period before practical completion.

Dilution

The reduction in the ownership percentage of shareholders caused by the issuance of new securities or the conversion of convertible securities of the issuer, typically with the connotation that the new securities are issued at a lower price than that paid in a previous round of financing.

Direct Alpha

A public market equivalent (PME) methodology where all private equity cash flows are compounded by the returns of the reference benchmark to the same single point in time, which when combined with the final net asset value (NAV), forms a series of future values of net cash flows; the impact of any changes in the reference benchmark on the actual private equity cash flows is effectively neutralized and the resulting net cash flows are not affected by any changes in the reference index but reflect only the sole private equity returns relative to the index returns.

Direct Investment

An investment that involves the outright purchase of a property or properties or mortgage financing not done through other investment vehicles and may include any co-investments.

Discount margin

Rate above your floating benchmark rate.

Discount Rate

With reference to finance:  a yield rate used to convert future payments or receipts into present value; reflects both the safe rate earned from a completely riskless investment (which rate may reflect anticipated loss of purchasing power due to inflation) and compensation for risk, lack of liquidity, and investment management expenses; most often estimated by band-of-investment analysis or sales comparison analysis that estimates typical internal rates of return; With reference to monetary policy:  the rate that the Federal Reserve Bank charges member banks to borrow.

Discounted Cash Flow (DCF)

A valuation method used to estimate the feasibility and attractiveness of an investment opportunity; utilizes future free cash flow and discount rate estimates to determine a net present value (NPV) of the investment; if the present value of the cash flows is higher than the initial cost of the investment, the DCF analysis will show a favorable investment, or positive net present value (NPV); if the initial cost is higher, however, the NPV will be negative, showing an unfavorable investment.

Discretion

Within the GIPS standards, discretion is the management company's ability to execute transactions and to make decisions regarding the vehicle's investments on behalf of the investors without their prior approval. There are degrees of discretion. However not all investor imposed restrictions or investor approval rights will necessarily cause a portfolio to be non-discretionary. GIPS describes a discretionary portfolio as one for which the investors have not imposed restrictions or requirements that impede the manager from fully executing the defined and approved strategy. 

Discretion or Discretionary Account

The level of authority granted to an adviser or investment manager over the investment and management of client capital; With reference to a discretionary account:  typically defined as one in which the adviser or investment manager has full authority to invest and manage client's capital subject only to specific investment guidelines.

Disposals Account

The Disposals Account is used to hold the proceeds of disposal of a Property pending prepayment of Loans.

Disposition

Sale of an interest in an asset in exchange for consideration received.

Disposition Fee

A fee charged by an investment manager or operating partner to sell an investment.  The fee compensates for the costs of marketing, negotiating and closing the sale.  

Distressed Asset

An asset, generally a security or real property that features a sharply reduced value as a result of actual or potential losses created by an excess of credit risk, market risk, or liquidity risk.

Distribution fee

Fees charged in conjunction with operating or return of capital cash distributions to investors.

Distribution Waterfall

See "waterfall"  

Distribution-dividend yield

The amount of income (or shareholder loan interest payments) the vehicle distributes to investors on a rolling 12 months basis as a percentage of the average NAV over the same period.

Distributions

Cash or other assets paid from the Vehicle to its investors as a share of income or gains from operations or a return of capital.

Distributions to paid-in capital (DPI) multiple

Measures what portion of the return actually been returned to the investors. The DPI will be zero until distributions are made. As the fund matures, typically the DPI will increase. When the DPI is the equivalent of one, the fund has broken even. Consequently, a DPI of greater than one suggests the fund has generated profit to the investors

District heating and cooling

District heating and cooling is a system for distributing hot or cold steam and water generated in a centralised location for residential and commercial heating requirements such as space heating and water heating. The heat is often obtained from a cogeneration plant burning fossil fuels but increasingly biomass. Heat-only boiler stations, geothermal heating and central solar heating are also used.

Diversifiable Risk

The risk inherent to a particular investment or portfolio of investments that can be mitigated or reduced through diversification; also known as “idiosyncratic risk,” “residual risk,” “specific risk,” or “unsystematic risk”.

Diversity, Equity and Inclusion (DEI)

Diversity is the presence of differences within an industry or an organisation. A diverse environment is likely to exist where individuals are able to think and act differently. Examples of diversity types may include race, gender, religion, sexual orientation, ethnicity, competency, nationality, socioeconomic status, language, physical or mental disability, age, or political perspective. Including populations that have been underrepresented in the broader society may also help create functional diversity. Equity and inclusion are not natural consequences of diversity and diverse representation does not automatically lead to diversity of thought. Equity requires acknowledgement that everyone has different needs, experiences, and opportunities. It promotes justice and impartiality within the procedures, processes, and resource distribution and requires treating diverse members of the team fairly. People are likely to feel included when an organisation invites them and are able to feel hear fully in the decision-making processes and development opportunities within an organization or group and consequently positively impact outcomes. (Reference: https://dei.extension.org/)

Dividend Equivalent Amount

The foreign corporation’s effectively connected earnings and profits for the taxable year adjusted for changes in US net equity.

Dividend Payment

A form of Distribution as defined in the Vehicle’s Documentation.

Dollar-Weighted Rate of Return

A measure of investment performance calculated by finding the rate of return that will set the present values of all cash flows equal to the value of the initial investment; also known as “internal rate of return” or “money-weighted rate of return”.

DOWNREIT

An organizational structure that makes it possible for REITs to buy properties using partnership units; the effect is the same as an umbrella partnership real estate investment trust (UPREIT); however, the DOWNREIT is subordinate to the REIT itself, hence the name.

Drag-Along Rights

The right that enables a majority shareholder to force a minority shareholder to join in the sale of a company or investment; the majority owner doing the dragging must give the minority shareholder the same price, terms and conditions as any other seller.

Drawdown

The actual act of transferring capital in the fund’s portfolio companies; the drawdown may be in the form of a notice issued by a fund (or its general partner) instructing investors to make a capital contribution to the fund to permit the fund to make an investment or pay for fund expenses or liabilities; also known as a “capital call notice”.

Drive Time-Based Trade Area

A geographic area containing the customers of a particular firm or group of firms for specific goods or services based on consumer travel time and distance to the interest point(s); normally reflects barriers to travel not considered in other methods, including water bodies or stretches of freeways without exits.

Dry Powder

The amount of capital committed to a fund minus the amount of capital that has been called by the sponsor or general partner of the fund.

Due Diligence Questionnaire (DDQ)

A questionnaire given to a company to retrieve a standard set of documents and information that exemplify the strategy, investment and operating capabilities of the company.  It is generally given to a GP by an LP or investment consultant, but may be prepared by the GP to provide LPs with an overview of the firm.  It frequently covers factors such as the firm history, investment strategy, compliance and operating capabilities.

Due-on-Sale Clause

A provision in a mortgage contract that requires the mortgage to be repaid in full upon a sale or conveyance of partial or full interest in the property that secures the mortgage; protects the lender, or the ultimate mortgage holder, from the risk that the mortgage may be transferred to the new owner of a property when the rate on the mortgage is below current market interest rates; also known as “due-on-transfer clause”.

Due-on-Transfer Clause

A provision in a mortgage contract that requires the mortgage to be repaid in full upon a sale or conveyance of partial or full interest in the property that secures the mortgage; protects the lender, or the ultimate mortgage holder, from the risk that the mortgage may be transferred to the new owner of a property when the rate on the mortgage is below current market interest rates; also known as “due-on-sale clause”.

Duty of Care Agreement

An agreement entered into between the Secured Parties and an Asset Manager (AM) or Managing Agent (MA) in which the AM or the MA acknowledges the security over the relevant Properties and in which the parties agree the terms under which the services of the AM or MA, in the event of a default or breach of the owner of the relevant Properties under any agreement, may be continued and under which they may be cancelled.

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)

A measure of a company's or investment’s overall financial performance; utilized as an alternative to simple earnings or net income in some circumstances.

Easement

A legal right to use another's land for a specific limited purpose.

Economic Development

Economic development is an intervention endeavour with the aim of improving the economic and social well-being of people. Real estate impact investment strategies that are focussed on economic development would set performance goals such as local jobs creation, wage increases and improvements in the economic performance of local businesses.

Economic Feasibility

The feasibility of a building or project in terms of costs and revenue, with excess revenue establishing the degree of viability.

Economic Life

The period over which an entity expects to be able to use an asset, assuming a normal level of usage and preventive maintenance.

Economic Obsolescence

The reduction in a property’s value due to external circumstances (outside of the property’s boundaries), which may be caused by economic or locational factors; generally deemed to be incurable on the part of the owner, landlord, or tenants; also known as “locational obsolescence”.

Economic Ownership

With reference to performance calculations:  the actual ownership interest in an investment, which may differ from the legal ownership and which reflects the post-promote sharing of the investment’s economics; also known as “effective ownership”.

Economic Regime

A given set of rules and/or institutions which are said to govern the economy as a system and account for its qualitative (static or dynamic) behaviors; can be defined in terms of four key factors, which tend to dominate financial market performance: economic growth, inflation, monetary policy, and labor market slack.

Economic Share

Please see Effective Share. 

Effective Age

The typical age of a structure equivalent to the one in question with respect to its utility and condition, as of the appraisal date.

Effective Buying Income (EBI)

An individual's disposable income, consisting of salary and wages, dividends, interest, and other profits, less all government taxes and deductions.

Effective Gross Income (EGI)

The total income from a property generated by rents and other sources, less a vacancy factor estimated to be appropriate for the property; expressed as collected income before expenses and debt service.

Effective Ownership Share

With reference to performance calculations:  the actual ownership interest in an investment, which may differ from the legal ownership and which reflects the post-promote sharing of the investment’s economics; also known as “economic ownership share”.

Effective Practical Control (of Section 892)

May be achieved through a minority interest which is sufficiently large to achieve effective control, or through creditor, contractual, or regulatory relationships, which together with ownership interest held by a foreign government, achieve effective control; an entity engaged in commercial activity may be treated as a controlled commercial entity if a foreign government holds sufficient interests in such entity to give it effective  practical control.

Effective Rent

The actual rental rate to be achieved by the landlord after deducting the value of concessions from the base rental rate paid by a tenant, usually expressed as an average rate over the term of the lease.

Effective Share

Also known as Economic Share, a term used to describe the ownership of the Fund's interest in a particular investment based on the current period hypothetical liquidation (i.e., waterfall) calculation. (As used herein, joint venture means any investments which is other than wholly owned). At different points in the life of the investment, the Effective Share may differ from the contractual (i.e., legal or contribution) share for the investment.

Effective Tax Rate

The average tax rate paid by a corporation or an individual; The tax rate expressed as a percentage of market value, will be different from the nominal tax rate when the assessment ratio is not equal to 1; The relationship between dollars of tax and dollars of market value of a property; may be calculated either by dividing tax by value or by multiplying a property’s assessment level by its nominal tax rate.

Effective Yield

The actual return on an investment rather than the yield anticipated or promised when the investment is made.

Effectively Connected Earnings and Profits

The earnings and profits (without diminution by reason of any distributions made during the taxable year) which are attributable to income which is effectively connected (or treated as effectively connected) with the conduct of a trade or business within the US.

Effectively Connected Income (ECI)

All income from sources both within and outside the US connected with a trade or business conducted within the US by a non-resident alien individuals and/or foreign corporations.

Efficiency Ratio

The ratio of leasable space to gross space of a building, expressed as a percentage.

Efficient Frontier

The set of optimal portfolios (i.e., dominant portfolios) that offer the highest expected return for a defined level of risk or the lowest risk for a given level of expected return.

Egress

An outlet or exit or means of exiting.

Elasticity

C concept used to measure the sensitivity of one variable to change in another variable; typically used to gauge consumer demand for a good or service; can be measured by the change in aggregate quantity demanded following a change in price or quality.

Emerging Issues Task Force (EITF)

The Emerging Issues Task Force (EITF) was formed in 1984 in response to the recommendations of the FASB's task force on timely financial reporting guidance and a FASB Invitation to Comment on those recommendations. The mission of the EITF is to assist the FASB in improving financial reporting through the timely identification, discussion, and resolution of financial accounting issues within the framework of existing authoritative literature. See www.fasb.org/.

Emerging Manager

A fund manager with a limited track record, typically of less than two years.

Employee Retirement Income Security Act of 1974 (ERISA)

Legislation passed in 1974 and administered by the Department of Labor that controls the investment activities primarily of corporate and union pension plans.

Encumbrance

Any limitation that affects property rights and value.

End of Investment Period

The end of the period as defined in the Vehicle documentation during which the vehicle can acquire assets.

End of maximum extendable vehicle term

The maximum vehicle termination date based on either pre-determined extensions at the discretion of the manager or extensions with advisory board or investor vote.

Endowment

An organization that is created through donations and gifts, e.g a university endowment.  Generally designed to preserve the donated principal while using investment income for its charitable purpose.  

Enterprise Zone

A designated area within a depressed, usually inner-city, area in which firms are given favorable tax treatment and freedom from a number of planning constraints.

Entitlement

A legal right conveyed by an approval from a governmental entity to develop a property for a certain use, intensity, building type or building placement.

Entitlement Risk

The risk that the various government agencies with jurisdiction over a construction project will not issue the required approvals necessary to proceed with the development.

Entity Investing

An investment in an entity, such as a company or partnership, that controls an investment rather than directly in the underlying assets.

Environment, Social and Governance (ESG)

ESG refers to a set of factors related to environmental, social and governance issues. They may present both risks and opportunities for a particular investment, and can be used to define investment strategies, performance and risk metrics, and criteria for investment. Taking them into account in the investment process as well as in the ongoing operations, can help improve future financial performance. Environmental criteria may include climate change and carbon emissions, air and water pollution, biodiversity, deforestation, energy efficiency, waste management and water scarcity. Social criteria may include tenant satisfaction, gender and diversity, employee engagement, community relations, human rights and labour standards. Governance criteria may include board composition, audit committee structure, bribery and corruption, executive compensation, lobbying, political contributions and whistleblower schemes. The UN PRI defines ESG integration as “the explicit and systematic inclusion of ESG issues in investment analysis and investment decisions”. It is more than a decision about doing what is environmentally or socially responsible or morally right. Instead, it is about generation of long-term returns which is dependent on stable, well-functioning and well-governed social, environmental and economic systems. (Reference: https://www.unpri.org/fixed-income/what-is-esg-integration/3052.article) Ultimately, Integrating ESG into investment decision making contributes to better long term decisions for stakeholders through visibility of risk and structured management of material risks.

Environmental Assessment

A report showing the results of investigation into environmental contamination; report is often required by the Environmental Protection Agency (EPA) and other regulatory agencies to establish the extent of contamination; depending on the type and extent of contamination suspected, “Phase I Environmental Site Assessment (ESA)” or more extensive “Phase II Environmental Site Assessment (ESA)” may be required.

Environmental Indemnity Agreement

An agreement under which a borrower (and often a guarantor) contracts to indemnify, defend and hold another person (typically the lender) harmless from any liability arising out of existing or potential environmental violations (such as contamination from a release of prohibited substances like petroleum) related to the property which is the security for a loan.

Environmental Protection Agency (EPA)

An agency of the US government established in December 1970 and created to promote and protect human and environmental health by creating standards and laws that support this mission.

Environmental Risk

The risk stemming from environmental conditions of a property or risks based on regulatory programs concerning a property or resource limitations.

Environmental, Social and Governance (ESG) Criteria

A set of standards for a company’s or fund’s operations that socially conscious investors use to screen potential investments; environmental criteria consider how a company or fund performs as a steward of nature; social criteria examine how a company or fund manages relationships with employees, suppliers, customers, and the communities where it operates; governance deals with a company’s or fund’s leadership, executive pay, audits, internal controls, and shareholder rights.

Equal-Weighted Index

A type of market index with individual components, or securities, weighted equally, regardless of capitalization.

Equilibrium

A state of rest achieved by a balance of the forces that impel change; a market is said to be in equilibrium when the factors of production are used in the production of an array of consumer goods that maximize consumer welfare.

Equilibrium Vacancy

Vacancy unrelated to disequilibria in supply and demand, producing no upward or downward pressure on rents; a typical vacancy rate in a given market operating in equilibrium; also known as “frictional vacancy”.

Equity Capitalization (Cap) Rate

Equity component of an overall direct capitalization rate; computed by dividing equity earnings by the market value of equity.

Equity Method

A type of accounting used for intercorporate investments; used when an investor holds significant influence over a investee but does not exercise full control over it, as in the relationship between a parent company and its subsidiary; generally, an investor is deemed to have significant influence over an investee if it owns between 20% to 50% of the investee’s shares or voting rights; if, however, the investor has less than 20% of the investee’s shares but still has a significant influence in its operations, then the investor must still use the equity method.

Equity multiple (Gross)

Current equity multiple (Gross) is the same as the Current equity multiple (Net) but adjusted so as to remove the effect of vehicle-level fees, taxes and carried interest deductions. This uses as a numerator the aggregate of the cash flows used to calculate the IRR since inception gross and as a denominator total capital drawn down (for the avoidance of doubt, not Total capital commitments drawn).

Equity multiple (Net)

Current equity multiple (Net) = [Total return of capital + Total Income/Interest/Dividend distributions + Fair value of vehicle (NAV)] / Total capital drawn down. This uses as a numerator the aggregate of the cash flows used to calculate the IRR since inception net and as a denominator the Total capital drawn down since inception (for the avoidance of doubt, not Total capital commitments drawn).

Equity multiple- gross, projected

Current projected gross equity multiple from inception to end of vehicle term (gross of taxes, fees and carried interest) per the manager's estimate, or in the case of an open end vehicle over a period agreed between the manager and investors. This is the weighted average of the equity multiple of realized investments and the manager's projection of the equity multiple of unrealized investments.

Equity multiple-net, projected

Current projected net equity multiple from inception to end of vehicle term (net of all taxes, fees and carried interest) per the manager's estimate, or in the case of an open end vehicle over a period as agreed between the manager and investors. This is the weighted average of the equity multiple of realized investments and the manager's projection of the equity multiple of unrealized investments.

Equity Yield or Equity Yield Rate

The return on the portion of an investment financed by equity capital, taking into account periodic cash flow and the proceeds from resale.

Equity-share

Used to define organisational boundaries for financial and sustainability (and especially GHG emissions) reporting. Equity share reflects the economic interest, which is the extent of rights a fund has to the risks and rewards flowing from an asset. Typically, the share of economic risks and rewards in an operation is aligned with the fund’s percentage ownership of that asset, and equity share will normally be the same as the ownership percentage.

ERISA

Employee Retirement Income Security Act of 1974, a US federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans.  

ERISA Fund

A fund that consists of, or is deemed to hold, plan assets and operates as a plan asset vehicle that is subject to Title I of ERISA and/or Section 4975 of the Internal Revenue Code (IRC); in the context of a subscription-backed credit facility, borrowers and lenders may have concerns regarding ERISA funds and potential prohibited transactions with lenders that may subject the fund and the lender to tax penalties and/or other fines.

ERISA Limited Partner

An investor that is (i) an employee benefit plan (as defined in ERISA) subject to Title I of ERISA; (ii) any plan defined in and subject to Section 4975 of the Internal Revenue Code (IRC); or (iii) any other entity whose assets include or are deemed to include the assets of one or more such employee benefit plans in accordance with ERISA and related regulations.

Escheat

The right to have property revert to the state for nonpayment of taxes or when there are no legal heirs of someone who dies without leaving a will.

Estimated Rental Value (ERV)

The current rent at which space within a property could reasonably be expected to be let given current market conditions.

Euro Interbank Offered Rate (EURIBOR)

Daily reference interest rate for a given period published by the European Money Markets Institute based on the average interest rates at which Eurozone banks offer to lend unsecured funds to other banks in the euro wholesale money market (or interbank market).

Event of Default (EOD)

Contractual breaches or other events, the occurrence of which gives the lender the right to demand a full and immediate repayment of the loan (subject to cure rights). These are defined within the loan agreement.

Event Risk

The risk of an unexpected, future decrease in credit quality that is a result of events such as a corporate acquisition or material changes in taxes, laws, or regulations.

Excess Return

An indication of the degree to which a fund or investment has been successful at adding value or meeting a hurdle rate; calculated by subtracting a predetermined rate of return (such as a risk-free rate, minimum acceptable return or benchmark return) from the net return of a fund or investment over a specified period; used in the calculation of statistics, such as the Sharpe ratio.

Exchange Rate Risk

The potential risk of loss from fluctuating foreign exchange rates when an investor has exposure to foreign currency or in foreign-currency-traded investments, also known as “currency risk”.

Excluded Recovery Proceeds

Amounts recovered from a Property Vendor or a report provider which do not have to be used in prepayment provided they are used for a particular purpose within a certain time.

Exclusion Clause/Provision

A term in a contract which seeks to exclude or limit the liability of one of its parties.

Exclusivity Right

A legally binding clause that specifies that all investments that meet certain criteria will only be allocated to a particular investment vehicle managed by an investment manager and not be allocated to any other investment vehicles.  Usually limited to the Investment Period or when a certain percentage of the Committed Capital has been invested.  

Execution Risk

The risk that a transaction will not be executed or consummated within the range of predetermined parameters or recent market prices.

Exempt fees and costs

Specific fees and costs which are not included in the TER and REER calculations. See example of exempt fees and costs in the fee and expense metrics module.

Exit Capitalization (Cap) Rate

The estimated or actual capitalization rate used to estimate the resale value of a property at the end of the holding period; calculated by dividing the expected net operating income (NOI) by the expected sale price and expressed as a percentage; also known as the “residual cap rate” or “terminal cap rate”.

Exit LTV

The anticipated ratio of the principal amount of the loan to the value of the property as at the date of property disposal or repayment of the loan.

Expansion

Extending an existing building via construction of additional space.

Expense Policy

A policy or legal clause that defines which expenses will be allocated to the property or fund or will be covered by the Manager under the Asset Management Fee.  

Expense Ratio

The ratio of expenses to gross income; a typical expense ratio is the relationship of normal expenses to effective gross income.

Expense Reimbursements

Costs which are paid back to a landlord by a tenant; generally includes property taxes, property insurance, maintenance and repair costs, and other operational expenses; at the end of the year (or the end of the lease), the landlord will reimburse the tenant if actual costs are less than expected costs; alternately, the landlord will bill the tenant any additional expenses that were not covered by their monthly tenant reimbursement bill; also known as “recoveries”.

Expense Stop

The level (or maximum amount) up to which the landlord will pay certain operating expenses; amounts above the stop are the responsibility of the tenant.

Extension Term

A pre-determined additional time period, usually in years, by which a time period such as, the Investment Period or Termof a Vehicle may be prolonged, as defined in the Vehicle Documentation.  

External leasing commissions

Commissions charged by the listing agent/broker and tenant representative after a new lease or a renewal lease is signed. These include marketing of vacant space. Commission ranges vary and may depend on the market and/or the value of the transaction.

Externality

An economic term that describes a third-party factor that has a positive or negative impact on an individual or firm where the third party factor has no direct control over the creation of a cost or benefit.

Facade

The main exterior face of an improvement.

Face Rent

The rental obligation, expressed in dollars, as specified in a lease; also known as “contract rent” or “stated rent”.

Facility Agent

in syndicated facilities (more than one lender) the Facility Agent is the party which acts as an agent for all lenders in dealings with the borrower.

Fair Value

As defined under ASC 820 is "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date"

Fair Value (GIPS, Appraisal Institute)

The amount at which that asset (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale. The appraisal profession further expands this definition as follows: The most probable price which a specified interest in real property is likely to bring under all of the following conditions: ▪ Consummation of a sale occurs as of a specified date. ▪ An open and competitive market exists for the property interest appraised. ▪ The buyer and seller are each acting prudently and knowledgeably. ▪ The price is not affected by undue stimulus. ▪ The buyer and seller are typically motivated. ▪ Both parties are acting in what they consider their best interest. ▪ Marketing efforts were adequate and a reasonable time was allowed for exposure in the open market. ▪ Payment was made in cash in U.S. dollars or in terms of financial arrangements comparable thereto. ▪ The price represents the normal consideration for the property sold, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. This definition can also be modified to provide for valuation with specified financing terms.

Fair value (IFRS definition)

IFRS defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The IFRS definition of fair value is assumed in the INREV Guidelines, except where specifically mentioned otherwise.

Fair Value Accounting Policy Manual

A consistent set of accounting standards for use when preparing financial statements for the institutional real estate investment community.

Fair Value Generally Accepted Accounting Principles (FV GAAP)

The foundational standards for fair value accounting used to report by the institutional real estate investment community to both tax-exempt investors (e.g. pension funds) as well as non-tax-exempt investors (e.g. funds) to tax-exempt investors and those investors and those investors that are not tax exempt. See www.fasb.org

Fair Value Net Asset Value (FV NAV)

Represents the excess of the fair value of investments owned, cash, receivables, and other assets over the liabilities of the reporting entity. Notwithstanding different financial statement presentations that exist between the Operating Model and Non-operating Model, FV NAV reported by a reporting entity under both models is generally expected to be similar because both models require investments to be reported at fair value in accordance with ASC 820.

Fair value of investment portfolio

Fair value of investment properties and trading properties intended for sale (properties that are stabilized and in lease up) in accordance with the Property Valuation module.

Fair value of vehicle according to INREV guidelines

NAV as reported by the manager in accordance with the INREV NAV module.

Fair Value Option

Under ASC 825-10, the Fair Value Option permits entities to elect a on-time option that is irrevocable to measure financial instruments at fair value on an instrument by instrument basis.

Fashion / Specialty Center

Typically 80,000 to 250,000 square feet with no dominant anchors, consisting of higher-end fashion oriented tenants.

Fee Drag

The negative impact of fees on investment returns.

Fee Leakage

The positive impact on fees on investment returns from the under reporting, or non-capture, of all expenses.

Fee Loss (in Dollars)

The amount of investor profit forfeited because of fees earned by the investment manager.

Fee Loss (in Percent)

The percentage difference between the before fee internal rate of return generated by the investment and the after fee internal rate of return realized by the investor.

Fee reductions/rebates

A fee reduction occurs when an investor is charged a management fee lower than the one specified in the vehicle terms (e.g. in the PPM or LPA). However, if the investor is charged the same management fee as the one specified in the fund terms, but once that fee is received by the management company, the investor receives a portion of its fee back as a rebate, this is considered a Fee Rebate.

Fee Sharing (in Dollars)

The allocation of profit dollars that fall into each category of the waterfall at the time of each investor distribution.

Fee Simple Value

Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the government powers of taxation, eminent domain, police power, and escheat.

Fee Spread (in Percent)

The difference between the gross IRR generated by the aggregate investments in the venture and the net IRR earned by the investor.

Fee waivers

Fee waivers represent a portion of the management fee that is waived and can be used by the investment manager to satisfy a capital call. The waived management fee process and potential distribution of the amount waived to be used in a capital call are generally detailed in the vehicle documentation. The amount waived and the amount used for the capital calls for the year are disclosed in financial statement footnotes.

Feed-in-Tariffs

A feed-in-tariff is a policy mechanism designed to encourage the adoption of renewable energy sources.

Feeder Vehicle

A separate investment vehicle that enables one or more individuals or entities to pool and invest capital in a specific Master Vehicle(s), without being involved in the portfolio management decisions of the underlying Master Vehicle(s).  

Fiduciary

Any person who exercises any discretionary authority or control over a plan's asset management, administration or disposition, or renders investment advice for a fee or other compensation with respect to a plan's assets; may include but is not limited to staff, trustees, investment board members, administrators, consultants, actuaries and investment managers.

Fiduciary Self-Dealing Transactions

A transaction wherein a fiduciary acts in its own best interest rather than in the best interest of its clients; represents a conflict of interest and an illegal act, which can lead to litigation, penalties, and termination of employment for those who commit such.

Final closing

As defined in the Vehicle Documentation, the date of the final closing occurs at the end of the equity raising period set by the investment manager when the Vehicle is closed to new commitments.

Finance, Insurance, and Real Estate (FIRE)

A sector of the economy composed of finance, insurance, and real estate; includes banks and credit unions, credit card companies, insurance agencies, mortgage brokers, investment brokerages, real estate agencies, and hedge funds, among others.

Financial Accounting Standards Board (FASB)

The Financial Accounting Standards Board is the independent, private- sector, not-for-profit organization, that establishes financial accounting and reporting standards for public and private companies and not-for-profit organizations that follow Generally Accepted Accounting Principles (GAAP). The FASB is recognized by the U.S. Securities and Exchange Commission as the designated accounting standard setter for public companies. See www.fasb.org

Financial control

Used to define organisational boundaries for financial and sustainability (and especially GHG emissions) reporting. Financial control relates to where the fund manager has the ability to direct the financial and operating policies of the asset with a view to gaining economic benefits from its activities.

Financial Covenants

Covenants designed to test the financial strength and performance of the property and the Borrower during the life of the loan.

Financial Inclusion

(Related to Impact Investing) The pursuit of making financial services accessible at affordable costs to all individuals and businesses. It strives to address and proffer solutions to the constraints that exclude people from participating in the financial sector. Affordable housing strategies seeking to address financial inclusion would consider how financially excluded tenants are engaged and may look at partnering with relevant charities or other service providers to help tenants to access financial services

Financial Industry Regulatory Authority (FINRA)

An independent, non-governmental, self-regulatory  organization that writes and enforces rules governing registered brokers and broker-dealers to safeguard the investing public against fraud and bad practices.  

Financial Institutions Reform, Recovery and Enforcement Act (FIRREA)

A US federal law passed in 1989 that provided government funds to insolvent savings and loan associations, and mandating sweeping changes in the examination and supervision of savings and loans; designed to reform, recapitalize, and consolidate the Federal deposit insurance system, enhance the regulatory and enforcement powers of Federal financial institutions regulatory agencies, and ensure that real estate appraisals are performed to standard; required savings and loans to adopt new capital standards, transferred the regulatory powers of the Federal Home Loan Bank Board to the newly formed Office of Thrift Supervision, and placed the 12 district Federal Home Loan Banks under control of an oversight board, the Federal Housing Finance Board; also abolished the defunct Federal Savings and Loan Insurance Corporation (FSLIC), expanded the enforcement powers of banking regulators, authorizing banking agencies to assess civil money penalties up to $1 million a day and criminal penalties up to $5 million a day, and added bank fraud to crimes covered under the Racketeer Influenced and Corrupt Organizations Act (RICO).

Financial Risk

The risk of the possibility that shareholders, investors, or other financial stakeholders will lose money; more distinct probabilities include credit risk, liquidity risk, and operational risk.

Financing Company

Type of SPV engaged in financing real estate assets. There are many different types of financing structures, for example secured and unsecured or internal and external.

Financing fee

See definition Debt Arrangement Fee

First Generation Space

Generally refers to new space that is currently available for lease and has never before been occupied by a tenant.

First Loss (Equity) Position

The position in a security that will suffer the first economic loss if the underlying assets lose value or are foreclosed on; Carries a higher risk and a higher yield; The lowest class or tranche of a commercial mortgage backed security (CMBS) that will absorb credit losses from a pool of mortgages first before any other classes are affected.

First Ranking Mortgage

A fixed security interest over property which ranks in priority to all other claims.

First-Close Investor

An investor willing to commit to a fund before the fund’s first closing; the investor typically receives an incentive by the fund investment manager for making the commitment prior to the fund’s first close, such as reduced fees.

First-Time Fund

The first investment vehicle raised by a fund manager, typically by a firm or fund management team that has not previously raised any prior fund.

Fixed and floating charges over assets

Security over an asset. A fixed charge is security over a specific asset of a borrower. A floating charge is a charge over all the borrowers asset. Both only crystalize in the event of default. 

Fixed Cost or Expense

A cost or expense that does not fluctuate in proportion to the level of sales or production.

Fixed or Determinable Annual or Periodical Income (FDAP)

All income except (i) gains derived from the sale of real or personal property (including market discount and option premiums, but not including original issue discount) and (ii) items of income excluded from gross income, without regard to the US or foreign status of the owner of the income, such as tax-exempt municipal bond interest; income is fixed when it is paid in amounts know ahead of time; income is determinable whenever there is a basis for figuring the amount to be paid; income can be periodic if it is paid from time to time; income can be determinable or periodic, even if the length of time during which the payments are made is increased or decreased.

Fixed Rate Debt

Fixed rate debt has a pre-determined or locked interest rate or coupon that is payable at specified dates. Due to its fixed nature, the fixed-rate debt is not susceptible to fluctuations in interest rates.

Fixed Rate Recourse Debt

An interest rate on a loan secured by assets, which interest rate remains the same for the agreed term in the loan agreement.

Fixture

Personal property which is permanently affixed or attached to real property such that it is considered to be an integral part of the real property.

Flat Fee

A fee paid to an adviser or manager for managing a portfolio of real estate assets, typically stated as a flat percentage of gross asset value, net asset value or invested capital.

Flex Space (industrial)

Single story buildings with 10-18 foot ceilings with both floor height and dock height loading. Includes wide variation in office space utilization, ranging from retail and personal service through distribution, light industrial and occasional heavy industrial use.

Flexibility for alternative use

Refers to the flexibility of the property's physical structure and the ease with which it might be converted or adapted for another use (e.g. adapting a retail building for use as an office building).

Floating Rate Debt

Floating rate debt contains a variable coupon that is commonly equal to a money market reference rate, or a federal funds rate plus a specified spread. Although the spread remains constant, the majority of floating rate debt contains periodic coupons that pay interest on that periodicity with variable percentage returns. At the beginning of each coupon period, the rate is calculated by adding the spread with the reference rate. This structure differs from the fixed-bond rate which locks in a coupon rate.

Floor area

Codes for defining floor areas vary by location, building type and landlord-tenant arrangement, for example: common parts area, lettable/leasable area, internal area, usable area, occupied area, conditioned/treated area.

Floor Area Ratio (FAR)

The ratio of the gross square footage of a building to the square footage of the land on which it is situated.

Follow-On Investment

Investment in an existing portfolio company of a fund that is made to protect or enhance the value of the fund’s investment; often permitted to be made throughout the life of the Fund, though the amount of capital that may be called to fund a follow-on investment may be limited after the fund’s commitment period has expired and concentration limits may apply to the overall investment in any given portfolio company that is subject to a follow-on investment.

Force Majeure

A force that cannot be controlled by the parties to a contract and prevents them from complying with the provisions of the contract, includes acts of God such as a flood or a hurricane, or acts of man such as a strike, fire or war.

Foreign Corrupt Practices Act (FCPA)

A US federal law passed in 1977 that prohibits US firms and individuals from paying bribes to foreign officials in furtherance of a business deal; also outlines required accounting transparency guidelines.

Foreign exchange difference

IFRS defines exchange difference as the difference resulting from translating a given number of units of one currency into another currency at different exchange rates. In the context of the SDDS, it includes exchange movements and valuation of hedge instruments.

Foreign Investment in Real Property Tax Act of 1980 (FIRPTA)

A US tax law enacted as Subtitle C of Title XI (the Revenue Adjustments Act of 1980) of the Omnibus Reconciliation Act of 1980, that imposes income tax on foreign persons disposing of US real property interests; tax is imposed at regular tax rates for the taxpayer on the amount of gain considered recognized; purchasers of real property interests are required to withhold tax on payment for the property; the 2015 omnibus spending bill significantly altered FIRPTA with a change in withholding rate for closings post-February 2016.

Forward Commitment

A contractual obligation to perform certain financing activities upon the satisfaction of any stated conditions; usually used to describe a lender's obligation to fund a mortgage.

Foundation

An entity created for charitable purposes, usually created by a high-net worth individual or family.  Investments may (or may not) be focused on charitable goals rather than typical investment metrics.  

Foundational Standards

Standards established by existing authoritative organizations including, but not limited to, valuation standards established through Uniform Standards of Professional Appraisal Practice (USPAP), accounting principles generally accepted in the United States of America established by the Financial Accounting Standards Board (GAAP), and the performance measurement and reporting standards promulgated by the CFA Institute known as the Global Investment Performance Standards (GIPS®).

Four Quadrants

The four main types of real estate exposure (private equity, private debt, public equity, and public debt), each with its own set of advantages and disadvantages.

Fractions Rule

Established by section 514(c)(9)(E) and the associated Treasury regulations, the rule pertains to some types of tax-exempt qualified organizations (primarily pension funds and educational organizations) seeking to acquire real estate on a leveraged basis through a partnership without incurring an unrelated business income tax (UBIT) on what would otherwise be debt-financed income;  compliance with the fractions rule requires that the partnership agreement fall within the substantial economic effect safe harbor of Regulatory Section 1.704-1(b) and that allocations under the partnership agreement cannot result in any qualified organization having a percentage share of overall partnership income in any tax year that is greater than its overall percentage of partnership loss for the tax year in which its share of loss will be smallest; the rule is qualified by several exceptions and limitations.

Free Rent

A period of time during the lease term when the tenant is excused from paying rent.

Frictional Vacancy

Vacancy unrelated to disequilibria in supply and demand, producing no upward or downward pressure on rents; a typical vacancy rate in a given market operating in equilibrium; also known as “equilibrium vacancy”.

Frontage

The extent of a parcel of land along a street, road, river, or other traffic artery on which the parcel is said to face.

Fugitive emissions

Fugitive emissions are emissions of gases or vapours from pressurised equipment such as air conditioning due to leaks and various other unintended or irregular releases of gases.

Full Recourse Guarantee

With to respect to risk transfer, in general:  signifies that the seller (not the buyer) of an asset or the drawer (not the holder) of a negotiable instrument assumes the risk of non-performance of the asset or the non-payment of the instruments; With respect to debt:  provides the lender rights to assets beyond the secured collateral specified in the loan contract to cover full repayment of the borrower’s loan obligations in the event of default.

Full Service Lease

A commercial lease where the tenant pays a base rent and the landlord pays for all operating expenses related to the tenant’s occupancy of the space such as common area maintenance, utilities, property insurance, and property taxes; generally includes an expense stop, above which any additional expenses are passed through to the tenant; also known as a “gross lease”.

Full Service Rent

An all-inclusive rental rate that includes operating expenses and real estate taxes for the first year; tenant is generally still responsible for any increase in operating expenses over the base year amount.

Full-Pool Carry (Waterfall)

Distribution of Carried Interest in which Profits are distributed in the aggregate for the portfolio, generally at the end of the fund life.  Also known as Back-end Carry, European-style Carry or Waterfall.  See also Deal-by-Deal Carry.  

Functional Obsolescence

The reduction in a property’s value due to changes in tastes, preferences, technical innovations, or market standards.

Fund

A Vehicle where capital is pooled together and managed as a single entity with a common investment objective.

Fund /Account(s)

Commingled Funds, both Open-end Funds and Closed-end Funds and Single Client Accounts

Fund Expenses

Broadly refers to the liabilities incurred in connection with (i) establishing a fund and (ii) operating a fund.

Fund management fee

Also known as Investment Management or Investment Advisory fees, Fund Management fees are typically charged by investment advisors, or managers, for their services regarding the management of the vehicle. They generally cover services such as: • appointment of third party service providers • reporting activities to investors • cash management and dividend payment • managing the vehicle level structure • arrangement of financing • fund administration • investor relations Occasionally, fund management fee and asset management fee are combined.

Fund Manager

See definition Investment Manager.

Funds of funds

A collective real estate investment vehicle that has a strategy of investing in a portfolio of real estate funds.

Future Proposed Space

Space in a proposed commercial development that is not yet under construction or where no construction start date has been set; also may refer to the future phases of a multi-phase project not yet built.

Garden-type Apartments

Low-rise apartments situated on a sizable landscaped plot, under one management.

General Consultant or Consulting Firm

One or more experts that provide professional advice and recommendations across all  asset classes to an individual or an organization for a fee.

General Partner (GP)

Sometimes referred to as Managing Member, an entity or person who joins with at least one other entity or person to form a partnership. The general partner, bound by the terms of the partnership agreement, is responsible to act on behalf of business without having to seek agreement from the limited partners for the day to day operational activities and the authority to legally bind the partnership. The general partner may or may not be monetarily invested in the partnership, but generally has unlimited liability for the financial obligations of the partnership.

Generally Accepted Accounting Principles (GAAP)

GAAP are the standards, conventions, and rules that accountants follow in recording and summarizing transactions and in preparing financial statements. GAAP, measured at fair value, is the foundational standard for accounting within the Reporting Standards. See www.fasb.org

Geo-Fence

A virtual perimeter for a real-world geographic area.

Geographic Core

A geographic area containing the customers of a particular firm or group of firms for specific goods or services; encompasses 50 to 80 percent of a store's customers; the area closest to the store and possesses the highest density of customers to population and the highest per capita sales; also known as a “primary trade area”.

Geographic Information System(s) (GIS)

System(s) (usually computer-based) used for capturing, handling, storing, retrieving, managing, manipulating, and displaying geographic information or geo-coded data.

Geometric Mean

The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment or portfolio; defined as the “nth root product of n numbers”.

Geometrically linked TWR

A process by which sub-period returns are averaged to arrive at a period's rate of return. The linking formula is: (1 + S1) x (1 + S2) x ... (1 + Sn) - 1, S1 - is the first sub-period return , S2 - is the second sub-period return , and Sn - is the last sub-period return.

Giveback Provision

With reference to a general partner or manager:  a mechanism whereby a manager is obligated to return a portion of its previously received promote or performance fee payment if as a result of timing and fund performance, the general partner receives more carry or performance fee during the life of the fund than the general partner would be entitled to receive had profits and losses been allocated on an aggregate basis at the time of dissolution of the fund; With reference to a limited partner:  the obligation of an investor to return previously received distributions to the fund if the fund requires such amounts to fulfill its indemnification obligations or satisfy expenses or other liabilities; Also known as “clawback provision”.

Glide Path

The formula in the design of a target date fund that defines the asset allocation mix for the fund, based on the number of years to the target date; defines an asset allocation that becomes more conservative (more fixed-income assets and fewer equities, for example) the closer a fund gets to its target date.

Global Endowment Management Implied Private Premium® (GEM IPP)

A benchmark metric that calculates the annualized rate of excess return that a private return stream generates over a public market benchmark, where a positive (negative) rate indicates outperformance (underperformance).

Global Financial Crisis (GFC)

The most severe economic recession in the US since the Great Depression; applies to both the US recession, officially lasting from December 2007 to June 2009, and the ensuing global recession in 2009; began when values in the US housing market collapsed, and large amounts of mortgage-backed securities (MBSs) and derivatives lost significant value; also known as “the Great Recession”.

Global Investment Performance Standards (GIPS®)

The Global Investment Performance Standards are a set of standardized, industry-wide ethical principles that provide investment managers with guidance on how to calculate and report their investment results to prospective clients based on the principles of fair representation and full disclosure. The GIPS® standards are sponsored by the CFA Institute. The GIPS® standards (www.gipsstandards.org) are the Foundational Standards for performance within the Reporting Standards and INREV Performance Guidelines.

Going-Concern Value

The enhanced or synergistic value of assets due to their existence within, or assemblage into, an operating and economically viable business that is expected to continue its operation in the future with no intention or necessity of liquidation or the material alteration of the scale of operation.

Going-In Capitalization (Cap) Rate

The capitalization rate computed by dividing the projected first year's net operating income by the value of the property.

Governmental Accounting Standards Board (GASB)

The designated organization to establish and improve standards of state and local governmental accounting and financial reporting that will result in useful information for users of financial reports and guide and educate the public, including issuers, auditors, and users of those financial reports. See www.gasb.org

Graduated Lease

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

Gravity or Gravitational Models

Economic models that apply to all types of retailing situations in which a spatial dimension is present; assert that groups of customers are drawn to certain locations because of factors like the distance to market, distance between markets, market population, the size of the retail establishment, the location of competitors, etc.  

Great Depression, The

The greatest and longest economic recession in modern world history; began with the US stock market crash of 1929 and did not end until 1946 after World War II; some of the many repercussions included the failure of thousands of banks and the loss of employment for nearly one-fourth of the US workforce.

Great Recession, The

The most severe economic recession in the US since the Great Depression; applies to both the US recession, officially lasting from December 2007 to June 2009, and the ensuing global recession in 2009; began when values in the US housing market collapsed, and large amounts of mortgage-backed securities (MBSs) and derivatives lost significant value; also known as the “Global Financial Crisis (GFC)”.

Greenfield

Land that has never been used or previously developed (i.e. natural and without improvements).

Greenhouse gas (GHG) emissions

Greenhouse gases (sometimes abbreviated to GHG) are gas in the Earth’s atmosphere that is the fundamental cause of the greenhouse effect which can greatly affect the temperature of the Earth. GHGs are the six gases listed in the Kyoto Protocol: carbon dioxide (CO2); methane (CH4); nitrous oxide (N2O); hydrofluorocarbons (HFCs); perfluorocarbons (PFCs); and sulphur hexafluoride (SF6). Since the beginning of the Industrial Revolution, the burning of fossil fuels has substantially increased carbon dioxide (CO2) emissions into the atmosphere thereby contributing to the greenhouse gas effect.

Gross Asset Value of Vehicle (GAV)

Total assets as per the Vehicle's financial statetment under the chosen GAAP before INREV adjustments, if applicable.  Note: For further information on INREV adjustments visit this page.

Gross Assets (for fund leverage measures)

Under the Operating Model, gross assets equals the sum of total balance sheet assets minus the JV partner's economic share of total assets. (if the Operating Model includes investments that are subject to both consolidation and equity method accounting, separate adjustments to the denominator need to be made on an investment by investment basis.) Under the Non-operating model it is the sum of total balance sheet assets plus the Fund's economic share of JV liabilities.

Gross Building Area

The total floor area measured from the exterior of the walls, including below-grade space but excluding unenclosed areas.

Gross Domestic Product (GDP)

An estimated value of the total worth of a country’s production and services, within its boundary, by its nationals and foreigners, calculated over the course of one year.

Gross equity multiple of vehicle realized

Equity multiple of portion of equity invested that has been divested (regardless of whether the proceeds have been distributed), before any vehicle-level fees, taxes and carried interest are deducted.

Gross Floor Area (GFA)

The sum of the floor areas of the spaces within the building, including basements and mezzanine and intermediate-floored tiers; excludes non-enclosed (or non-enclosable) roofed-over areas, such as exterior covered walkways, porches, terraces or steps, roof overhangs, and similar features; measured from the exterior faces of exterior walls or from the centerline of walls separating buildings.

Gross Income Multiplier (GIM)

A capitalization technique that uses the ratio between the sale price of a property and its potential gross income or its effective gross income; may be multiplied against the income of a property to obtain an estimate of value.

Gross initial yield

The passing rent divided by the property value.

Gross Leasable Area (GLA)

The total area rented to tenants, including basements and mezzanine and intermediate-floored tiers; measured from the outside wall surface to the center of interior partitions.

Gross Lease

A commercial lease where the tenant pays a base rent and the landlord pays for all operating expenses related to the tenant’s occupancy of the space such as common area maintenance, utilities, property insurance, and property taxes; generally includes an expense stop, above which any additional expenses are passed through to the tenant; also known as a “full service lease”.

Gross National Product (GNP)

An estimated value of the total worth of production and services, by citizens of a country, on its land or on foreign land, calculated over the course on one year.

Gross Negligence

A conscious and voluntary disregard of the need to use reasonable care, which is likely to cause foreseeable grave injury or harm to persons, property, or both; conduct that is extreme when compared with ordinary Negligence, which is a mere failure to exercise reasonable care.

Gross operating income

The total income generated by an investment before deducting general operating expenses. Total income includes rental income, and all other income associated with the investment (eg, parking).

Gross property return

The absolute unleveraged return of the property portfolio over a stated period before any vehicle-level costs are deducted.

Gross property value

The fair value of the property based on the latest external or internal valuation as of the reporting date.

Gross Rent Multiplier (GRM)

The factor by which gross rent is multiplied in order to obtain an estimate of value or the ratio between sale price and potential gross income (PGI) or effective gross income (EGI); typically the term used when developing the relationship based on monthly rent.

Gross return

The absolute return of the vehicle over a stated period before any vehicle-level fees and expenses are deducted.

Gross Sales Area (GSA)

The gross leasable area minus storage and work areas.

Gross Sales Price

The gross sales price received for a property sale before deduction for selling costs and expenses.

Ground Lease

A lease of the land only; usually the land is leased for a relatively long period of time to a tenant that constructs a building on the property; separates ownership of the land from ownership of buildings and improvements constructed on the land.

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 (such as, 99 years) with the lessor retaining title to the land.

Guarantee

Credit enhancement by an issuer (in this case, either the investor or the fund).

Guarantor

A person or firm that promises performance or payment of the obligations of another; one who makes a guarantee or guaranty.

Haircut

The difference between the market value of an asset used as loan collateral and the value ascribed to that asset when used as collateral for that loan (i.e., an ascribed (nominal) reduction to the value of that asset, when it is used as collateral).

Heat Map

A real estate investment analysis tool that uses visual cues in addition to numerical data to distinguish different locations based on performance.

Hedged %

The percentage of floating rate debt that has been transformed into fixed rate debt through interest rate swaps or other types of derivatives.

Hedging Arrangement/Agreement

Any master agreement, confirmation, transaction, schedule or other agreement (in agreed form) entered into or to be entered into by a Borrowerfor the purpose of hedging interest payable under this Agreement.

hedging instruments

A financial instrument whose cash flows should offset changes in the cash flows of a designated hedged item (asset, liability, or investment).

High Quality Liquid Assets (HQLA)

The assets that a bank must hold to satisfy its Liquidity Coverage Ratio (LCR) obligations.

High-rise Elevator Apartments

Buildings that are four stories or more in height.

High-Yield Investment

Primarily fixed-income instruments that carry higher risk and return (or yield).

Highest and Best Use

The use of an asset by market participants that would maximize the value of the asset or group of assets within which the asset would be used. Highest and best use is determined based on the use of the asset by market participants, even if the intended use of the asset by the reporting entity is different.

Historical Interest Cover Ratio (Historical ICR)

Interest cover covenant included as a financial covenant and that covenant is to be tested on a historical basis. The definition sets out how Historical Interest Cover is calculated and certain adjustments that are commonly made in calculating both finance costs and passing rental received by the borrowers. If the Company fails to calculate this, the Agent may do so.

Hold Period

The actual or expected period of time between the purchase and sale of an investment.

Hold-Over Tenant

A tenant retaining possession of the leased premises after the expiration of a lease.

Holding Company

A holding company's primary purpose is investing in real estate or controlling other companies, assets or entities. For example, holding companies can hold property or ownership interests in loan portfolios, partnerships, and joint ventures.

Homogenous or Homogeneous

 Similar or uniform characteristics  

Household

A housing unit or residence at a given location that is occupied by one or more persons (that is, a social unit comprised of one or more individuals living together in the same dwelling or place).

Household Population

The total number of households in a given geographic market or submarket as defined by specific demographic and socioeconomic characteristics.

Huff’s Law of Shopper Attraction

Building upon the gravitational model theorized by Reilly’s Law of Retail Gravitation, a model that delineates trading areas on the basis of the product assortment carried at various shopping locations, travel times from the shopper's home to alternative locations, and the sensitivity of the kind of shopping to travel time; to account for differences in the attractiveness of a store relative to other stores, a measure of store utility such as sales volume, number of products in inventory, square footage of sales floor, store parcel size, or gross leasable area (GLA) is used in conjunction with the distance measure; potential store locations can also be input into the model to determine new sales potential as well as the probabilities of consumers patronizing a new store instead of other stores.

Hurdle Rate

The minimum rate of return, as defined in the vehicle documentation, that has to be achieved before the investment manager can receive a performance fee or carried interest.

HVAC

Heating, Ventilation, Air Conditioning

Idiosyncratic Risk

The risk inherent to a particular investment or portfolio of investments that can be mitigated or reduced through diversification; also known as “diversifiable risk,” “residual risk,” “specific risk,” or “unsystematic risk”.

Impact Investing

Impact investments are investments made with the intention to generate positive, measurable social and/or environmental impact alongside a financial return. Additionality and intentionality are key factors of impact investing. For Real Estate, social impact for example, might occur through developing or providing affordable housing, social housing , healthcare or education units when there is a lack thereof or using one of the SDGs as an impact theme. Furthermore, environmental impact can for example, be achieved by improvement in energy efficiency as a result of sustainable building investments.  

Impact investing metrics

Impact strategies will have specific performance metrics related to the socialor environmental impact that they are addressing.  These metrics will be monitored alongside and in a similar fashion to financial performance metrics and help investors manage toward success. They are estimated, measured and monitored over time to give an indication of the performance of the investment in a given area of impact. Qualitative social impacts that cannot be easily measured can be measured through quantitative proxies. Investments will have to meet these social or environmental criteria as well as satisfying financial investment guidelines. For example, a Real Estate impact metric might be the percentage of units delivered that are available at an affordable rent. 

Impact Measurement & Management

Measuring and managing the process of creating social and environmental impact in order to maximize and optimize it. An impact measurement and management framework will be developed at the outset and will exist to test the achievement of the social and / or environmental impact goals associated with the strategy. An external independent party would ideally be appointed to assure or verify the annual statement of impact measurement and also to comment on the extent to which the impact strategy is meeting the initially identified social or environmental need. 

Implemented Consulting

In its broadest application, a form of discretionary investment consulting which comprises elements of policy formation, manager structure and selection, and performance monitoring through a fee relationship between an organization or pension plan or fund and a consultant or consultancy firm.

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.

Inception date

The date on which the vehicle first undertook operating, financing, or investing activity as defined in the Vehicle Documentation.

Inception-Date Cohort

Similar investments with the same inception date over the same period of time as subject; also known as an “acquisition-date cohort”.

Income Approach (valuation technique)

Uses valuation techniques to convert future amounts (for example cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts.

Income distribution

The amount of operating cash flow or gains that are distributed to the investors in accordance with the vehicle documentation. Along with income distribution, there are other types of distributions that may be present. See the definition of distributions.

Income return

Net investment income divided by NAV plus the time weighted (daily) contributions for the measurement period (TwdC) minus the time weighted (daily) redemptions for the measurement period (TwdR) and minus the time weighted (daily) distributions for the measurement period (TwdD). See Performance Measurement Module of the INREV Guidelines.

Indemnity

Security or protection against a loss or other financial burden.

Independent Variable

A variable that is manipulated or changed in a statistical model (such as regression analysis) and whose effects on a data point are measured and compared; a variable whose value is not determined by other (dependent) variables.

Indexed Rent

A type of Contingent Rent as defined in the lease agreement that varies based on changing interest rates or a specified inflation index such as the Consumer Price Index (CPI), typically used to anticipate future effects of inflation.

Industrial Revenue Bonds

Also known as low floater tax exempt bonds or tax exempt real estate bonds. Originally used as a vehicle by which municipalities could encourage socially responsible investing in the apartment and industrial sectors. They are only available on new construction but are assumable. There are government reporting requirements associated with these low interest rate loans.

Inflation Hedge

An investment that is considered to protect the decreased purchasing power of a currency that results from the loss of its value due to rising prices (inflation).

Inflation Risk

The risk due to a decrease in purchasing power of assets or cash flow due to inflation; also known as “purchasing power risk”.

Information Covenants

Undertakings given by borrowers to lenders in a loan agreement to ensure lenders have the information they need, such as financial statements, compliance certificates and a duty to notify a default.

Information Ratio

A measurement of portfolio returns beyond the returns of a benchmark, usually an index, compared to the volatility of those returns; often used as a measure of a portfolio manager's level of skill and ability to generate excess returns relative to a benchmark; also attempts to identify the consistency of the performance by incorporating a tracking error, or standard deviation component into the calculation.

Informational Efficiency

The degree to which market prices quickly and correctly reflect information and, thus, the true value of an underlying investment.

Initial Closing

As defined in the vehicle documentation, it is the date on which the conditions for the operating agreement are met for the initial closing.  Generally, these conditions relate to subscription commitments.

Initial Leasing

Completed construction that is less than 60% occupied since the end of construction and has been available for occupancy for less than one year

Initial Yield

The amount of income that an investment produces at the time of acquisition.

INREV

INREV is the European Association for Investors in Non-Listed Real Estate Vehicles. The platform for sharing knowledge on the non-listed real estate industry to improve transparency, professionalism and best practices across the sector, making the asset class more accessible and attractive to investors. See www.inrev.org/.

INREV Guidelines

An integrated set of principles and recommendations including tools and examples for governance and information provision for investment managers and investors of non-listed real estate Vehicles. See www.inrev.org/.

Insurance Prepayment Proceeds

Amounts received under insurance policies which are to be used in mandatory prepayment.

Intangible Personal Property

Property that has no physical existence beyond merely representational, nor any extrinsic value; includes rights over tangible real and personal property, but not rights of use and possession; value lies chiefly in what it represents.

Intentionality

An investor’s intention to have a positive social or environmental impact through investments is essential to impact investing. These impacts are defined as part of the strategy and investments are assessed against social or environmental impact criteria as well as financial return thresholds.

Interaction (in Attribution)

With reference to attribution:  an effect that measures the combined impact of a portfolio manager's selection and allocation decisions within a segment; not a residual but rather a directly calculable effect resulting from the combination of (or “interaction” between) allocation and selection effects.

Intercreditor Agreement

An agreement between various financiers providing loans or credits to a borrower that reconciles their different (potentially competing) interests. It formalizes their relationship; in particular the ranking of their debt and security, particularly on insolvency, by subordinating junior lenders and regulating the rights of lenders.

Interest Payment Date (IPD)

Dates on which lenders receive interest payment on the debt instrument they hold. Interest payment dates are usually set at the outset and usually correlate closely to rental quarter dates.

Interest Period

The period over which the interest due to the lender under a debt instrument agreement is calculated.

Interest Rate

Annual cost of borrowing paid by the borrower to the lender on the outstanding loan balance. Typically expressed as a percentage.

Interest rate hedging ratio

Percentage of the nominal value of debt excluding shareholder loans of which the interest rate risk is hedged through derivatives.

Interest Rate Risk

The possibility of a reduction in the value of a security, especially a bond, resulting from a rise in interest rates.

Interest Rate Swaps

A type of hedging where two parties exchange a floating interest rate for a fixed interest rate or vice-versa

Interest reserve account

The account the borrowermay be required to maintain, principally used to establish a cash reserve which must be used for interest payment shortfalls under the loan. 

Interim Close

A periodic, non-final closing of a fund during the fund’s capital raising period, typically name in the sequence in which the close occurs, such as first close, second close and so forth; once an initial or first close occurs, a fund can initiate making investments.

Intermediary

An entity that acts as the middleman between two parties in a financial transaction.

Internal leasing commissions

Commissions charged by investment advisors, or managers, after a new lease or a renewal lease is signed. These include marketing of vacant space. Commission ranges vary and may depend on the market and/or the value of the transaction.

Internal Rate of Return - IRR (INREV)

The annual rate of return based on the present value of a capital investment over a holding period expressed as a percentage of the investment.

Internal Rate of Return - IRR (RS)

The annualized implied discount rate (effective compounded nominal rate) that equates the present value of all of the appropriate cash inflows associated with an investment with the sum of the present value of all the appropriate cash outflows accruing from it and the present value of the unrealized residual investment.

Internal Rate of Return (IRR) Breakpoint Analysis

The calculation of the internal rate of return (IRR) earned by the investor at the point where the manager is earning the stipulated share of profits; allows for comparison of alternative fee rates and terms (such as the impact of changing the preferred rate and catch-up rate).

Internal Rate of Return-gross

The absolute IRR of the property portfolio before any vehicle-level fees are deducted.

Internal Rate of Return-net

The absolute leveraged IRR of the property portfolio after all vehicle-level fees are deducted. Source: www.nationalcne.org/faq/re_glossary.htm

Internal Rate of Return-original and projected

Original and projected IRRs include actual fund performance to date and the projected performance through the anticipated liquidation date of the fund. In the early stage of the fund a projected IRR may be what was reported within the fund offering documents

Internal Rate of Return-realized (Gross) vehicle

IRR of portion of equity invested that has been achieved from actual divestments (regardless of whether the proceeds have been distributed or reinvested), before any vehicle-level fees, taxes and carried interest are deducted. Ignores any unrealized returns or distributions not derived from disposals and does not include NAV as an end value.

Internal Rate of Return-since inception gross of fees

The equity IRR at vehicle level before any vehicle-level fees, taxes and carried interest are deducted. This calculation is from inception through to the current quarter adopting NAV (adjusted to eliminate the effect of fees, taxes and carried interest if necessary) as the final end value

Internal Rate of Return-since inception net

The equity IRR at vehicle level after any vehicle-level fees, taxes and carried interest are deducted. This calculation is from inception through to the current quarter adopting NAV (adjusted to eliminate the effect of fees, taxes and carried interest if necessary) as the final end value

Internal Rate of Return-starting from inception to end-projected-gross

Current projected gross return performance from inception to end of vehicle term (gross of taxes, fees and carried interest) per the manager's estimate, or in the case of an open end vehicle over a period as agreed between the manager and investors.

Internal Rate of Return-starting from inception to end-projected-net

Current projected net return performance from inception to end of vehicle term (net of all taxes, fees and carried interest) per the manager's estimate, or in the case of an open end vehicle over a period as agreed between the manager and investors.

Internal Ratings-Based Approach (IRB)

A method of calculating regulatory capital requirements based on an institution's own internal assessment.

Internal valuation

Internal valuation is a valuation carried out by a valuer who is employed by either the entity that owns the assets or a related company or manager. An internal valuer is generally capable of meeting all the requirements of independence and professional objectivity, but for reasons of public presentation and regulation may not always be acceptable to fill the role of an external independent valuer.

International Council of Shopping Centers (ICSC)

An international trade organization that represents the shopping center and retail real estate industry.

International Financial Reporting Standards (IFRS)

A set of accounting standards, developed and maintained by the IASB with the intention of those standards being applied on a globally consistent basis thus providing investors and other users of financial statements to compare across their peers. See www.ifrs.org/.

International Valuation Standards Council (IVSC)

An independent, not-for-profit organisation that produces and implements universally accepted standards for the valuation of assets across the world in the public interest. See www.ivsc.org/.

Inventory

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

Invested Capital

See also Committed Capital, Assets Under Management.  

Investee

A corporation, partnership or other legal entity or contractual arrangement in which an investor makes a direct investment.

Investment

A discrete asset or group of assets held for future income, appreciation, or both and tracked separately.

Investment Advisers Act of 1940 (Investment Advisers Act)

A US federal law that regulates investment advisers; requires that firms or sole practitioners compensated for advising others about securities investments must register with the Securities and Exchange Commission (SEC) (with certain exceptions) and conform to regulations designed to protect investors.

Investment Advisor

The role referring to activities related to the development and implementation of a strategic portfolio management function for a real estate investment Vehicle. This generally includes research and the development of a strategic plan, the identification and qualification of deal flow, financing and structuring advice and the monitoring of overall Vehicle performance. The Investment advisor can be a separate legal entity with a contractual relationship with an Investment Vehicle, or can be embedded within the activities of a Vehicle Manager. The role of the Investment Advisor is usually documented in an executed agreement between the client/investor and the Investment Advisor.

Investment Company

A type of investment vehicle which has legal form and framework adapted for specialised investment activities such as but not limited to managing pooled capital from multiple investors in order to buy, sell, or hold investments in various other investment products, funds, or businesses. The investors share in the profits/losses incurred by the investment vehicle.

Investment Company Act of 1940

A US federal law that regulates the organization of companies, including mutual funds, that engage primarily in investing, reinvesting, and trading in securities, and whose own securities are offered to the investing public; designed to minimize conflicts of interest that arise in these complex operations and requires these companies to disclose their financial condition and investment policies to investors when stock is initially sold and, subsequently, on a regular basis; it does not permit the Securities and Exchange Commission (SEC) to directly supervise the investment decisions or activities of these companies or judge the merits of their investments.

Investment Grade Security

A security rated AAA through BBB- that generally reflects a safer tranche of security with a higher level of subordination.

Investment Guidelines

A legally binding clause that specifies the types of investments in which an investment vehicle will or will not invest.  It often specifies limits on specific factors such as the percentage of the portfolio that can be invested in certain types of investments, e.g. by property type, geographic region, construction or risk exposure.   

Investment Guidelines or Limitations

Provisions in a fund’s governing documents that place restrictions on the types of investments the fund may undertake, which may include limitations on the size, geography, industry, concentration or return characteristics arising out of applicable regulations or law.

Investment level

Evident or applied only to the entire investment i.e.. e., "Investment-level debt" and "investment-level leverage". By contrast, "property-level" applies to characteristics of individual properties within an investment.

Investment Level Return

A return based upon the equity of the investor in the fund which consists of beginning net assets, contributions, net income, appreciation, and distributions.

Investment Management Agreement

Agreement between the sponsor’s management company and the Fund to manage the fund.  Specifies general terms under which the management company is authorized to perform its duties in exchange for the Management Fee.  

Investment Management Company

An entity which manages investment vehicles on behalf of investors. Depending on the scope of activities and legal domicile a management company may need to be authorized and supervised by a regulatory body.

Investment Manager

The organisation responsible for the overall governance and oversight of the real estate investment fund or other type of investment Vehicles and may incorporate the Investment Advisor. The Investment Manager is ultimately accountable to investors for the overall management of the fund or Vehicle. This can be a formal role as defined by applicable regulation (e.g. the AIFMD), or legally such as the role of the General Partner in a partnership arrangement. Also known as Fund Manager, Vehicle Manager or Investment Advisor.

Investment margin (Spread)

In relation to floating interest rates, the rate of interest charged by the lender over and above the relevant cost of funding, such as LIBOR or EURIBOR

Investment multiple

A ratio which measures the value of the investment relative to its cost basis, not taking into consideration the time invested.

Investment Period

The period of time, as defined in the Vehicle Documentation, during the life of the Vehicle when the Vehicle can make investments.

Investment Policy

A document that formalizes an institution's guidelines for investment and asset management; 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 Risk

The risk associated with investing; the potential of experiencing losses following a fluctuation in security prices; also known as “capital market risk”.

Investment Value

The worth of an investment property to a particular investor. Investment value may or may not coincide with market value depending on the requirements of the specific investor.

Investor Letter

An undertaking agreement or acknowledgement made by an investor in favor of a subscription-backed credit facility lender whereby the investor makes representations, acknowledgments and covenants in favor of the lender as a condition to the investor being included in the borrowing base; typically, includes an acknowledgement of the existence of the subscription-backed credit facility and the pledge of the right to receive and enforce the subscription-backed credit facility collateral, and the investor will agree to make capital contributions upon notice by the lender during an event of default.

Investor Opinion

A letter issued by legal counsel to an investor stating various legal conclusions with respect to the investor, delivery of which is often a condition to the Investor being included in the borrowing base of a subscription-backed credit facility; under certain circumstances, an authority certificate can be delivered in lieu of an investor opinion.

J Curve

An investment cash flow pattern in which an investment initially requires a significant amount of negative cash flow in the early years of investment with positive cash flow distributions occurring later in the life cycle of the investment.

Japanese Real Estate Investment Trust (J REIT)

A corporation-type closed-end fund listed on the Tokyo Stock Exchange (TSE), where the investment units are publicly traded.

Jensen’s Alpha

A risk-adjusted performance measure that represents the average return on a portfolio or investment, above or below that predicted by the capital asset pricing model (CAPM), given the portfolio's or investment's beta and the average market return.

Job creation

(Related to Impact Investing) Additional jobs created as a direct result of an investment. An impact investment strategy may focus on employment for vulnerable or disadvantaged groups.

Joint Venture

A Vehicle with at least two parties with a common investment objective. Control over significant investment and risk management decisions is not transferred to an external manager, but is exercised by members in the venture per the Vehicle Documentation.

Junior Debt

Debt that has a lower priority for repayment than first ranking debt claims in the case of a borrower's default. It is a type of subordinated debt.

Junior Debt/Loan/Mortgage

A debt financing obligation issued to a company or an individual by a bank or similar financial institution which is lower in priority to a first or more senior debt/loan/mortgage.

Key person clause

A provision intended to ensure that the identified management professionals making and managing the investments on behalf of the vehicle are the same individuals who the investors expect to manage the vehicle and / or the individuals responsible for the prior track record(s). Key person provisions often allow investors to suspend further investments in the vehicle if certain key personnel leave the manager or in case of other circumstances as defined in the vehicle documentation. 

Kick-Out Clause/Provision

With reference to leasing:  a right of a party to terminate an agreement, such as a tenant’s or landlord’s right to terminate a lease based on insufficient percentage rent, or a hotel owner’s right to terminate a management agreement based on poor performance; With reference to asset acquisition:  a purchaser’s right to exclude certain properties or loans from a multi-property or multi-loan acquisition.

Know Your Customer (KYC)

Implemented in 2012 by FINRA Rule 2090 (Know Your Customer) and Rule 2111 (Suitability), regulations that require broker-dealers to know and keep essential facts of their customers.  

Lag Vacancy

The vacancy in between consecutive leases.

Land Ratio Method

A method used to value land, in the absence of vacant land sales, by using a typical ratio of land to improvement value; also known as “allocation method”.

Landscaping

Any activity that modifies the visible features of an area of land.

Lead Manager

The investment banking firm that handles the principal responsibilities for coordinating the new issuance of securities.

Lease

An agreement whereby the owner of real property gives the right of possession to another for a specified period of time and for a specified consideration.

Lease Agreement

The formal legal document entered into between a landlord and a tenant to reflect the terms of the negotiations between the parties.

Lease Area

The area for which rent can be charged.

Lease Commencement Date

The date usually constitutes the commencement of the term of the lease, whether or not the tenant has actually taken possession, so long as beneficial occupancy is possible.

Lease Expiration Exposure Schedule

A listing of the total square footage of all current leases that expire on an annual basis, without regard to renewal options.

Lease Terms

The details outlined in the lease agreement, including such factors as rent, term, responsibility for expenses, renewal options, tenant allowances, and other such items.

Leased Fee Estate

An ownership interest held by a lessor with the rights of use and occupancy conveyed by lease to another.

Leasehold Value

The value of a tenant's interest in a property; the term applies to a long-term lease when rent paid under the lease is lower than current market rates; some US states permit the lessee to claim the leasehold interest from the landlord in a condemnation proceeding, unless the lease prohibits such a claim; represented by a price which would be agreed upon by a willing seller and a willing buyer under usual and ordinary circumstances without any compulsion to either buy or sell.

Leasing Fee

A fee charged by an investment manager or operating partner to lease space in a building, either for a new tenant or for renewal. The amount varies and may be split with a leasing broker.  

Legal fees (Not property specific)

See definition professional service costs.

Legislative Risk

The risk that a government enacts regulations or may do something that adversely affects the value of an investment.

Lendee

The person or entity to whom something is lent.

Lender

An individual, a public or private group, or a financial institution that makes funds available to another with the expectation that the funds will be repaid.

Lessee

A person who holds the lease of a property.

Lessor

A person who leases or lets a property to another.

Letter of credit (LOC)

Commitment made by a bank or other party (the "issuer"), upon the application of the issuer's client (the "applicant"), to pay the amount of the letter of credit to a third party (the "beneficiary") upon the beneficiary's submission to the issuer of the documents listed in the letter of credit. By separate reimbursement agreement, the applicant agrees to reimburse the issuer for any liability incurred by the issuer under the letter of credit.

Leverage

Using debt and other debt-like instruments to acquire assets. In essence, the use of leverage lowers the equity required to fund an investment by sharing the risk of the investment with the lender. Leverage may decrease or increase returns beyond what would be possible through an all equity investment.

Leverage Limits

Leverage limits are restrictions put on an advisor, typically governed by the fund organizational documents, which may limit the amount or type of leverage that can be used in a Fund. There could also be individual investment level leverage limits as well. Restrictions may include a limit on the maximum percentage of leverage that can be used to make new investments or on total gross asset value, limit the use of recourse vs. non-recourse debt, or place limitations on pledging investor commitments or providing Fund guarantees, among others.

Leverage Percentage

The most widely used measure of leverage for monitoring financial risks in a real estate portfolio. The Leverage Percentage indicates what proportion of debt a fund has relative to the value of its assets. This measure shows stakeholders in the fund the level of fund leverage along with the potential risks the fund faces in terms of its debt load.

Leverage Ratio

Any ratio used to measure the ability of a company or investment to meet financial obligations.

Liability Driven Investment (LDI)

An investment philosophy and strategy that is designed toward gaining enough assets to cover all current and future liabilities; general approach consists of minimizing and managing liability risk followed by generating asset returns and maximizing asset performance relative to plan liability; considers a wide range of risks, including interest rate risk, inflation risk, longevity risk, credit risk, and foreign-exchange risk.

Life Insurance Separate Account

Funds held by a life insurance company that is maintained separately from the insurer’s general assets. It is generally used for investing pension assets or variable annuity holdings. In the United States, the accounts are regulated by state insurance departments and may or may not be registered with the Securities and Exchange Commission. In Europe, the accounts are regulated by European Insurance and Occupational Pensions Authority (EIOPA) and regulators per country.

Lifecycle

The various developmental stages of a property: pre-development, development, leasing, operating, and redevelopment (or rehab).

Limited Liability Company

A legal entity which operates within the framework of general corporate legal provisions of a respective domicile. The owner's pooled liability is limited.

Limited Liability Company (LLC)

A legal entity which operates within the framework of general corporate legal provisions of a respective domicile. The owner's pooled liability is limited.  

Limited Liability Partnership (LLP)

A partnership established between two or more partners governed by a partnership agreement. The LLP can have different legal forms and varying liability provisions for its partners depending on its jurisdiction. In some jurisdictions LLPs are distinct from Limited Partnerships which may allow all LLP partners to have limited liability, while a Limited Partnership requires the general partner to have unlimited liability.

Limited Partner

An entity or person who joins with at least one other entity or person to form a partnership. The limited partner generally does not receive dividends but receives distributions from the cash flow generated by the investments, does not have an active role in the operations of the business, and has limited liability with respect to the financial obligations.

Limited Partner Advisory Council (LPAC)

A group of LPs who are independent of the GP, but usually selected by the GP and comprised of the largest investors.  Responsibilities include resolving conflict of interest situations, reviewing/approving related party transactions, approving appointment of auditors or appraisers, and reviewing requests for flexibility on investment strategy or limits.  

Limited Partner Excuse

The right by which an investor is permitted to opt-out from an investment on a case-by-case basis, often as a result of regulatory issues or due to a policy of the Investor that would prohibit the investor from participating in a particular investment; also used to describe the right a general partner has to exclude an investor from participating in investments on a case-by-case basis for regulatory or other legal reasons.

Limited Partner Transfer

The legal sale, assignment, pledge or disposition of all or an undivided portion of an investor’s interest in a fund, including its obligation to make capital contributions and its right to receive distributions of fund assets; the constituent documents of a fund will place limitations on an investor’s ability to transfer or encumber its interest, except in accordance with the terms and conditions set forth therein and with the general partner’s consent.

Limited Partner Withdrawal

The termination of an investor’s participation in a fund; rights of withdrawal (either mandatory or voluntary) are typically limited to situations where the investor’s continued participation in the fund would result in the investor or the fund violating applicable regulations or law.

Limited Partnership (LP)

A partnership established between two or more partners governed by a partnership agreement, with at least one general partner and one limited partner. The general partner has responsibility for the day-to-day management of the limited partnership and has unlimited liability for the debts and obligations of the LP whereas the limited partner generally has limited liability. The limited partners have direct rights to a share of the assets and the profits of the LP.

Limited Partnership Agreement (LPA)

The contract between all partners in a limited partnership, defining the terms of the limited partnership including the authority of the general partner and the rights of all limited partners.

Line of Credit

See Subscription- Backed Credit Facility  

Linkage

The physical or economic concept pertaining to the time and distance between a land use and support facilities, or between people and their activities.

Liquidity

The ease with which assets can be bought or sold without affecting the price.

Liquidity Coverage Ratio (LCR)

A requirement set out in Basel Ill and CRD IV, designed to ensure that banks hold adequate liquid assets to meet their expected outflows over a 30 day time horizon.

Liquidity Risk

The risk that an investment cannot be bought or sold quickly enough to prevent or minimize a loss due to a lack of marketability.

Loan Amortisation

The annualized rate of repayment, usually expressed in % terms, of a Loan's outstanding principal balance.

Loan Amortization Period

Number of months used to calculate the amount of monthly payments for principal and interest which could be longer than the loan term.

Loan Covenants

Loan covenants are stipulations in a commercial loan or bond issue that require the borrower to fulfill certain conditions or which forbids the borrower from undertaking certain actions or possibly restricts certain activities to circumstances when other conditions are met. Typically, violation of a covenant may result in a default on the loan being declared, penalties applied or the loan being "called", meaning all future payments due under the loan are deemed to be due and payable immediately. The loan documents typically have provisions to specify soft vs. hard covenants, testing periods, cure methods (if any), and extension options. Typical covenants for real estate related loans stipulate to minimum/ maximum Loan to Value Ratio (LTV), Debt Service Coverage Ratio (DSCR) and Interest Service Coverage Ratio (ISCR).

Loan Lockout Period

Remainder of time in months a borrower is prohibited from refinancing the loan without defeasance.

Loan Term

Length of loan in months from time of origination until final payment due.

Loan to Cost (LTC)

Ratio used to compare the amount of the loan used to finance a project to the cost to build the project. It does not change based on changes in valuation

Loan to equity

The consolidated total leverage at the vehicle level as a percentage of the NAV of the vehicle.

Locational Obsolescence

The reduction in a property’s value due to external circumstances (outside of the property’s boundaries), which may be caused by economic or locational factors; generally deemed to be incurable on the part of the owner, landlord, or tenants; also known as “economic obsolescence”.

Lock-Out Period

With respect to debt:  the period during which a loan may not be prepaid; With respect to a fund:  the period of time during which an investor in an open-end fund is not permitted to redeem or sell its equity interest; also known as “lock-up period”.

Lock-up

Any arrangement where investors are prohibited from requesting a redemption and/or transfer of their interests as outlined in the vehicle documentation.

Lock-Up Period

The period of time during which an investor in an open-end fund is not permitted to redeem or sell its equity interest; also known as “lock-out period”.

Lock-up Period

The period of time where a lock-up is applicable. See the definition of  Lock-up.

London Interbank Offered Rate (LIBOR)

The average interest rate at which major global banks borrow from one another in the London interbank market. 

Low-rise Apartments

Walk-up buildings and elevator buildings three stories or less.

Make-Whole Margin

Payment made as compensation to lender for unpaid interest arising due to early payment of outstanding loan principal, refers to the make-whole provision.

Make-Whole Provision

A provision which allows a borrower to repay a loan early, without lender consent, but subject to certain payments being made to the lender to compensate them for the loss of interest which would have otherwise been payable until the final maturity date of the loan.

Management Fee

See Asset Management Fee.  

Management Risk

The risk associated with decisions made by a company’s managers in relation to the overall interest of shareholders and the company at large.

Mandate

A mandate is an authorization or directive to carry out a policy or course of action; for example, an investment manager could receive a mandate from an investor to use an allocation of funds for a specific purpose or strategy.

Mandatory disclosure requirements

Legally binding reporting requirements for listed or non-listed companies. In the EU, these requirements include the European Accounts Modernisation Directive, which is interpreted in different ways by different countries.

Manufacturing facility (industrial)

Buildings with 10-16 foot ceilings or sufficient height for overhead cranes. Provides floor height and dock height loading.

Margin

The percentage rate of interest charged by lenders over the relevant basis rate reflecting the credit quality of the collateral.

Mark-to-Market

Revaluing the price of an asset or liability to reflect current market value.

Market Analysis

A study of the demand for and supply of a property type and the specific market area for that property type.

Market Approach (valuation technique)

The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

Market Area

The geographic area  from which a majority of demand is derived and the majority of competition is located.

Market Cycle

The period between the two latest highs or lows of a common benchmark; refers to trends or patterns that emerge during different business environments; often has four distinct phases and at different stages of a full market cycle, different asset classes will respond to market forces differently.

Market Delineation

The process of defining the geographic extent of the demand for a specific property.

Market Interest Rate

The prevailing rate of interest paid on deposits and other investments, determined by the interaction of the supply of and demand for funds in the money market.

Market Participants

Those buyers and sellers transacting business in the principal market for an asset or liability; they are not related parties, have a reasonable understanding of the asset or liability, are capable of entering into a transaction to buy or sell the item, and are motivated to do so.

Market Portfolio

A theoretical portfolio consisting of all assets available to investors, with each asset held in proportion to its market value relative to the total market value of all assets.

Market Rent

The rental income that a property most likely would command in the open market, indicated by the current rents asked and paid for comparable space.

Market Risk

The risk inherent to the entire market that cannot be mitigated or reduced through diversification; also known as “non-diversifiable risk,” “systematic risk,” or “undiversifiable risk”.

Market Risk Premium

A measure of the extra return, or risk premium, that investors demand to bear risk; the difference between the expected return on a market portfolio and the risk-free rate and is equal to the slope of the security market line (SML).

Market Segmentation

The process of dividing a market of potential customers into groups, or segments, based on different characteristics; segments created are composed of consumers who will respond similarly to marketing strategies and who share traits such as similar interests, needs, or locations.

Market Share

The percentage of total sales in a retail category that each competing outlet is expected to capture based on current patterns and trends in the market.

Market Study

A forecast of future demand for a certain type of real estate project that includes an estimate of the square footage that can be absorbed and the rents that can be charged.

Market Vacancy

Current vacancy rate for the market for the same property type.

Market Value

The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. (IVS, Eighth Edition, 2007, Standard 1.4.1 pg. 79

Marketability Analysis

A study of how a specific property is expected to perform as it competes for the available market demand in a specific market.

Marketing costs

See definition vehicle formation costs.

Master Lease

A primary lease that controls subsequent leases and may cover more property than subsequent leases.

Master Vehicle

A Master Vehicle, also known as Primary Vehicle, is the primary underlying investment vehicle which pools capital from individuals or entities, including Feeder Vehicle, to invest in a portfolio of assets.  

Material Adverse Effect

This is used as a qualifier to certain representations and undertakings as well as triggering the material adverse change Event of Default. This definition should be considered on a case by case basis and is frequently the subject of negotiation.

Maturity Date

The date when the Total Principal Balance comes due.

Maximum LTV

The consolidated total external leverage at the vehicle level as a percentage of the GAV of the vehicle. Depending on the accounting standards, a manager will mark the debt to market, with any gain or loss being reflected in the vehicle’s profit & loss account. Investors’ subscriptions in the form of loans (e.g., for tax purposes) should be excluded from the calculation

Mean

A mathematical representation of the typical value of a series of numbers, computed as the sum of all the numbers in the series divided by the count of all numbers in the series; also known as “arithmetic mean” or “average”.

Mean-Variance Analysis

The process of weighing risk (i.e., variance) against expected return; a component of modern portfolio theory (MPT), which assumes that investors make rational decisions and expect a higher return for increased risk.

Median Income

The middle point of area incomes; divides the income distribution range for a given area in half, one with residents having incomes above the median, and the other with residents having incomes below the median.

Metropolitan Statistical Area (MSA)

Generally, the area in and around a major city; the Office of Management and Budget (OMB) defines an MSA as having one of the following characteristics: a city with a population of at least 50,000, or an urbanized area with a population of at least 50,000 with a total metropolitan population of 100,000.

Mezzanine Debt/ Loan/ Mortgage

The capital structure layer of funding between common equity and secured borrowing, usually subordinated (to the senior debt), and secured not by a lien on property, but secured by the ownership of equity interests of a Borrower.

Minimum Capital Requirement (MCR)

The minimum level of regulatory capital that insurance companies are required to maintain under Solvency II.

Minimum Rent

The smallest amount of rent due from a tenant with a variable rental rate, such as a rent calculated as a certain percentage of gross sales, with a minimum rent of a certain amount per month.

Mixed-Asset Portfolio

An investment portfolio containing a well-diversified blend of asset types.

Mixed-Use

A building or project that provides more than one use, such as office/retail or retail/residential.

Modern Portfolio Theory (MPT)

An investment theory put forth by Harry Markowitz based on the idea that risk-averse investors can construct portfolios to optimize or maximize expected return based on a given level of market risk, emphasizing that risk is an inherent part of higher reward; MPT suggests that it is possible to construct an efficient frontier of optimal portfolios, offering the maximum possible expected return for a given level of risk.

Modified Dietz

The single period rate of return formula that is widely used throughout the financial industry to combine into TWRs. It allows the placement of sub period boundaries at dates when valuation data will be available e.g., quarterly. Within these sub-periods, if a cash flow occurs, an implicit constant rate of return before and after is effectively assumed by time-weighting the cash flows in the denominator by the fraction of the sub-period duration that the cash flows affect the portfolio.

Money-Weighted Rate of Return

A measure of investment performance calculated by finding the rate of return that will set the present values of all cash flows equal to the value of the initial investment; also known as “dollar-weighted rate of return” or “internal rate of return”.

Monte Carlo Simulation

A computerized mathematical technique that allows an individual to account for risk in quantitative analysis and decision making; furnishes the decision-maker with a range of possible outcomes and the probabilities they will occur for any choice of action; performs risk analysis by building models of possible results by substituting a range of values—a probability distribution—for any factor that has inherent uncertainty and establish the odds for a variety of outcomes.

Moral Hazard

The risk that a party has not entered into a contract in good faith or has provided misleading information about its assets, liabilities, or credit capacity; occurs when one party in a transaction has the opportunity to assume additional risks that negatively affect the other party, with such a decision based not on what is considered right, but what provides the highest level of benefit, hence the reference to morality.

Mortgage Company

A legal entity which conducts business of providing funding to borrowers in order to facilitate additional equity needs in order to acquire residential or commercial real property. The funding is typically collateralized by the real property that is acquired.

Mortgage REIT

A REIT that makes or owns loans and other obligations that are secured by real estate collateral.

Mortgagee

A person or firm to whom property is conveyed as security for a loan made by such person or firm (a creditor).  

Mortgagor

One who borrows money, giving as security a mortgage or deed of trust on real property (a debtor).

Most Favored Nations Clause (MFN)

A contract provision by which a fund sponsor promises to provide an investor with terms no less favorable than the terms provided to any other investor in the fund; entitle an investor to elect to have any more-favorable right or privilege granted to another investor by the fund apply to it; clause subject to numerous exceptions, qualifications and exclusions to rights.

Multi manager

An investment manager who invests capital in a variety of investment strategies.

Multi-Asset Portfolio

An investment portfolio containing a well-diversified blend of asset types.

Multi-Tenant

A property that has two or more tenants.

National Council of Real Estate Investment Fiduciaries (NCREIF)

NCREIF is a US based not-for-profit association of institutional real estate professionals which includes investment managers, plan sponsors, academicians, consultants, appraisers, certified public accountants (CPAs) and other service providers who share a common interest in the industry of institutional real estate investment. NCREIF is a co-sponsor of the Reporting Standards. See www.ncreif.org.

Negative Leverage

The cost of borrowed funds is greater than the free and clear internal rate of return (IRR) on the property.

Neighborhood Center (retail)

Provides for the sale of daily living needs of the immediate area. Typical area is 30,000 to 150,000 square feet with at least one anchor tenant.

Nelson Technique

An approach to estimating the retail trade area (and sales/revenue potential) for a given establishment or center.

Net Absorption

A measurement of the net change of the supply of commercial space in a given real estate market over a specific period of time; measured by deducting commercial space vacated by tenants and made available on the commercial space market from total space leased up.

Net Asset Value of Vehicle (NAV)

A vehicle’s assets less all liabilities as per the Vehicle Documentation, under the chosen GAAP.

Net Debt Yield

Net Operating Income (NOI) as a percentage of the nominal value of debt, also known as book value.

Net equivalent yield

A time-weighted average of the net initial yield and reversionary yield, representing the return a property will produce based upon the timing of the income received.

Net financing cost

All costs related to external debt (e.g., interest expenses or received, extension fees, prepayment fees, cost of related interest rate swaps), excluding amortization and distribution to investors.

Net Income

With reference to property level performance calculations:  accrual basis net income of the property (which would ultimately be consolidated into the fund's net investment income).

Net Initial Yield (NIY)

The passing rent or net operating income divided by the gross property value including notional acquisition costs.

Net investment income-Operating Model

Under the Operating Model, net investment income is a measure of operating results. It is primarily intended to provide a measure of operating activity, exclusive of capitalized expenditures, such as leasing commissions, tenant improvement costs, tenant inducements and other replacement cost that can be capitalized if in accordance with GAAP. Rental income is recognized when it is contractually billable to tenants (i.e., straight-lining of rents is not applicable when real estate is reported at fair value). The recognition of rental income matches appraisal methodology which factors in the future rental income in the determination of property value. Accruing for free rent/stepped rent would in essence be accounting for the same item twice (i.e., once in the property's valuation and aging in an accounts receivable/other asset account outside the property base). Expenses are generally recognized when the obligation is incurred. Certain expenses may be based on the investment vehicle's unrealized change in net asset value, including, for example, incentive management fees, and are recognized as a component of the unrealized gain or loss.

Net Lease

A contractual agreement where a lessee pays a portion or all of the taxes, insurance fees, and maintenance costs for a property in addition to rent; in its purest form, the tenant is expected to pay for all the costs related to a property as if the tenant were the actual owner.

Net Operating Income (NOI)

The gross operating income of a property for the period less operating expenses. NOI relates to the operating portfolio of the vehicle and not (re)development assets which are reported under 'other net income.

Net return

The amount an investor earns over the stated period after all vehicle-level fees and expenses including taxes and servicing of debt are deducted.

Net Sale Price

Gross Sales Price net of any selling costs and expenses, and before debt. Selling expenses are directly attributable to the sale which are the seller's responsibility including, but not limited to, items such as commissions, disposition fees, legal fees, title insurance, escrow fees, etc.

Net Zero Carbon Building

The IPCC defines net zero as that point when “anthropogenic emissions of greenhouse gases to the atmosphere are balanced by anthropogenic removals over a specified period”.[1] With regards to real estate,  “net zero carbon” is when the carbon emissions emitted as a result of all activities associated with the development, ownership and servicing of a building are zero or negative.[2] This definition encompasses the entire life cycle of a building, including construction, operation, refurbishment, and demolition, and includes emissions associated with whole-building energy use during the operational phase (operational carbon) as well as emissions embodied in building materials during the construction phase (embodied carbon). The net zero carbon balance has to be achieved on an annual basis. Consequently, these emissions include those attributable to the ownership of the real estate and from the activities of tenants in occupation.   [1] IPCC Special Report: Global Warming of 1.5 degrees [2] BBP Net Zero Carbon Framework

Neutral Leverage

The cost of borrowed funds is the same as the free and clear internal rate of return (IRR) on the property.

NOI yield

NOI / fair value of investment portfolio

Nominal Alpha

The actual over (under) return relative to the market (benchmark) without taking risk into account; calculated as actual return less benchmark return.

Nominal Tax Rate

The stated tax rate, which does not necessarily correspond to the effective tax rate.

Nominal value of debt excluding shareholder loans

This includes third party portfolio facilities or credit lines (and any drawn equity bridge), with all currencies converted to vehicle currency.

Non-Amortizing Debt/Loan/Mortgage

A type of loan in which payments on the principal are not made until a lump sum is required; generally requires a higher interest rate due to the unsecured nature of the loan and lower installment payments, reducing the cash flow to the lender.

Non-Compete Clause/Provision

A clause that can be inserted into a lease specifying that the business of the tenant is exclusive in the property and that no other tenant operating the same or similar type of business can occupy space in the building.

Non-controlling effects on the INREV NAV adjustments

This adjustment represents the impact on NAV of the combined effect of the recognition of minority interest on the INREV NAV adjustments (the INREV NAV excluding non-controlling effects).

Non-Controlling Equity Interests (Minority Interest)

An ownership position that does not meet the requirements of control according to the governing accounting literature.

Non-Discretion or Non-Discretionary

The level of authority granted to an adviser or investment manager over the investment and management of client capital that permits only the undertaking of specific tasks that are authorized on a per task basis; in general, the investor retains the decision on whether to invest.

Non-Diversifiable Risk

The risk inherent to the entire market that cannot be mitigated or reduced through diversification; also known as “market risk,” “systematic risk,“ or “undiversifiable risk”.

Non-Operating Model

A reporting model, supported by ASC 946, Financial Services-Investment Companies. It generally employs a net presentation.

Non-participating mortgage loan

an investment secured by a lien on real estate that generally entitles the lender to payments of contractual principal and interest that do not increase based on the underlying operating results of a property.

Non-Performing Loan (NPL)

A loan which is no longer performing in line with the contractual obligations of the facility agreement.

Non-Recourse

The concept of a lender not having the right to pursue recovery from any assets of a borrower other than those assets specifically given as collateral.

Non-Recourse Debt

A loan with no source of repayment beyond the mortgaged collateral

Non-Transferable Debt/Loan/Mortgage

A debt financing obligation issued to a company or an individual by a bank or similar financial institution that is prohibited by the terms of the loan from being assumed by any other party.

Nonconforming Use

A use of property that does not comply with the applicable zoning ordinance; Uses that differ noticeably from prevailing uses in a neighborhood.

Number of assets

Number of assets as defined by the manager

Number of new / renewed loans

Total number of new loans (additional borrowing/ refinancing)

Numerator

The number above the line in a common fraction showing how many of the parts indicated by the denominator are taken.

Obligor

Obligor means the asset owning property company (Company) or a Borrower.

Occupancy Rate

The ratio of rented or used space to the total amount of available space.

Offer price

The amount that an investor must pay (relative to NAV) if it wishes to subscribe to a vehicle.

Office Showroom

Single story (or mezzanine) with 10-16 foot ceilings with frontage treatment on one side and dock height loading or grade level roll-up doors on the other. Less than 15% office space.

Open End Vehicle

An investment Vehicle with a variable and unlimited amount of capital which may be accepted and has an infinite life. Investors may purchase or redeem units or shares from the Vehicle as outlined in contractual agreements.

Operating Expense Risk

The risk of a negative impact associated with the continuous financial obligations incurred in the daily operation of the business.

Operating Expenses

Cash outlays necessary to operate and maintain a property, such as real estate taxes, property insurance, property management and maintenance expenses, utilities, and legal or accounting expenses.

Operating Model

A reporting model, supported by ASC 960 and GASB 25. (ASC 960 GASB 25 require certain investments held by tax-exempt investors, including defined benefit plans and endowments are to be reported at fair value. It generally employs a gross presentation.

Operating Partner

The partner that is responsible for operating the property and making daily decisions.  Usually the partner with a minority investment in a joint-venture agreement.  

Operating Property

Includes any asset which has been completed and/or placed into service for 12 months or is at least 60% leased, whichever occurs sooner  

Operational control

Used to define organisational boundaries for financial and sustainability (and especially GHG emissions) reporting. Operational control relates to where the fund manager or one of its subsidiaries has the full authority to introduce its operating policies and ability to influence operational decisions within directly managed and controlled areas. 

Operational Real Estate

An investment in a real estate asset structured so as to create a strong correlation between returns to the asset owner and the underlying operational performance of the operator or occupant.   Operational real estate investments typically entail a different risk-return profile (operational, financial, or both) when compared to non-operational investments. Such investments may be accessed via a variety of structures, including, but not limited to, operational services agreements, joint venture arrangements or taking equity stakes in an operating business.

Operational results

NOI plus other net income

Operational Risk

The risk of loss resulting from inadequate or failed internal processes, people, and systems, or from external events.

Opportunistic (INREV Style)

A fund which typically uses high leverage, has a high exposure to development or other forms of active asset management, and will deliver returns primarily in the form of capital appreciation. The fund may invest in any markets or sectors, and may be highly focused on individual markets or property types.

Opportunistic (RS Style)

An Account of preponderantly noncore investments that is expected to derive most of its return from appreciation/ depreciation and/ or which is expected to and may exhibit significant volatility in returns. This volatility may be due to a variety of characteristics, such as exposure to development, significant leasing risk, high leverage, or a combination of moderate risk factors.

Opportunity Cost

The principle that the cost of a resource for one use is the value of the resource in its best alternative use.

Other net income

Non-recurring non-operating profit income, calculated by subtracting related operating expenses from the revenue of development projects and non-rental revenue.

Other/misc. vehicle costs

Small or infrequent vehicle level costs that are not assigned to another cost category but are classified as a group. These may include other administration costs, statutory costs, etc.

Outlet Center

Typically 50,000 to 400,000 square feet of manufacturer's outlet stores, with a primary trade area radius of 25 to 75 miles.

Outliers

Observations that have unusual values, that is, they differ markedly from a measure of central tendency.

Outsourced Chief Investment Officer (CIO)

In its broadest application, a form of discretionary investment consulting which comprises elements of policy formation, manager structure and selection, and performance monitoring through a fee relationship between an organization or pension plan or fund and a consultant or consultancy firm; also referred to as “implemented consulting”.

Outsourcing

A practice of a firm hiring third-party labor to replace services previously performed in-house.

Outstanding Capital Commitment

Outstanding capital commitment also known as Unfunded Commitment, uncalled capital or remaining capital commitment represents the total unexpired capital commitment less the total capital commitment drawn plus any unexpired Recallable Capital since inception, in accordance with the Vehicle Documentation. 

Outstanding Portfolio Balance

The outstanding portfolio balance is the total outstanding loan value of the entity’s portfolio at the end of the reporting period. Unpaid principal balance (UPB) is a metric used in GRESB data analysis to identify the size of the reported portfolio.

Outstanding Principal Balance

Outstanding principal balance refers to the aggregate outstanding principal amounts attributable to the loan under the Facility Agreement.

Outstanding Redemption Requests

The total value of investor redemption request that remain unfulfilled, including cancelled redemptions, as of the reporting date.

Over the Counter (OTC)

Refers to the trading of securities and derivatives by counterparties directly rather than through a recognised exchange.

Overage Rent

The additional rent (over a base amount) that is paid by tenants to owners on tenant sales over a specified dollar amount;  frequently found in retail leases; also known as “percentage rent”.

Override Fee

A commission fee paid to a broker as additional compensation.

Overstored Trading Area

A geographic area with so many stores selling a specific good or service that some retailers will be unable to earn an adequate profit.

Paid in capital

The cumulative drawdown amount or the aggregate amount of committed capital actually transferred to a fund or property.

Paid in Capital Multiple

This ratio gives information regarding how much of the total commitments have been drawn down.

Paid in capital to committed capital multiple

See paid in capital multiple

Par Value

The face value of an item of intangible property that has both a stated face value and a fluctuating market value; applied especially to corporate stocks.

Parallel Vehicle

A separate investment vehicle that enables one or more individuals or entities to pool and invest capital together alongside other investors in another vehicle, or pool of assets, with the ability to control their exposure to the underlying portfolio.

Pari-Passu

A Latin phrase meaning "equal footing" that describes situations where two or more assets, securities, creditors, or obligations are equally managed without preference.

Parking Index

The ratio of the number of parking bays occupied in a time duration to the total space available; gives an aggregate measure of how effectively parking space is utilized.

Parking Ratio

The total rentable square footage of a property divided by the number of parking spaces; typically expressed as a ratio of spaces per 1,000 square feet.

Partial Period (for TWR purposes)

If an asset is acquired on a date other than the first day of a quarter, or sold on a date other than the last, the resulting measurement is said to be a "partial period" because the asset does not have a full quarter's worth of activity during that period. Different methodologies are used to treat partial periods within the TWR calculation.

Participated Loan

A loan arranged by a group of lenders, but unlike a syndicated loan, each lender does not have a direct contractual relationship with the Borrower and typically, there is no lead bank/manager.

Participating mortgage

an investment secured by a lien on real estate that generally consists of three parts: (1) "based interest" payments at contractually stated fixed or floating rates; (2) "contingent interest" payment where the lender is paid a percentage of property net operating income or cash flow after debt service and (3) "additional contingent interest" which is in the form of lender participation in the appreciation in value of the underlying property.

Partnership

A legal entity or formal arrangement between two or more partners to manage and operate a business, governed by a partnership agreement. The partners have direct rights to a share of the assets and the profits of the partnership. An example of a partnership is a Limited Partnership.

Party-in-Interest

Any fiduciary, legal counsel, employee of an employer-sponsored benefit plan, or service provider to the plan.

Party-in-Interest Transaction

An otherwise legitimate transaction that is prohibited under the Employee Retirement Income Security Act (ERISA).

Pass-Through Entity

A special business structure that is used to reduce the effects of double taxation.

Payment in Kind (PIK) interest/ Accrued Interest

Payment in Kind (PIK) interest accrues and capitalises periodically over the life of the debt instrument, thus increasing the underlying principal (i.e. compound interest). This is typical of development loans where there is no income at the asset. 

Pension Real Estate Association (PREA)

PREA is a non-profit organization whose members are engaged in the investment of tax-exempt pension and endowment funds into real estate assets. PREA's mission is to serve its members engaged in institutional real estate investments through the sponsorship of objective forums for education, research initiatives, membership interaction, and the exchange of information. PREA is co-sponsor of the Reporting Standards. See www.prea.org.

Percentage In Point (PIP)

A unit of change in an exchange rate of a currency pair; also known as “price interest point”.

Percentage of total capital commitments invested

Total capital commitment drawn / Total capital commitments (by all investors). This expresses the amount of the capital commitment to the vehicle that is currently invested (allowing for reinvested returned capital) as a percentage of the total vehicle size in terms of total commitments.

Percentage Rent

A percentage of the tenant's total annual sales paid as rent. Percentage rent is normally paid after a predetermined sales level has been achieved. The percentage factor is then applied to all sales over the preset level (breakpoint).

Performance Allocation

A form of incentive fee compensation paid to a fund general partner in the form of an allocation of the profits of the fund, typically calculated as a set percentage of the profits of the fund after returning the investors’ capital contributions and a preferred rate of return; designed to ensure that a general partner’s interest is aligned with the limited partners’ interests; also known as “carried interest,” “carry,” and “promote”.

Performance Attribution

Analysis of the performance of an investment against its benchmark. It quantifies and explains the returns of a portfolio when compared to its appropriate benchmark. It facilitates understanding of what decisions or events lead to the performance.

Performance Bond

A type of surety bond that guarantees the contract will be completed according to its terms and conditions of the contract.

Performance fee

Also known as incentive fees, promote or carried interest, are fees charged by investment advisors, or managers, after a predetermined investment performance has been attained. Carried interest represents a re-allocation of equity and should be treated accordingly for accounting, tax or regulatory purposes.

Permitted Payment

Payments permitted as outlined in the loan documentation (e.g. amortisation, or repayments from sales in a portfolio) under the payment waterfall. These payments should be considered on a transaction by transaction basis.

Personal Property

Consists of every kind of property that is not real property; movable without damage to itself or the real estate; subdivided into “tangible personal property” and “intangible personal property”.

Persons

The average number of persons used as a denominator of a building energy intensity indicator. For example: visits to shopping centres, workstations in offices, workers in industrial, residents in multifamily housing, guests in hotels.

Phase I Environmental Site Assessment (ESA)

A study of a property and its surrounding area to determine whether there are any hazards to the environment and human health; if issues are found, it presents a potential liability for the lender and/or owner, as well as affecting the value of the property; completed prior to the closure of a real estate transaction and can be used to satisfy the requirements of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) innocent land owner defense under the All Appropriate Inquiries (AAI) rule.

Phase II Environmental Site Assessment (ESA)

A study of a property and its surrounding area to determine whether there are any hazards to the environment and human health triggered when a Phase I Environmental Site Assessment (ESA) identifies a Recognized Environmental Condition (REC) or the potential for soil contamination; determines the presence, or absence of, petroleum products or hazardous waste in the subsurface of a site and includes sampling and laboratory analysis to confirm the presence of hazardous materials.

Phase III Environmental Site Assessment (ESA)

A study of a property and its surrounding area to determine whether there are any hazards to the environment and human health triggered by the confirmation of environmental contaminants discovered during a Phase II Environmental Site Assessment (ESA); determines the extent of environmental contaminants and the amount of soil and groundwater impacted; allow parties involved to develop a Remedial Action Plan (RAP) to remove environmental contaminants from the property.

Physical Obsolescence

The reduction in a property’s value due to gross mismanagement and physical neglect resulting in deferred maintenance; however, physical deterioration in itself is not a form of obsolescence that is too costly to repair.

Physical Risk

The physical, locational and integrated systems risks associated with the impact of climate change on real assets and investments. It can be event driven (acute; e.g. natural hazards, cyclones, hurricanes, or floods), or longer-term shifts in climate patterns (chronic; e.g. sea level rise or chronic heat waves). Physical risks may have financial implications for organisations, such as direct damage to assets and indirect impacts due to extreme temperature changes (e.g. increased demand of heating and/or cooling). (In line with TCFD Definition) 

Placement Agent

An intermediary who raises capital for investment funds; professional placement agents are required to be registered with the securities regulatory agency in their jurisdiction, such as (in the US) the Securities and Exchange Commission (SEC).

Placement agent costs

Costs incurred when sponsors of real estate funds retain placement agents in connection with the sale of limited partnership interests in the fund. It is calculated based on investor commitments sourced by the placement agent multiplied by the placement fee rate. Placement costs are usually born by the vehicle; however it is possible that investors negotiate an offset against management fee of 100% of any placement agent cost paid by the vehicle.

Planned Liquidation Date

The specific date, as defined in the Vehicle’s Documentation, on which the Vehicle is expected to be liquidated and all residual equity returned to the investors.

Pooled Fund

See “Commingled Fund”  

Pooled Trusts

A multi-investor investment Vehicle which is legally structured as a trust.

Portfolio Deal

A single transaction involving the sale of multiple buildings or companies.

Portfolio Interest Service Coverage Ratio

Projected NOI over the following four quarters as a ratio of projected interest payments on bank (not shareholder) loans over the same period. This is a portfolio metric which may not reflect precisely the varying stipulations of each loan facility of the vehicle but aims to give an indication of the vehicle’s general ability to service its debt. For the avoidance of doubt, the ISCR is calculated without reference to cash in bank.

Positive Leverage

The cost of borrowed funds is less than the free and clear internal rate of return (IRR) on the property.

Potential Gross Income (PGI)

The sum of potential gross rent and miscellaneous income; the income from rent and other sources that a property could generate with normal management, before allowing for vacancies, collection losses, and normal operating expenses.

Potential Gross Rent

The total rent a property would produce if 100 percent occupied at market rent.

Power Center

Typically 250,000 to 600,000 square feet with three or more anchor stores that occupy 75-90% of the total area. Anchor stores are "category-dominant" home improvement stores, discount department stores, warehouse clubs, and off price stores.

Predevelopment

Predevelopment is the initial stage of development. It generally includes activities pertaining to the preparation of a site or land parcel and infrastructure in anticipation of the development construction for specific usage including, but not limited to, acquisition of title or options to land, assessment of its surroundings, initial conceptual designs of the intended building, preparation for obtaining building rights and/or application for relevant governmental permits, resulting in the contractual development.

Preferred Debt/Loan/Mortgage

A financial obligation that has priority over other types of debt.

Preferred Return

A profit distribution preference whereby profits, either from operations, sale, or refinance, are distributed to one class of equity before another until a certain rate of return on the initial investment is reached.

Prepayment

When a loan is repaid or partially repaid prior to its maturity date. 

Prepayment Fees

A penalty fee which may be charged if a loan is repaid or partially repaid prior to maturity (Prepayment), designed to protect the lender against loss of income should a loan be repaid quickly. The amount or calculation will be specified in the loan agreement. The penalty is usually based on a percentage of the repaid part of the loan. 

Prepayment Penalty

Fees paid by borrowers for the privilege of retiring a loan early. Such charge is provided for in the debt instrument and normally is expressed as a percentage of the loan, an additional interest charge, or a flat fee.

Price Interest Point (PIP)

A unit of change in an exchange rate of a currency pair; also known as “percentage in point”.  

Pricing Risk

The risk of a decline in the value of a security or an investment portfolio excluding a downturn in the market.

Primary Trade Area

A geographic area containing the customers of a particular firm or group of firms for specific goods or services; encompasses 50 to 80 percent of a store's customers; the area closest to the store and possesses the highest density of customers to population and the highest per capita sales; also known as a “geographic core”.

Prime Space

Typically refers to first-generation space that is available for lease.

Prime Tenant

The major tenant in a building, or the major or anchor tenant in a shopping center.

Principal Market

The market in which the reporting entity normally would enter into a transaction to sell the asset or to transfer the liability; the market in which the reporting entity normally exits its leveraged equity positions.

Private Placement

A private placement is the placing of institutional debt with a non-bank investor, typically an insurance company or pension fund. This provides the ability of non-bank lenders to grant long-term debt finance which may not otherwise be available in the loan or bond markets.

Private Placement Memorandum (PPM)

Private Place Memorandum (“PPM”) – A document that outlines the terms of the real estate investment vehicle to be offered in private placements. The document resembles a business plan in content and structure which includes but is not limited to a formal description of the investment opportunity, fees, capital structure, historical track record of the investment advisor, risk factors and a summary of the management team.  Note that specific contents may be dictated by local jurisdictions.

Professional services costs

Costs charged at vehicle level in connection with third party services such as accounting, secretarial, legal, tax and other advisory costs, which do not fall into another specific cost category such as formation costs, valuation costs, etc.

Profit

Total income minus total expenses.  

Programmatic Joint Venture

A legal entity to create a series of investments between two investors.  It creates the infrastructure under which the investors can continue to invest without having to negotiate and vet different investors for each investment.  

Prohibited Transaction

A certain transaction between a retirement plan and a disqualified person that is prohibited by law; two general types of transactions are prohibited: transactions with parties in interest and fiduciary self-dealing transactions; certain exemptions apply and can be statutory or granted by the US Department of Labor either on a class or individual basis.

Prohibited Transaction Safe Harbor

Under Internal Revenue Code (IRC) Section 857(b)(6)(C) safe harbor provides that the term “prohibited transaction” does not include a sale of property that is a real estate asset if certain requirements are met.

Project management costs

Costs charged by third parties for guiding the design, approval, and execution of a renovation project, as well as construction process of a development project. These costs may be expensed or capitalised at the property level.

Project management fee (excl. development activities)

A fee charged to the vehicle by the investment manager for oversight of a significant renovation project or large maintenance works.

Promote

A form of incentive fee compensation paid to a fund general partner in the form of an allocation of the profits of the fund, typically calculated as a set percentage of the profits of the fund after returning the investors’ capital contributions and a preferred rate of return; designed to ensure that a general partner’s interest is aligned with the limited partners’ interests; also known as “carried interest,” “carry,” and “performance allocation”.

Property

A real estate asset.

Property acquisition costs

Direct costs related to a specific property acquisition such as transfer tax, legal costs, due diligence or other closing costs. These exclude costs of running an acquisition program such as general and administrative costs, costs incurred in analysing proposals that are later on rejected, joint-venture organizational costs or fees paid to the manager for execution of the deal.

Property acquisition fee

Fee charged by investment advisors, or managers, associated with the closing of a new investment. The fee compensates the real estate investment advisor, or manager, for services rendered in an investment acquisition, including sourcing, negotiating and closing the deal.

Property Company

A legal entity, often referenced as PropCo, formed with the sole purpose of owning real estate assets. This is an example of a SPV.

Property Condition Assessment Report

An evaluation of a commercial real estate asset based on a thorough inspection, including all improvements and all the systems of each building on the property; purpose of which is to observe and report on the physical condition of the subject property and to provide professional recommendations regarding future issues including financial risk or liability to the client.

Property Conversion

The process or act of changing a property type to a different property type.

Property disposition costs

Also known as disposal costs, they represent the costs of selling an investment property. Disposition costs are typically charged to the seller, and consist of legal fees, title fees and insurance, disposition fees, and broker commissions. Disposition costs include only direct costs related to a property-specific disposal and do not include costs of running an disposition program such as general and administrative costs, costs incurred in analysing proposals that are rejected, joint-venture organization costs or fees paid to the manager for execution of the deal.

Property disposition fee

Fee typically charged by investment advisors, or managers, for services rendered in an investment disposition, including sales marketing, negotiating and closing of the deal.

Property insurance costs

Expenses related to insurance coverage which is often required by lenders which compensates a property owner and/or lender should the property be damaged by fire, windstorm or other peril.

Property Level Return

A return based upon the property equity which consists of primarily cash invested in a property (at acquisition plus subsequent capitalized expenditures) plus recognized changes in value plus principal payments on debt.

Property Loan to Value (LTV)

Nominal value of debt, or book value, which includes third party facilities or credit lines (and any drawn equity bridge), over total fair value of property/ investment.

Property Management Company

A entity specialised in managing the day-to-day operations of real estate properties for the owners of real estate assets. The entity may be managed directly by the real estate owner or by an asset manager hired by the owner. Services provided can include management, leasing and / or accounting.

Property management costs

Costs charged by third parties for the administration, technical and commercial management of real estate. A property management engagement typically involves the managing of property that is owned by another party or entity. This includes property advisory services.

Property Management Fee

Fee charged by investment advisors, or managers, for the administration, technical and commercial management of real estate. A property management engagement typically involves the managing of property that is owned by another party or entity. This includes property advisory services.

Property Manager

The day-to-day management of individual real estate properties within a portfolio. Typical activities of a property manager include the invoicing and collection of rents and building maintenance. The property management responsibility can be either outsourced or insourced. 

Property Protection Loan

A loan that is made to finance payments which are required to 'protect' either a specific asset (Property) or the Lender's security over that asset. This may include paying insurance policies, for example. 

Property Stacking Plan

A visual representation of a commercial structure that shows the tenants on each floor, the square footage of each floor, when each tenant’s lease will expire, and other pertinent information.

Property-related taxes

Taxes assessed against real property, usually by a country or municipal taxing authority but sometimes also by special purpose districts and agencies, in proportion to the assessed value of the property.  Franchise taxes and excise taxes are already included in the NAV, and thus should be excluded.

Prospective Value

A value opinion effective as of a specified future date; frequently sought in connection with projects that are proposed, under construction, or under conversion to a new use, or those that have not yet achieved sellout or a stabilized level of long-term occupancy.

Prospectus

A formal document submitted to the Securities and Exchange Commission (SEC) by a company that wishes to market a debt or equity offering to the market.

Protecting Americans from Tax Hikes Act of 2015 (PATH Act)

A US tax law created to protect taxpayers against fraud and permanently extend certain expiring tax laws; makes significant changes to provisions of the Internal Revenue Code (IRC) of 1986, as amended with respect to real estate investment trusts and the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA), and permanently extends some provisions that have been the subject of frequent extender legislation in prior years.

Prudent Man Rule

The standard to which a fiduciary is held accountable under the Employee Retirement Income Security Act of 1974 (ERISA):  "Act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man, acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of a like character and with like aims".

Public Market Equivalent (PME)

A collection of performance measures developed to assess private equity funds and to overcome the limitations of the internal rate of return (IRR) and multiple on invested capital measurements.

Public/Private Partnership (PPP)

This type of partnership involves a collaboration between a government entity and a private sector business. This may be to finance, build or operate projects, such as community spaces (buildings or outdoors) or public transport networks

Purchasing Power

The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy.

Purchasing Power Risk

The risk due to a decrease in purchasing power of assets or cash flow due to inflation; also known as “inflation risk”.

Qualified Borrower

A fund vehicle (often a holding company for an investment or a portfolio company) that is a borrower under a subscription-backed credit facility whose obligations are guaranteed by the fund vehicle itself; typically do not provide collateral.

Qualified Business Income

The net amount of qualified items of income, gain, deduction and loss from any qualified trade or business, including income from partnerships, S corporations, sole proprietorships, and certain trusts; generally this includes, but is not limited to, the deductible part of self-employment tax, self-employed health insurance, and deductions for contributions to qualified retirement plans (e.g. SEP, SIMPLE and qualified plan deductions).

Qualified Client or Investor

An investor that meets as least one of the following requirements:  (i) an individual with at least $1 million in assets under management with the advisor immediately after entering into an investment advisory contract with the advisor; (ii) an individual with a net worth of $2.1 million or more, either individually or jointly with a spouse, immediately before entering into an advisory contract, not including the value of their primary residence; (iii) an individual who matches the definition of a qualified purchaser at the time an advisory contract is enacted, including ownership of at least $5 million in investments; (iv) an individual with the position of executive officer, director, trustee, general partner, a person serving in a similar role, or the advisor; and/or (v) an employee of the advisor who is involved in the investment activities, and has been so for at least one year.

Qualified Foreign Pension Fund (QFPF) or Plan (QFPP)

Under Internal Revenue Code (IRC) Section 897(I)(2), any trust, corporation, or other organization or arrangement) that satisfies five separate requirements:  (i) created or organized under the law of a country other than the US, (ii) established (a) by such country (or one or more political subdivisions thereof) to provide retirement or pension benefits to participants or beneficiaries that are current or former employees (including self-employed individuals) or persons designated by such employees, as a result of services rendered by such employees to their employers, or (b) by one or more employers to provide retirement or pension benefits to participants or beneficiaries that are current or former employees (including self-employed individuals) or persons designated by such employees in consideration for services rendered by such employees to such employers, (iii) does not have a single participant or beneficiary with a right to more than five percent of its assets or income, (iv) subject to government regulation and with respect to which annual information about its beneficiaries is provided, or is otherwise available, to the relevant tax authorities in the country in which it is established or operates, and (v) with respect to which, under the laws of the country in which it is established or operates (a) contributions to such eligible fund that would otherwise be subject to tax under such laws are deductible or excluded from the gross income of such entity or arrangement or taxed at a reduced rate, or (b) taxation of any investment income of such eligible fund is deferred or such income is excluded from gross income of such entity or arrangement or is taxed at a reduced rate.

Qualified Organization (QO)

Includes qualified trusts under Internal Revenue Code (IRC) 401, educational organizations described in IRC 170(b)(1)(A)(ii) and their supporting organizations described in IRC 509(a)(3), and organizations described in IRC 501(c)(25).  

Qualified Plan

Any employee benefit plan that is qualified by the Internal Revenue Code (IRC) as a tax-exempt plan; among other requirements, the plan's assets must be placed in trust for the sole benefit of the employees covered by the plan.

Qualified Purchaser

Under Section 2(a)(51) of the Investment Company Act:   (i) any natural person (including any person who holds a joint, community property, or other similar shared ownership interest in an issuer that is excepted under section 3(c)(7) with that person's qualified purchaser spouse) who owns not less than $5,000,000 in investments, as defined by the Securities and Exchange Commission (SEC); (ii) any company that owns not less than $5,000,000 in investments and that is owned directly or indirectly by or for two or more natural persons who are related as siblings or spouse (including former spouses), or direct lineal descendants by birth or adoption, spouses of such persons, the estates of such persons, or foundations, charitable organizations, or trusts established by or for the benefit of such persons; (iii) any trust that is not covered by clause (ii) and that was not formed for the specific purpose of acquiring the securities offered, as to which the trustee or other person authorized to make decisions with respect to the trust, and each settlor or other person who has contributed assets to the trust, is a person described in clause (i), (ii), or (iv); or (iv) any person, acting for its own account or the accounts of other qualified purchasers, who in the aggregate owns and invests on a discretionary basis, not less than $25,000,000 in investments.

Query

A request for data or information from a database, database table or combination of tables.

Racketeer Influenced and Corrupt Organizations Act (RICO)

A US federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization.

Rating Agency

Independent firm engaged to rate the creditworthiness of securities for the benefit of investors.

Real Estate Expense Ratio (REER)

REER represents property fees and costs as a percentage of time weighted average INREV GAV.

Real Estate Investment Trust (REIT)

A company that owns or finances income-producing real estate.  It may or may not be traded in the public markets and must meet a series of requirements regarding cash flow and investments.  

Real Estate Market Cycle

The period between the two latest highs or lows of a common benchmark; refers to trends or patterns that emerge during different business environments; often has four distinct phases (recovery, expansion, hypersupply, and recession) and, at different stages of a full market cycle, real estate assets will respond to market forces differently.

Real Estate Market Cycle Risk

The risk of financial losses due to economic volatility associated the real estate market cycle.

Real Estate Operator

Any individual or combination of individuals, labor unions, joint apprenticeship committees, partnerships, associations, corporations, legal representatives, mutual companies, joint stock companies, trust, unincorporated organizations, trustees in bankruptcy, receivers or other legal or commercial entity, the city or any of its agencies or any owner of real property that is engaged in the business of selling, purchasing, exchanging, renting or leasing real estate, or the improvements thereof, including options, or that derives income, in whole or in part, from the sale, purchase, exchange, rental or lease of real estate.

Real Property Interest

Consists of the interests, benefits, and rights inherent in the ownership of land plus anything permanently attached to the land or legally defined as immovable; the bundle of rights with which ownership of real estate is endowed.

Realised (capital) gain/ loss

The appreciation and depreciation for vehicle assets and liabilities due to a transaction event such as a disposition of assets or a settlement of liabilities.

Realization Multiple

See Cumulative Distribution to paid-in capital (DPI)

Recallable Capital

Also known as recyclable capital, returned capital that can be recalled by the investment manager, in accordance with the Vehicle Documentation. The existence of recallable capital increases investors' remaining capital commitments.

Recognized Environmental Condition (REC)

A term used to identify environmental liability within the context of a Phase I Environmental Site Assessment (ESA); indicates the presence or likely presence of any hazardous substances or petroleum products in, on, or at a property that is (i) due to release to the environment, (ii) under conditions indicative of a release to the environment, or (iii) under conditions that pose a material threat of a future release to the environment.

Reconciliation

With reference to valuation:  the final step in the valuation process wherein consideration is given to the relative strengths and weaknesses of the three approaches to value, the nature of the property appraised, and the quantity and quality of available data in formation of an overall opinion of value (either a single point estimate or a range of value).

Recourse Debt

A legal agreement by which the lender has the legal right to collect pledged collateral in the event that the borrower is unable to satisfy debt obligations. Recourse lending provides protection to lenders, as they are assured to have some sort of repayment - either cash or liquid assets. Traditionally, companies that issue recourse debt have a lower cost of capital, as there is less underlying risk in lending to that firm.  

Recourse Loan

A legal agreement by which the lender has the legal right to collect pledged collateral in the event that the borrower is unable to satisfy debt obligations. Recourse lending provides protection to lenders, as they are assured to have some sort of repayment - either cash or liquid assets. Traditionally, companies that issue recourse debt have a lower cost of capital, as there is less underlying risk in lending to that firm.  

Recoveries

Costs which are paid back to a landlord by a tenant; generally includes property taxes, property insurance, maintenance and repair costs, and other operational expenses; at the end of the year (or the end of the lease), the landlord will reimburse the tenant if actual costs are less than expected costs; alternately, the landlord will bill the tenant any additional expenses that were not covered by their monthly tenant reimbursement bill; also known as “expense reimbursements”.

Recovery Payment Proceeds

Amounts recovered from any claim an Obligor may have against a Vendor to be used in mandatory payment.

Redemption

The partial or full return of an investor’s equity by the Vehicle, at the investor’s request, at a pricing as defined in the Vehicle Documentation.

Redemption fees

One-time fee paid to the manager when investors redeem from the fund, calculated as redemption amount, NAV or NAV per share, multiplied by redemption fee rate. This fee is mostly seen in open-ended funds.  If the amount is paid to the fund, then it is not included in TGER.

Redemption limits (cap)

The partial or maximum amount of an investor’s equity that may be returned from the Vehicle over a predefined time period, at the investor’s request, as defined in the Vehicle Documentation.

Redemption Period

The timeframe after an initial lock-up period during which an investor may withdraw its capital (in whole or in part) from a fund, usually on a quarterly basis; typically applies to hedge funds, core real-estate funds and other open-end fund investment vehicle structures.

Redemption Queue

With reference to a fund:  Form when investor demand for liquidity exceeds both incoming capital from new investors and proceeds available from property dispositions; generally redeemed pro rata to the extent of cash available for redemptions; depending on the severity of liquidity needs, investors can wait for a quarterly redemption or seek liquidity in the secondary market.

Redemption Queuing Mechanism

The order in which outstanding redemption requests/ investor requests to redeem or sell their shares or units in the investment vehicle are prioritised by the Investment Manager in accordance with the  Vehicle Documentation. It establishes a queue or waiting list, ensuring a fair and transparent process for honouring redemption requests, particularly in open-end vehicles.

Redevelopment

The act or process of improving or changing a site with pre-existing conditions or land use type through (partial) demolition of the existing real property or infrastructure and replacing it with new or different construction or land use improvements, such as buildings, roads, or utilities with the purpose of increasing value.

Refurbishment

Renew or restore an existing building to a better technical condition and/or appearance.

Regional Center

A retail property that provides general merchandise (a large percentage of which is apparel) and services in full depth and variety; main attractions are its anchors:  traditional, mass merchant, discount department stores, or fashion specialty stores; usually enclosed with an inward orientation of the stores connected by a common walkway and parking surrounds the outside perimeter.

Regional Mall

Provides a variety of goods comparable to those of a central business district in a small city, including general merchandise, apparel and home furnishings, as well as a variety of services and perhaps recreational facilities. Two or more full-line department stores anchor a total area of 400,000 to 800,000 square feet.

Registered Investment Advisor (RIA)

Any person or firm that gives investment recommendations or advice in return for any form of economic benefit and is registered with the U.S. Securities and Exchange Commission (SEC) or qualifies under SEC rules to be regulated by and required to register with the SEC. For further consideration please visit https://www.sec.gov

Registration Statement

Forms filed with the Securities and Exchange Commission (SEC) (or the appropriate state regulatory agency) in connection with a proposed offering of new securities or the listing of outstanding securities on a national exchange.

Regression Analysis

A particular statistical technique, similar to correlation, used to analyze data in order to predict the value of one variable (the dependent variable), such as market value, from the known values of other variables (the independent variables), such as lot size, number of rooms, and so on; if only one independent variable is used, the procedure is called simple regression analysis and differs from correlation analysis only in that correlation measures the strength of relationship, whereas regression predicts the value of one variable from the value of the other; when two or more variables are used, the procedure is called multiple regression analysis.

Regression Line

A straight line that describes how a response variable y (the dependent variable) changes as an explanatory variable x (the independent variable) changes; often used to predict the value of y for a given value of x.

Regulation A+ Offering (Reg A+)

An exemption from registration requirements—instituted by the Securities Act—that applies to public offerings of securities that do not exceed $50 million in any one-year period; companies utilizing the exemption must still file offering statements with the Securities and Exchange Commission (SEC); however, the companies utilizing the exemption are given distinct advantages over companies that must fully register.

Regulation D Offering (Reg D)

A Securities and Exchange Commission (SEC) regulation governing private placement exemptions that allows companies to raise capital through the sale of equity or debt securities without having to register their securities with the SEC.

Regulatory / Statutory costs

See definition other/misc. vehicle costs.

Reilly’s Law of Retail Gravitation

An approach to estimating the retail trade area (and sales/revenue potential) for a given establishment or center which holds that trade centers draw consumers from neighboring communities in proportion to the trade areas’ populations and in inverse proportion to the distances between the communities and the trade areas; in analogy with Isaac Newton's law of gravitation, the point of indifference is the point at which the "attractiveness" of two retail centers (postulated to be proportional to their size and inversely proportional to the square of the distance to them) is equal; utilized as the traditional means of trading-area delineation that establishes a point of indifference between two cities or communities, so the trading area of each can be determined;  heuristic developed by William J. Reilly in 1931.

Reimbursement Income

Any payment made by tenants to reimburse the landlord for expenses.

Related parties

Parties are considered to be related if one party has the ability to control the other party or to exercise significant influence or joint control over the other party in making financial and operating decisions. (source: IAS 24).

Related Party Transaction

A transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged.

Relative Return

The return achieved by an asset over a specific time period contrasted to a benchmark; computed as the difference between the absolute return reached by the asset and the return reached by the benchmark.

Remaining capital commitment

See definition of Outstanding capital commitment. 

Remedial Action Plan

A detailed summary of the environmental issues found on a property during a site characterization and outlines a plan of action that illustrates which remedies will be used to achieve cleanup goals.

Renewable energy

Energy sources and specific clean energy technologies that emit fewer GHG emissions relative to other sources of energy that supply the electric grid. Includes solar photovoltaic panels, solar thermal energy, geothermal energy, landfill gas, low-impact hydropower and wind turbines.

Renewal Option

A clause giving a tenant the right to extend the term of a lease.

Renovation

The process of improving, remodeling and/or rehabilitating a real estate asset in order to enhance its intended function, extend the period of usage and increase value and/or related cash flows. Sometimes referred to as “refurbishment”.

Rent (Rental) Growth

The expected trend in market rental rates over the period of analysis, expressed as an annual percentage increase.

Rent 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.

Rent Growth

The expected trend in market rental rates over the period of projection, expressed as an annual percentage increase.

Rent-Up Period

The period following construction of a new building when tenants are actively being sought and the project is approaching its stabilized occupancy.

Rentable Area

A tenant’s pro rata share of the entire building, excluding elements of a building that penetrate through the floor to areas below, such as stairs and elevators; measurement varies with locality.

Rented Area

The amount of space under lease in a building.

Repayment

Any payment made against an outstanding loan, either in accordance with the terms of the loan documentation or an unscheduled Prepayment.

Replacement Costs

Expenditures that provides for the periodic restoration of building components that wear out more rapidly than the building itself and must be replaced during the building's economic life.

Reporting standards - handbook volume I and II

Reporting standards to promote transparent, consistent and meaningful performance, risk, accounting and valuation reporting for use of the institutional real estate investment community. The Reporting Standards are mainly used in the US and are co-sponsored by NCREIF and PREA. See www.reportingstandards.info.

Repositioning

Changing the use of the building through a combination of renovations, improvements and use in order to change its market positioning, typically to add value to the property.

Required standard

Those elements which must be followed, where applicable, in order for an Account Report to be deemed compliant with the Reporting Standards.

Research and Development (industrial)

One- and two-story buildings with 10-15 foot ceiling heights with up to 50% office/dry lab space (remainder in wet lab, workshop, storage, and other support), with dock height and floor height loading.

Reserve

An amount of money held to be used for later known or unknown expenditures.  It may be held in an account controlled by the operating partner or a lender.  

Residential Mortgage-Backed Securities (RMBS)

An issued security which is backed by a portfolio of mortgages secured against residential properties.

Residual Capitalization (Cap) Rate

The estimated or actual cap rate used to estimate the resale value of a property at the end of the holding period; calculated by dividing the expected net operating income (NOI) by the expected sale price and expressed as a percentage; also known as the “exit cap rate” or “terminal cap rate”.

Residual multiple

A measure of how much a return is unrealized. As the fund matures, the residual multiple will increase to a peak and then decrease as the fund eventually liquidates to a residual fair value of zero. At that point, the entire return of the fund has been distributed.

Residual Risk

The risk inherent to a particular investment or portfolio of investments that can be mitigated or reduced through diversification; also known as “diversifiable risk,” “idiosyncratic risk,” “specific risk,” or “unsystematic risk”.

Residual value

The remaining equity in a fund or property.

Residual value to paid-in capital multiple (RVPI)

See residual multiple

Resolution Trust Corporation (RTC)

A temporary federal agency established to act as a receiver for insolvent federal savings and loan associations and to transfer or liquidate those associations' assets; created by Congress in the wake of the 1980s savings and loan crisis, in which hundreds of depository institutions slipped into insolvency due to unsound banking practices; established in August 1989, when the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) was signed into law; under its mandate, placed closed failed financial institutions placed in conservatorship by selling or merging troubled thrifts and folding their assets back into the Federal Deposit Insurance Corporation (FDIC); shuttered a total of 747 failed financial institutions, with total assets of $394 billion.

Restrictions on transfer

The conditions outlined by a manager on the transfer of stakes in a vehicle between parties. Revaluation to fair value of derivative financial instruments held for hedging. The adjustment represents the impact on NAV of the recognition of derivative financial instruments measured at fair value. If a vehicle does not revalue, this should be clearly indicated.

Retail Investor

Any individual who purchases and sells securities for his or her own investment portfolio; may need to meet a certain level of accreditation to participate in some investments, such as private equity, hedge funds, and certain private placements.

Retrofit

The addition of new technology or features to older systems in order that a property be in compliance with updated government ordinances, codes and/or environmental and energy conservation practices.

Return of capital

The Distributions paid to an investor until they receive all of their Capital contributions, in accordance with the Vehicle documentation. 

Return on Capital (ROC)

The profit on an investment in relation to how much was invested; a ratio used in accounting, finance and valuation that shows how effective a company has been at turning capital into profits; also known as “return on invested capital” or “return on total capital”.

Return on Invested Capital (ROIC)

The profit on an investment in relation to how much was invested; a ratio used in accounting, finance and valuation that shows how effective a company has been at turning capital into profits; also known as “return on capital” or “return on total capital”.

Return on Total Capital (ROTC)

The profit on an investment in relation to how much was invested; a ratio used in accounting, finance and valuation that shows how effective a company has been at turning capital into profits; also known as “return on capital” or “return on invested capital”.

Reversionary income

The estimated increase in rent at next renewal/ review based on ERV.

Reversionary yield

The estimated rental value as a percentage of gross property value.

Reward-to-Risk Ratio

A metric that divides a measure of portfolio holding-period return by a measure of portfolio risk; the higher the value, the more return an investment portfolio has generated per unit of risk.

Right of First Offer (ROFO)

A contractual right that permit the purchase of property, or the lease of space, upon the occurrence of certain events, often referred to as trigger events; commonly triggered when a property owner elects to make his or her property available for purchase or lease; the property owner must first offer to sell or lease (as applicable) the subject property to the holder of the ROFO on terms and conditions that are determined by the owner; if the holder of the ROFO does not timely exercise its right to purchase or lease the property, the property owner may proceed to offer the subject property for sale or lease to third parties.

Right of First Refusal (ROFR)

A contractual right that permit the purchase of property, or the lease of space, upon the occurrence of certain events, often referred to as trigger events; commonly triggered when a property owner receives an acceptable offer to lease or purchase from a third party; prior to accepting the third party offer, the property owner must allow the holder of the ROFR to either lease or purchase (as applicable) the subject property either upon the same terms and conditions contained in the third party offer or upon terms otherwise specified in the parties’ ROFR agreement; the owner may only proceed with selling or leasing the property to the third party if the holder of the ROFR does not timely exercise its right to purchase or lease the property.

Risk Factor

Any attribute or characteristic that increases the likelihood of negatively affecting an investment and/or portfolio.

Risk Parity

A portfolio allocation strategy using risk to determine allocations across various components of an investment portfolio; follows the modern portfolio theory (MPT) approach to investing; typically requires quantitative methodology that makes allocations more advanced than simplified allocation strategies.

Risk Preferences

The behavioral approach and tolerance investors hold toward the inherent risk of investments.

Risk-Adjusted Discount Rate

The rate based on the risk-free rate and a risk premium used in the calculation of the present value of a risky investment.

Risk-Adjusted Return

The return of an investment relative to the amount of risk the investment has incurred over a given period of time.

Risk-Free Rate

The rate of return of an investment with no risk of loss; in practice, it does not exist as even the safest investment carries a very small amount of risk; for US investors, the interest rate on a three-month US Treasury bill or other longer-term US Treasury bonds are often used as a representation of the risk-free rate.

ROI (Return on Investment)

Financial benefits flowing from an investment, typically expressed as an annual percentage of the amount invested.

Rollover

With reference to debt:  the paying off of existing debt, usually debt about to mature, through the issuance of new debt; With reference to an investment:  the rolling over of an investment, such as a certificate of deposit at maturity, to another investment.

Rollover Risk

The risk that a tenant's lease will not be renewed.

Royal Institution of Chartered Surveyors (RICS)

A professional, representative and independent body that establishes and enforces standards for the valuation, operation, and development of assorted types of property; accredits professionals involved in the valuation, management, and development of land, real estate, construction, and/or infrastructure worldwide.

Rule 144A

Introduced in 2012, reduces the amount of time a qualified institutional buyer must hold privately placed securities from two years to six months for a company that reports to the Securities and Exchange Commission (SEC) or a year for a company that does not; the introduction of this rule has substantially enhanced liquidity in the market for private placement securities; the modification was introduced to acknowledge that sophisticated institutional buyers do not need the same protections an individual investor requires on the open market.

Safe Harbor

A legal provision to reduce or eliminate legal or regulatory liability in certain situations as long as certain conditions are met (see also “prohibited transactions safe harbor”).

Sale-Leaseback

An arrangement by which the owner-occupant of a property agrees to sell all or part of the property to an investor, then lease it back and continue to occupy space as a tenant.

Sales Comparison Approach (SCA)

One of three approaches to valuation; estimates a property’s value (or some other characteristic, such as its depreciation) by reference to comparable sales; also known as the “market approach”.

Sales Risk

The risk of a decline in revenue due to sales failure.

Saturated Trading Area

A geographic area with the proper amount of retail facilities to satisfy the needs of its population for a specific good or service, as well as to enable retailers to prosper.

Savings and Loan Association (S&L)

A type of financial institution that was originally created to accept savings from private investors and to provide home mortgage services for the public; typically private businesses, mutually owned by their customers that relied on a share-accumulation model whereby members committed to buying shares in the association and subsequently had the right to borrow against the value of those shares in order to purchase a home; as a result of deregulation in the late 20th century, they began to enter the business of commercial lending, trust services, nonmortgage consumer lending, and large-scale speculation, particularly in real estate.

Scenario Analysis

The process of estimating the expected value of a portfolio after a given period of time, assuming specific changes in the values of the portfolio's securities or key factors take place, such as a change in the interest rate; commonly used to estimate changes to a portfolio's value in response to an unfavorable event and may be used to examine a theoretical worst-case scenario; can be used to examine the amount of risk present within a given investment as related to a variety of potential events, ranging from highly probable to highly improbable; output of analysis is only as good as the inputs and assumptions made by the analyst.

Second Generation Space

Previously occupied space that becomes available for lease, either directly from the landlord or as sublease space; also known as “secondary space”.

Second Mortgage

A mortgage claim ranking subordinate to the senior mortgage, secured over the real estate asset.

Secondary Space

Previously occupied space that becomes available for lease, either directly from the landlord or as sublease space; also known as “second generation space”.

Secondary Trade

A transaction whereby an existing investor transfers units or shares in a Vehicle directly to another investor (either a new investor, or one already invested in the Vehicle), based on pricing and terms agreed between the two parties, without the occurrence of new share/unit issue or redemption by the Vehicle itself.

Secondary Trade Area

A geographic area containing the customers of a particular firm or group of firms for specific goods or services; encompasses an additional 15 to 25 percent of a store's customers; located outside the primary trade area (or geographic core) with customers more widely dispersed.

Section 892 Exemption

Exempts from US income taxation certain qualified investments, including income from investments in financial instruments, derived by a foreign government.

Secured Overnight Financing Rate (SOFR)

A broad measure of the cost of borrowing cash overnight collateralized by Treasury securities; utilized to price US dollar-denominated derivatives and loans.

Securities Act of 1933

A US federal law designed to protect investors after the stock market crash of 1929; requires that investors receive financial and other significant information concerning securities being offered for public sale and prohibits deceit, misrepresentations, and other fraud in the sale of securities; also known as the “truth in securities law”.

Securities and Exchange Commission (SEC)

An independent federal government agency responsible for protecting investors, maintaining fair and orderly functioning of the securities markets, and facilitating capital formation; empowered under the Securities Exchange Act (SEA) of 1934 to register, regulate, and oversee brokerage firms, transfer agents, and clearing agencies as well as US securities self-regulatory organizations (SROs); generally, issues of securities offered in interstate commerce must be registered with the SEC before they can be sold to investors; financial services firms—such as broker-dealers, advisory firms and asset managers, as well as their professional representatives—must also register with the SEC to conduct business.

Securities Exchange Act (SEA) of 1934

A US federal law that governs securities transactions on the secondary market, after issue, ensuring greater financial transparency and accuracy and less fraud or manipulation; authorized the formation of the Securities and Exchange Commission (SEC) and empowers the SEC with broad authority over all aspects of the securities industry.

Securities handling charges

Handling fees charged by third-parties on certain real estate security transactions.

Securitization

The process of converting an illiquid asset, such as a mortgage loan, into a tradable form, such as mortgage-backed securities.

Securitized Loan

A loan or portfolio of loans which are pooled and re-structured by way of risk apportionment, to provide collateral for issuance of securities.

Security

Assets pledged by the borrower or another party (as collateral against) amounts lent by the lender to the borrower. Following the occurrence of certain default events, the lender can use the secured assets towards recovering the amounts owed to it. Different from financial securities (stock, bonds, etc.).

Security Agent

The financial institution that empowered under the faciility agreement to take action on behalf of the lender to enforce Security in case of an event of default. Useful in loan agreements where there are, or will be, more than one lender.

Security Market Line (SML)

A graphical representation of the capital asset pricing model (CAPM); the SML is a linear depiction of the CAPM drawn on an axis chart, where the x-axis represents risk in terms of beta and the y-axis represents expected return.

Seed Asset

The initial investment in a portfolio or commingled fund.

Segregated Account

See definition Single Account

Selection (in Attribution)

With reference to attribution:  the value the portfolio manager adds by holding individual securities or instruments within the sector in different-than-benchmark weights.

Self-Storage (facility)

Self-storage units. Single and multi-story, basic or climate-controlled.

Senior Debt/Loan/Mortgage

A debt financing obligation issued to a company or an individual by a bank or similar financial institution that holds legal claim to the borrower's assets above all other debt obligations; in the event of a bankruptcy it will be the first loan to be repaid before any other creditors, preferred stockholders, or common stockholders receive repayment; usually secured via a lien against the assets of the borrower.

Senior Living (facility)

Specialized housing designed specifically to accommodate the needs of senior citizens, but whose function is not primarily healthcare. Note: Senior Living facilities without medical care should be classified in the Apartments (A) property type.

Senior Loan

First ranking portion of a real estate loan. A loan that ranks higher (in terms of repayment and enforcement of security) than other loans to the same Borrower or borrower group.

Sensitivity Analysis

The examination of how different values of an independent variable impact a particular dependent variable under a given set of assumptions; also known as “what-if analysis”.

Separate Accounts

A segregated investment account set up by a life insurance company which, through subaccounts, invests in the underlying mutual funds offered through a variable annuity or variable life insurance contract. The Separate Account assets are maintained separately from the insurance company's general account so they cannot be used to pay claims associated with any other business of the insurance company. Separate Accounts are regulated by state insurance departments and may or may not be registered with the Securities and Exchange Commission.

Set-up costs

See Vehicle formation costs

SFAS

A FASB Statement of Financial Accounting Standard.

Sharpe Ratio

The average return earned in excess of the risk-free rate per unit of volatility or total risk; generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.

Shopping Center

A group of retail and other commercial establishments that is planned, developed, owned, and managed as a single property; on-site parking provided; size and orientation generally determined by the market characteristics of the trade area served by the center; the two main configurations are malls and open-air strip centers.

Side Letter

An agreement entered into between a vehicle and an investor, and/or, a manager and an investor that amends or supplements the investor's rights and obligations in connection with its investment in a vehicle, in accordance with the vehicle documentation.

Sidecar Fund or Investment

An investment vehicle used in a fund structure to provide for co-investment opportunities by one or more investors in the fund, which investments are generally made alongside investments by the main fund.

Signage

Any visual representation which gives information about a business and its products and used to communicate a message to a specific group, usually for the purpose of marketing.

Single Account

Customized real estate investment accounts funded by one qualified investor. The manager makes investments from the account to meet the strategic and other portfolio management needs of the institutional investor. In certain jurisdictions, it can also be known as separate, segregated or single client account or mandate. The account's investment mandate can be of discretionary or non-discretionary nature.

Single Asset Deal

A transaction involving the sale of a single asset or building; transactions involving assets consisting of multiple buildings in one location also included.

Single Client Account

See definition Single Account.

Single Real Estate Operating Company (REOC) Fund

A fund offered by a fully or partially vertically integrated real estate operating company; the fund does not enter into joint ventures with third party operators, because the REOC sponsoring the fund is the operator of the assets.

Site Analysis

Determines the suitability of a specific parcel of land for a specific use.

Site Development

The installation of all necessary improvements made to a site before a building or project can be constructed on the site.

Site Plan

A detailed plan that depicts the location of improvements on a parcel.

Social Impact

The European Commission defines 'social impact' as the reflection of  social outcomes as measurements, both long-term and short-term, adjusted for the effects achieved by others, for effects that would have happened anyway (dead-weight), for negative consequences (displacement), and for effects declining over time (drop-off). (see http://www.europarl.europa.eu)

Social Investing

Investments driven in whole or in part by social or political (non-real estate) objectives.

Social Responsibility

A theory that argues that businesses are obligated to function in a manner that benefits the broader society, whether that be a local community, region or country.

Solver Function (Excel)

A Microsoft Excel add-in program used for sensitivity analysis; the solver function finds an optimal (maximum or minimum) value for a formula in one cell, called the objective cell, subject to constraints, or limits, on the values of other formula cells in an Excel worksheet.

Sophisticated Investor

An investor with special status under financial regulations and satisfying one or more requirements regarding income, net worth, asset size, governance status and/or professional experience; also known as a “accreditor investor”.

Sovereign Wealth Fund (SWF)

A state-owned investment fund or entity which comprises of pools of money derived from a country's reserves; reserves are funds set aside for investment to benefit the country's economy and its citizens; funding comes from central bank reserves which accumulate because of budget and trade surpluses, official foreign currency operations, money from privatizations, governmental transfer payments and revenue generated from the exporting of natural resources.

Space Absorption

The amount of inventory or units of a specific commercial property type that become occupied during a specified time period (usually a year) in a given market, typically reported as the “absorption rate”.

Space Market

The mechanism for the voluntary trading of the rights to use land and buildings; demand for space is created by those who are willing to pay for the use of space and supply for space is provided by those willing to sell the rights that they own to the users.

Space Plan

A graphic representation of a tenant's space requirements, showing wall and door locations, room sizes, and sometimes furniture layouts.

Special Limited Partner

An Investor in a fund that is an affiliate of the fund’s sponsor; generally used to receive promote or other carried interest distributions and typically has no capital commitment to the fund and limited obligations under the fund’s constituent documents.

Special Purpose Vehicle (SPV)

A separate legal entity created for a specific purpose within an investment structure, most often to acquire and/or finance specific assets as a method for isolating financial risk. An example of a SPV is a Property Company or Financing Company.

Specialist Consultant or Consulting Firm

One or more experts that provide professional advice and recommendations across a specific asset class, such as real estate, to an individual or an organization for a fee.

Specific Risk

The risk inherent to a particular investment or portfolio of investments that can be mitigated or reduced through diversification; also known as “diversifiable risk,” “idiosyncratic risk,” “residual risk, ” or “unsystematic risk”.

Specified Asset or Investment

A pre-defined asset for investment.

Specified Investing

Investment in individually specified properties or portfolios, or investment in commingled funds whose real estate assets are fully or partially specified prior to the commitment of investor capital.

Speculative Space

Any tenant space that has not been leased before the start of construction on a new building.

Spens Clause

A clause that allows the borrower under a facility agreement to make an early principal repayment with the provision of a specific early repayment penalty.

Sponsor

The entity that provides equity to a Borrowerin a real estate finance transaction. The sponsor can also be the investment manager.

Stabilisation

Stabilisation is a relative term and it is dependent on the condition to which it relates. When using this term, it is therefore important to specify the context (e.g. development, leasing/market conditions, a single property vs. entire portfolio, etc.), as this term carries a broad range of implications.  For example, the conditional criteria can be applied individually or collectively to determine the stability status of construction, operations, occupancy level, net income generation, or financing arrangements.

Staff costs

Costs incurred by the owner of an investment property for the staff required to manage the property.  Staff costs may be covered by the property management fees.  Staff costs required to run the day-to-day management and operations of a property may include payroll for the property manager, assistant property manager, and property engineer. It may happen that some vehicles have hired employees. Related staff costs should be allocated based on the activity of the employees.

Standalone Sustainable Lending Policy

Policy or guidance document that outlines real estate lending criteria and includes sustainability-related metrics/factors.

Standard Deviation (σ)

A measure of the dispersion of a data set from its mean, calculated as the square root of variance by determining the variation between each data point relative to the mean.

Standing investment

Operational real estate assets that are completed and lettable and not in the course of, or held for, development.

Start of Investment Period

The beginning of the period during which the vehicle can acquire assets.

Stated Rent

The rental obligation, expressed in dollars, as specified in a lease; also known as “contract rent” or “face rent”.

Statement of Position (SOP) (accounting)

An AICPA Statement of Positon.

Step in Rights

Rights bestowed under a facility agreement to the lender to step-in and take control of borrower's business transactions with an aim to improve business operations for future adherence to contractual debt obligations.

Step-Up Provision

A clause specifying set increases in rent at set intervals during the term of the lease.

Stepped Rent

A component of a lease agreement that is used to establish future rent increases or decreases at stated intervals during a longer-term lease agreement. Also known as “step rent”, “step-up rent” or “graduated rent”.

Strategic Investment Decisions

Investment decisions made with a focus on long-term planning and implications.

Strategy-Account Vehicle

A description of the mandate that includes the plan for investment allocations, taking into consideration including but not limited to, goals, risk tolerance, leverage limits, holding period, and the investment style.

Strip Center

An attached row of stores or service outlets managed as a coherent retail entity, with on-site parking usually located in front of the stores; open canopies may connect the storefronts, but there are no enclosed walkways linking the stores; may be configured in a straight line, or have an "L" or "U" shape.

Style

Describes the risk profile of the investment strategy adopted by an investment vehicle - there are three commonly used industry terms: core, value-added and opportunistic.

Style Drift

The divergence of a fund from its investment style or objective.

Style-Fund

Part of the investment Strategy, there are three commonly used industry terms to describe Style: Core, Value-added and Opportunistic.

Subadvisor

An investment management firm that typically partners with an investment advisor to help with the day-to-day management of the fund; often provide specialized expertise in a specific type of investment strategy.

Subordinate Debt/Loan/Mortgage

A debt financing obligation issued to a company or an individual by a bank or similar financial institution that is ranked behind that held by secured lenders in terms of the order in which the debt is repaid.

Subordinated Creditor

Any creditor of the Borrower which is a party to a Subordination Agreementin favor of the Lender.

Subordinated Creditor's Security Agreement

An agreement that governs the ranking, or priority of payment of the junior lender and the senior lender in terms of debt waterfall including principal repayment and interest payment and during an event of default leading to enforcement or foreclosure.

Subordinated Loan

Loans subordinate to senior debt, including stretched senior (40%-60% LTV), junior (60%-70% LTV) and mezzanine financing (70%-85%+ LTV).

Subordination

The process of sharing the risk of credit losses disproportionately among two or more classes of securities.

Subordination Agreement

A legal document that establishes one debt as ranking behind another in priority for collecting repayment from a debtor; acknowledges that one party’s claim or interest is superior to that of another party in the event that the borrower's assets must be liquidated to repay the debts.

Subscription Agreement

A legally binding agreement made by an incoming investor with a Vehicle or its representative fixing the amount of the contributions paid, or to be paid, and the terms and conditions for investing in the Vehicle.

Subscription fee

One-time fee paid to the manager when investors subscribe to the fund, calculated as investment amount, NAV or NAV per share multiplied by subscription fee rate. This fee is mostly seen in open-end funds.  If the amount is paid to the vehicle, then it is not included in TGER.

Subscription Period

The time period in which new investors can invest in a fund.  

Subscription queuing mechanism

The order in which outstanding subscription requests/ incoming investment requests from potential investors are prioritised by the Investment Manager in accordance with the  Vehicle Documentation. It establishes a waiting list or queue to allocate shares or units in the vehicle when investor demand exceeds the available capacity, ensuring a fair and transparent investment process, particularly in open-end vehicles.

Subscription secured credit facilities

Revolving lines, drawn upon to make acquisitions and then paid down from capital calls and/or asset-level borrowing.

Subscription-Backed Credit Facility

A loan or line of credit made by a bank or other credit institution to a fund that is secured by (i) the unfunded commitments of the investors to make capital contributions to the fund when called from time to time by the fund or the fund’s general partner, (ii) the rights of the fund or its general partner to make capital calls upon the commitments of the investors and the right to enforce payment of the same and (iii) the account into which investors fund capital contributions in response to a capital call.

Super-Exempt US Investor

A public pension fund claiming an exemption from US federal income tax under US Code Section 115; not subject to unrelated business taxable income (UBTI) under US Code Section 511 because tax-exempt status does not derive from US Code Section 501(c); also generally exempt from annual reporting requirements that apply to exempt organizations.

Super-Regional Mall

Provides an extensive variety of shopping goods comparable to those of the central business district of a major metropolitan area. The anchors are three or more full-line department stores, with total area in excess of 800,000 square feet.

Superfund or Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)

The federal Superfund program, administered by the US Environmental Protection Agency (EPA) is designed to investigate and cleanup sites contaminated with hazardous substances; sites managed under this program are referred to as "Superfund" sites.

Supermajority

A majority (such as two-thirds or three-fifths) that is greater than a simple majority.

Supply Risk

The risk that an inbound supply problem will disrupt a business; includes issues with suppliers, shipments, and markets that disrupt production, operations, sales, and/or projects; can also result in quality problems, liability, and reputational issues.

Surety Bond

Ensures contract completion or compensation in the event of a default by the contractor. A project owner (often in development projects) seeks a contractor to fulfill a contract. In the event of the contractor defaulting, the surety company will be obligated to find another contractor to complete the contract or provide compensation to the project owner.

Sustainability

Sustainability is a broad concept reflecting three dimensions; economic, social and environmental in a balanced and integrated manner. The United Nations defines sustainable development as “meeting the needs of the present without compromising the ability of future generations to meet their own needs” and identifies sustainable development in its three dimensions; economic, social and environmental (also known as profit, planet, people) (Reference: https://www.un.org/en). Integration of the three dimensions is key to achieving sustainable development and the capacity to create a sustainable future is balanced between productivity and respect to environment and to the society.

Sustainability scorecard

Document that outlines key sustainability attributes and risks related to the specific loan.

Sustainable Development Goals (SDG)

Also known as the Global Goals, are a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity. The SDGs were launched by the UN and member states in 2015 and target achievement of various social and environmental development challenges by 2030. They have become an important communication framework for impact investors to align and signal commitment to specific global development areas, and are increasingly being used by investors to mobilize and allocate new capital to one or more the goals. There are 17 SDGs, each focussed on a different area of need. Impact investment strategies may focus on at least one of the SDGs. For Real Estate, an impact investing fund would typically be linked to the SDG 1: No poverty, SDG 3: Good health and well-being, SDG 4: Quality education, SDG 6: Clean water and sanitation, SDG 7: Affordable Clean Energy, SDG 11: Sustainable Cities and Communities and SDG 12: Responsible consumption and production.

Sustainable Investment

Derived from sustainability definition, sustainable investing is broadly defined as the practice of using environment, social and governance (ESG) factors when making investment decisions. Sustainable investment is a desire to make responsible investment decisions, to carry out activities without depleting resources and having harmful impacts and to target positive impact on environment and society. Sustainable investments are deemed to be products that promote sustainability or achieve a sustainable objective. Sustainable investment is about the responsibility and potential the real estate industry holds to invest in a manner which is consistent with achieving medium to long term sustainability targets. These may include contribution towards climate targets, environmental goals or social impact outcomes.   Sustainable and Responsible Investment is a long-term oriented investment approach, which integrates ESG factors in the research, analysis and selection process of securities within an investment portfolio. It combines fundamental analysis and engagement with an evaluation of ESG factors in order to better capture long term returns for investors and to benefit society by influencing the behaviour of companies. (The European forum for responsible investment – Eurosif) The SFDR defines sustainable investment as "an investment in an economic activity that contributes to an environmental or social objective, provided that the investment does not significantly harm any environmental or social objective and that the investee companies follow good governance practices". Disclosure requirements apply under article 8 to products that promote also environmental or social characteristics, whereas disclosure requirements apply under article 9 to products that have sustainable investment as their objective. Article 8 SFDR (Published March 15, 2021 in the joint consultation paper: Taxonomy-related sustainability disclosures): “To develop additional disclosure rules on the pre-contractual information for Article 8 products using the environmental taxonomy (so-called “light green” products – i.e. that promote environmental characteristics), divided into technical standards for climate objectives and other environmental objectives”. Article 9 SFDR (Published March 15, 2021 in the joint consultation paper: Taxonomy-related sustainability disclosures): “To develop additional disclosure rules on the pre-contractual information for Article 9 products (so-called “dark green” products – i.e., that invest in an "economic activity that contributes to an environmental objective") making use of the environmental taxonomy, divided into technical standards for climate objectives and other environmental objectives”.

Syndicated Loan

A loan in which a number lenders participate, often as a result of an initial lender(s) having sold down some or all of their own participation in the loan.

Syndicated loan purchaser

The party that purchases an asset or group of assets from an asset originator. (Asset purchaser also refers to investors in mortgage-backed securities).

Systematic Risk

The risk inherent to the entire market that cannot be mitigated or reduced through diversification; also known as “market risk,” “non-diversifiable risk,” or “undiversifiable risk”.

Systemic Risk

The possibility that an event at the company level could trigger severe instability or collapse an entire industry or economy.

Tactical Investment Decisions

Investment decisions made with a focus on short-term planning and implications.

Tag-Along Rights

A contractual obligation used to protect a minority shareholder; if a majority shareholder sells its stake, then the minority shareholder has the right to join the transaction and sell its minority stake in the company.

Target percentage non-income producing investments

The target percentage of investments in non-income producing investments with the aim of generating future income after (re)development, refurbishment or re-letting activities. Note: Income producing investments are investments in assets for which construction work has been completed and which are owned for the purpose of letting, producing a rental income that is negotiated at arm’s length with third parties. Non-income producing investments are investments in assets (either properties or land) that at the time of investment are not producing any rental income and for which either (re)development, refurbishment or re-letting activities have to be undertaken before rental income is possible.

Target percentage of (re)development exposure

The percentage of overall vehicle target GAV at any point in the life of the vehicle. Development exposure includes any development or redevelopment activities but excludes refurbishment.

Target return derived from income

Percentage of target return derived from rental income that a vehicle is able to pay out on an annual basis.

Tax Bracket

A range of incomes subject to a certain income tax rate; results in a progressive tax system, in which taxation progressively increases as an individual's income grows.

Tax effect of the adjustments

An adjustment representing the tax impact on NAV of certain specified adjustments if not already taken into account in the adjustment of deferred taxes.

Tax Efficiency

The process of organizing an investment so that it receives the least possible taxation.

Tax Shelter

The ability of real estate investments to reduce an investor’s tax liability through the use of cost recovery.

Tax-Exempt Investor

An investor, or any investor that is a flow-through entity for US federal income tax purposes that has a partner or member, that is exempt from US federal income taxation under Section 501(c) of the Internal Revenue Code (IRC) of 1986, as amended; generally are not subject to US taxation, but they may be required to pay taxes on unrelated business taxable income (UBTI); examples include pension plans, universities, private foundations, and charitable endowments.

Taxable REIT Subsidiary (TRS)

A corporation that is owned directly or indirectly by a REIT and has jointly elected with the REIT to be treated as a TRS for tax purposes; may provide services other than customary services to tenants of the REIT's property without disqualifying the amounts received by the REIT from treatment as rents from real property.

Taxes on property related activities

Taxes assessed against real property, usually by a country or municipal taxing authority but sometimes also by special purpose districts and agencies, in proportion to the assessed value of the property. Franchise taxes and excise taxes are already included in the NAV, and thus should be excluded.

Tear Sheet

With reference to marketing:  a page torn from a publication to prove to a client that an advertisement has been published; With reference to finance:  a short summary of key information about individual companies or funds.

Tenant Finish Allowance

A negotiated sum a landlord is willing to spend to customize space for the needs of a particular tenant; also known as a “tenant improvement allowance” or “upfit”.

Tenant Improvement Allowance

A negotiated sum a landlord is willing to spend to customize space for the needs of a particular tenant; also known as a “tenant finish allowance” or “upfit”.

Tenant Improvements

Preparation of leased premises prior to or during a tenant’s occupancy, which may be paid for by either the landlord, the tenant, or both.

Tenant Mix

The selection and location of retail tenants to maximize the property’s income and stimulate business in general.

Term

The length of time, usually years, that an investment Vehicle (such as a fund), or loan is expected to exist, prior to any extensions.

Terminal Capitalization (Cap) Rate

The estimated or actual cap rate used to estimate the resale value of a property at the end of the holding period; calculated by dividing the expected net operating income (NOI) by the expected sale price and expressed as a percentage; also known as the “exit cap rate” or “residual cap rate”.

Terminal Value

The present value at a future point in time of all future cash flows assuming stabilization of cash flows; most often used in multi-stage discounted cash flow analysis and allows for the limitation of cash flow projections to a several-year period.

Termination Clause

A clause defined within the Vehicle Documentation that, when exercised, can lead to the termination of the agreement between the members and the Vehicle or the termination of the Vehicle itself.

Termination Date

The date the Vehicle is scheduled to liquidate, per the Vehicle's Documentation, or if such information is not identified within the legal documents, then the anticipated termination date agreed by investor and Investment Manager.

Terrorism Risk

The risk of potentially extreme losses as the result of the unlawful use of force and violence against persons or property to intimidate or coerce a government, the civilian population, or any segment thereof, in furtherance of political or social objectives.

Tertiary Trade Area

A geographic area containing the customers of a particular firm or group of firms for specific goods or services; includes customers not found in primary and secondary trading areas; these are the most widely dispersed customers.

Theme / Festival Center

Anchored by restaurants or other entertainment facilities, and oriented toward leisure and tourist-oriented goods and services. Typically 80,000 to 250,000 square feet.

TIF Notes

"TIF" or Tax Incremental Financing is a public financing method used for redevelopment infrastructure and other city improvement projects. This type of financing uses future gains in taxes to subsidize current improvements that are projected to create those gains.

Time-Weighted Return (TWR)

The geometric average of the holding period yields to an investment portfolio (Investment Analysis and Portfolio Management, Seventh Edition (2003)). TWRs are commonly used in the investment industry to measure the performance of an entity (e.g. fund, investment, property). The TWR formulas isolate the performance of the entity by removing the timing effect of cash contributions and distributions from the entity's ending fair value. TWRs measure performance over a specific period regardless of the size of the investment or timing of external cash flows.

Time-Weighted Return (TWR) (Fund Level)

A fund level TWR (also referred to as account or portfolio level) is the aggregation of all of the investments made by the entity and the amounts earned or incurred which relate to the entity but are not specifically attributable to a particular investment. Similar to investment level returns, the fund level TWRs are very broad in nature and try to capture all activity, which includes, but is not limited to, those revenues and expenses applicable to the fund, taken as a whole, such as audit and appraisal fees, interest income and portfolio borrowings. In essence, this return measures the performance of the advisor in terms of how well the management team performed its specified strategy.

Time-Weighted Return (TWR), investment level

Investment level TWRs reflect the performance of a single investment or group of investments, whether that investment is wholly-owned or a joint venture. Investment level TWRs differ from property level in that the full scope of the investment, including ownership level activity (use of working capital, owner expenses, etc.), is included in the calculation.

Time-Weighted Return (TWR), property level

Property level TWRs reflect the performance of an operating property or group of properties. The property level relates strictly to property operations and attempts to strip out all ownership level activity, usually including advisory fees, use of working capital and owner income and expenses. As such, property level TWRs do not represent investors' earnings from those properties, even in single property funds, but rather the earnings (in the form of appreciation and operating income) that are generated by the property.

Top-Down Investing

An investment approach that focuses on the macroeconomic analysis of various economic factors to understand how these factors may affect the overall market and investments.

Topography

The physical characteristics of the contour of a parcel of land; details the nature and variation of the surface of land which might be level, rolling or mountainous; may document the influence of issues such as ease of access, runoff and flooding hazards as well as availability of land for development in naturally constrained markets.

Total capital commitment drawn

Total capital drawn down since inception less total returned capital recalled since inception. This relates to the amount of actual capital commitment that has currently been drawn, net of any reinvested capital. This amount cannot therefore exceed total capital commitments.

Total capital commitments (By all investors)

Total capital commitments refers to the total committed capital a manager can draw down from all investors with a specified notice as outlined in the constituent fund documents.

Total capital drawn down

The capital (including shareholder's loans) injected by investors so far, including any returned capital that has been reinvested. The total can therefore exceed investors' total commitment. This does not reflect any returned capital that has been distributed.

Total current outstanding capital

The total capital drawn (including investment in both shareholder equity and shareholder loans, where applicable) less total return of capital (both recallable and non-recallable). Return of capital does not include income distributions.

Total debt maturities

Nominal value of debt maturing over a pre-determined amount of time, in the form of loans and excluding hedging debt.

Total direct GHG emissions

Direct GHG emissions come from sources that are owned or controlled by the fund manager. All direct emission sources are classified as scope 1 under the GHG Protocol.

Total indirect GHG emissions

Indirect GHG emissions are those that are a result of the activities of the fund, but that occur at sources owned or controlled by another entity. Indirect emission sources are classified as either scope 2 or scope 3 under the GHG Protocol.

Total return (net and unlevered)

Time-weighted net and unlevered return.

Total return net to investor

This uses as a numerator the aggregate of the cash flows used in the calculation of the gross IRR of a vehicle with respect to realized investments and as a denominator the total equity invested in respect of those same realized investments.

Total return of capital

Represents inception-to-date Return of capital. 

Total returned capital recalled

Represents a portion of inception-to-date investment proceeds paid back to investors and subsequently reutilised via a Capital call notice. 

Total Value to paid in capital multiple (TVPI)

See Investment Multiple

Tracking Error

A measure of the risk in an investment portfolio that is due to active management decisions made by the portfolio manager; indicates how closely a portfolio follows the index to which it is benchmarked; calculated as the standard deviation of difference in returns for fund or portfolio versus benchmark.

Trade Area

A geographic area containing the customers of a particular firm or group of firms for specific goods or services.

Traffic Count

A count of vehicular or pedestrian traffic utilized for analytical purposes.

Transaction Document

This incorporates all transaction related documentation, and is wider than just the Facility Agreement.

Transaction Obligor

This includes entities in addition to the Obligors which are required to comply with, or whose actions are intended to be controlled by, the Facility Agreement – e.g. a Shareholder or a Subordinated Creditor.

Transaction offsets

Transaction offsets occur typically if income, based on investment and not for specific services (e.g. closing or monitoring fee), is earned by the investment manager or management company of the vehicle from the portfolio properties, and a portion of that income is required to be offset against the management fee by the vehicle documentation.

Transfer agent costs

Costs charged by trustees who are responsible for managing the assets owned by a trust for the trust’s beneficiaries. This is most relevant in a REIT structure where trustees act on behalf of all unit holders.

Transferee

A person who receives property being transferred or conveyed.

Transferor

A person who makes a transfer or conveyance of property.

Transition Risk

The risks associated with the transition to a low carbon economy. The components of transition risks include regulatory and legal risk and broader commercial environment within which the asset/investment exists and operates, such as technology risk, market risk (under transactional risk) and corporate reputation risk. (In line with TCFD Definition) 

Transparency

The extent to which investors have ready access to required financial information about a company or investment, such as price levels, market depth and audited financial reports.

Treynor Ratio

A risk-adjusted measurement of return based on systematic risk; indicates how much return an investment earned for the amount of risk the investment assumed.

Triple Net Lease (NNN)

A lease that requires the tenant to pay all expenses of the property being leased in addition to rent; typical expenses covered in such a lease include taxes, insurance, maintenance, and utilities.

Trustee Costs

Also known as Placement Agent Costs

Truth in Securities Law

A US federal law designed to protect investors after the stock market crash of 1929; requires that investors receive financial and other significant information concerning securities being offered for public sale and prohibits deceit, misrepresentations, and other fraud in the sale of securities; also known as the “Securities Act of 1933”.

Turn Key Project

The construction of a project in which a third party is responsible for the total completion of a building, or for the construction of tenant improvements to the customized requirements and specifications of a future owner or tenant.

Umbrella Partnership Real Estate Investment Trust (UPREIT)

Organizational structure where a REIT's assets are owned by a holding company for tax purposes.

Uncalled Capital Commitment

The portion of an investor’s capital commitment that is unfunded and may be subject to a capital call, excluding any amounts subject to a pending capital call that have not yet been funded as a capital contribution; the borrowing base in a subscription-backed credit facility is determined by reference to the uncalled capital commitments of the included investors.

Underserved population

(Related to Impact Investing) Potential consumers, who lack access to mainstream suppliers of goods and services. Education or healthcare Real Estate Impact strategies could have a particular focus on providing access to these services to underserved populations.

Understored Trading Area

A geographic area that has too few stores selling a specific good or service to satisfy the needs of its population.

Undiversifiable Risk

The risk inherent to the entire market that cannot be mitigated or reduced through diversification; also known as “market risk,” “non-diversifiable risk,” or “systematic risk”.

Unfunded Commitment

See definition of Outstanding Capital Commitment.

Uniform Standards of Professional Appraisal Practice (USPAP)

Valuation standards established through Uniform Standards of Professional Appraisal Practice in the United States. USPAP is developed, interpreted, and amended by the Appraisal Standards Board of the Appraisal Foundation. USPAP are quality control standards applicable to real property, personal property, intangibles, and business valuation appraisal and opinions which interpret the standards. USPAP is the foundational standard for valuation within the Reporting Standards. See www.uspap.org.

Unitized vehicle

A collective investment structure that allows the transfer of predefined ownership increments (e.g the purchase or sale of shares) as defined in the Vehicle Documentation.

Units of Comparison

The components into which a property may be divided for purposes of comparison.

Unrealised (capital) gain / loss

The appreciation and depreciation for vehicle assets and liabilities which results from a revised fair market value prior to a transaction event such as a disposition of assets or a settlement of liabilities.

Unrelated Business Income Tax (UBIT)

The tax on unrelated business taxable income (UBTI).

Unrelated Business Taxable Income (UBTI)

Income regularly generated by a tax-exempt entity by means of taxable activities and that is unrelated to an investor’s tax-exempt purpose, as generally defined under the Internal Revenue Code (IRC) of 1986, as amended,; typically not related to the main function of the entity but is needed to generate a small portion of income.

Unsystematic Risk

The risk inherent to a particular investment or portfolio of investments that can be mitigated or reduced through diversification; also known as “diversifiable risk,” “idiosyncratic risk,” “residual risk,” or “specific risk”.

Upfit

A negotiated sum a landlord is willing to spend to customize space for the needs of a particular tenant; also known as a “tenant finish allowance” or “tenant improvement allowance”.

Urban Land Institute (ULI)

A nonprofit organization providing research and information on land use and development.

US Real Property Holding Corporation (USRPHC)

A US corporation whose fair market value of the US real property interests held by the corporation on any applicable determination date equals or exceeds 50 percent of the sum of the fair market values of its US real property interests, interests in real property located outside the US and certain business assets.

US Real Property Interest (USRPI)

An interest in real property (including an interest in a mine, well, or other natural deposit) located in the US or the US Virgin Islands, as well as certain personal property that is associated with the use of real property (such as farming machinery).

Usable Area

The amount of area that can be occupied by tenants; can vary over the life of a building.

Usury

Charging more than the legal rate of interest for the use of money.

Utilities, repair and maintenance costs (non-rechargeable portion)

Shortfalls between the property operating expenses (incl. repairs and maintenance) incurred by the owner of an investment property and the expenses that are charged to the tenants.

Vacancy (Based on estimated rental value)

Estimated rental income of vacant space / (contractual rental income of occupied space + estimated rental income of vacant space).

Vacancy (Based on leasable floor space)

A measure of the level of vacant space, which is calculated based on net leasable floor space.

Vacancy Loss

Loss of potential rent revenue attributable to unoccupied space, expressed as a total dollar amount per year.

Valuation

1. The process of determining the worth of an asset or a fund. 2. The result of that process: the estimated worth or sales price of an asset or fund.

Valuation costs

Costs in connection with the external (third party) appraisal of the real estate assets and liabilities owned by the vehicle. Appraisals may be performed routinely or ad-hoc which can be triggered by certain provisions in the vehicle agreement.

Valuation Policy

A legally binding policy that defines how, by whom and how frequently investments will be valued.

Valuation Risk

The risk that an asset is overvalued and is worth less than expected when it matures or is sold.

Value Creation

The performance of actions that increase the worth of goods, services, and/or a business.

Value-added (INREV Style)

A fund which may invest in any property type and deliver returns from a balance of income return and capital appreciation. The fund may allocate part of its investments in development. Typically it will also invest in forms of active management, such as active leasing risk, repositioning or redevelopment to generate returns through adding value to the property. The fund will use moderate leverage.

Value-added (RS Style)

An account that generally includes a mix of core investments and noncore investments that will have less stable income streams. The Account as a whole is likely to have moderate lease exposure and moderate leverage. As a result, such Accounts should achieve a significant portion of the return from appreciation/ depreciation and are expected to exhibit moderate volatility.

Value-Weighted Index

A type of market index with individual components, or securities, weighted according to their total market capitalization; components with larger market capitalization exert a greater impact on the index value while components with a smaller market capitalization carry less significance; also known as a “capitalization-weighted index”.

Variable Cost or Expense

A cost or an expense that rises or falls in direct proportion to production volume.

Variance

A measure of the spread between numbers in a data set; measures how far each number in the set is from the mean.

Vehicle

The overarching term for any kind of investment structure, including funds, joint ventures, club deals and separate or single accounts.

Vehicle administration costs

Costs related to bookkeeping activities either paid to a 3rd party service provider or the manager/advisor.

Vehicle Documentation

The key documents, including their annexes, establishing a contractual framework of how the Vehicle will operate and the significant legal rights and obligations of the parties entering those agreements related to the Vehicle. For example, these include funds, partnerships, joint ventures or trust agreements.

Vehicle formation costs

Also known as set-up costs, these charges are incurred at the launch of a vehicle, and do not relate to the portfolio acquisition and financing structure. These include organisational costs (typically legal & notary services) as well as syndication costs, various marketing costs, including printing / publication, and initial subscription fees.

Vehicle Formation Date

The date on which the Vehicle was legally established and became available for investors.

Vehicle Loan to Value (LTV)

Nominal value of debt, or book value, which includes third party facilities or credit lines (and any drawn equity bridge), over the GAV of the vehicle.

Vehicle Manager

See definition Investment Manager.

Vehicle Reporting Currency

This is a denomination in which a Vehicleprepares and presents its financial statements and other financial information.

Vehicle-level loan to cost

The consolidated total external amount of leverage at the vehicle level as a percentage of the (historical acquisition) cost of the vehicle.

Venture Capital

A form of private equity and a type of financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential.

Venture Capital Operating Company (VCOC)

A term used in the context of a fund that is relying on the operating company exception to holding plan assets under ERISA.

Vertically Integrated Manager

An investment manager that employs a full spectrum of professionals needed to buy, operate and develop properties.  Often regionally-focused specialists with full development, leasing and sometimes property management capabilities.  

Vintage Year

A vintage year of an investment vehicle may be determined by using the following two methods: 1. The year when the first committed capital agreement from outside investors is closed and legally binding. 2. The year of the investment vehicle's first drawdown or capital call from its investors. The user should specify which definition is being used and presented for investor reporting purposes. Reference: GIPS

Visibility

The degree to which a property has exposure and can be seen by the public through location and/or signage.

Void rate

A measure of the level of vacant space, which is calculated based on floor space or estimated rental value.

Volatility

A statistical measure of the dispersion of returns for a given security or market index.

Warehouse (industrial)

50,000 square feet or more with up to 15% office space, the balance being 18-30 foot ceiling height. All loading is dock height.

Waste by disposal route

The method by which waste is treated or disposed, including composting, re-use, recycling, recovery, incineration, landfill, deep well injection, and on-site storage.

Waterfall

With reference to a debt obligation:  the priority of payment of amounts received from or on account of the borrower among creditors to the borrower; With reference to a fund:  the economic agreement between the investors and the general partner as to the priority of payment of distributions of fund assets as between the investors and the general partner;  also known as “distributions waterfall”.

Waterfall Analysis

Hypothetical sale methodology is typically employed in valuing real estate partnership interests for fair value financial reporting purposes. This methodology assumes a sale of the real estate (gross asset value) as of the measurement date and allocates that value to the various partnership interests per the terms in the partnership agreement. This is commonly referred to as the "waterfall" analysis or equity reconciliation.

Waterfall calculation

When returns are paid to more than one party in a vehicle, the order of priority for cash flows of these is set out in the waterfall calculation.

Wealth taxes

Represents a type of annual tax on “tax haven” indirect ownership of property.

Weighted average cost of debt

The interest rate on each external debt instrument in the vehicle weighted by the size of such instruments.

Weighted average cost of debt excluding shareholder loans

The interest rate (base rate and margin) on each external debt instrument in the vehicle weighted by the size of such instruments.

Weighted Average interest rate of Fund T1 leverage

The average interest rate of both fixed and floating rate debt at period end weighted by the outstanding principal balances at period end.

Weighted average lease expiry

Weighted average duration of lease contracts based on rent to the shorter of the first tenant break or lease expiry.

Weighted average maturity of debt excluding shareholder loans (Years)

The maturity on each external debt instrument in the vehicle weighted by the size of such instruments

Weighted Average Remaining term of Fixed Rate Fund T1 leverage

Generally, the classification of a loan as fixed rate debt depends upon what is stipulated in the loan documents without regard to triggers associated with the breach of loan covenants. The measure is calculated as the average remaining term until the maturity date weighted by the outstanding principal balances. The remaining term is defined as the period between the period end and the maturity date measured in years and fractional months. Extension periods that have not been formally exercised should not be included in the remaining term measure. Fund T1 leverage is used for the calculation.

Weighted Average Remaining term of Floating Rate Fund T1 leverage

Generally, the classification of a loan as floating rate debt depends upon what is stipulated in the loan documents without regard to triggers associated with the breach of loan covenants. The measure is calculated as the average remaining term until the maturity date weighted by the outstanding principal balances. The remaining term is defined as the period between the period end and the maturity date measured in years and fractional months. Extension periods that have not been formally exercised should not be included in the remaining term measure. Fund T1 leverage is used for the calculation.

What-If Analysis

The examination of how different values of an independent variable impact a particular dependent variable under a given set of assumptions; also known as “sensitivity analysis”.

Whistleblower

An individual who has and reports insider knowledge of illegal activities occurring in an organization; can be employees, suppliers, contractors, clients, or any individual who becomes aware of illegal business activities; protected from retaliation under various programs created by the Occupational Safety and Health Administration (OSHA), Whistleblower Protection Act of 1989, Sarbanes Oxley Act, and the Securities and Exchange Commission (SEC).

Whole Loan

A single loan that a lender has issued to a borrower.

Wholly Owned Subsidiary

A company whose stock is entirely owned by another company (the parent company).

Wind-up fee

Also known as liquidation fee, it is typically found in liquidating trusts, upon termination and dissolution of the vehicle. The sponsor is responsible for liquidating the partnership in an orderly manner.

1031 Exchange

The exchange, under section 1031 of the Internal Revenue Code (IRC), of a real property held for investment or used in a trade or business, for a similar property; allows a property holder to defer capital gains associated with the sale of a property

401(a) Pension Plan

An employer-sponsored money-purchase retirement plan that allows dollar or percentage-based contributions from the employer, the employee, or both; the sponsoring employer establishes eligibility and the vesting schedule, while the employee can withdraw funds through a rollover to a different qualified retirement plan, a lump-sum payment, or an annuity.  

501(c)(3) Nonprofit Organization

A nonprofit organization approved for tax-exempt purposes under the Internal Revenue Code (IRC); typically the organization has a single major source of funding (usually gifts from one family or corporation rather than funding from many sources); 501(c)(3) organizations are either private foundations or public charities but are presumed to be private foundations unless described as public foundations in IRC Section 509(a)(1), (2), (3), or (4).  

509(a) Nonprofit Organizations

A nonprofit organization approved for tax-exempt purposes under the Internal Revenue Code (IRC) and whose activity is inherently public in nature; generally includes organizations that are churches, hospitals, qualified medical research organizations affiliated with hospitals, schools, colleges and universities, have an active program of fundraising and receive contributions from many sources, including the general public, governmental agencies, corporations, private foundations or other public charities, receive income from the conduct of activities in furtherance of the organization’s exempt purposes, or actively function in a supporting relationship to one or more existing public charities; qualifies under IRC section 509(a)(1), (2), (3), or (4) as an exemption to the 501(c)(3) private foundation definition.

704(b) Regulations

Internal Revenue Code (IRC) procedures relating to capital account maintenance rules and rules regarding a partnership's right to adjust capital accounts to reflect unrealized appreciation and depreciation in the value of partnership assets; provides that a partner's distributive share of income, gain, loss, deduction, or credit is determined in accordance with the partner's interest in the partnership if the partnership agreement does not provide as to the partner's distributive shares of these items, or the allocation to a partner of these items under the agreement does not have substantial economic effect; regulations under IRC section 704 provide extensive rules for determining whether allocations under an agreement have substantial economic effect.