Global Definitions Database

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.

Country-by-Country Guide

Due Diligence Questionnaire (DDQ)

Standard Data Delivery Sheet (SDDS)