Global Definitions Database

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.