Glossary

Provisions in a lease that excuse the tenant from paying rent or other charges for a specified period of time. Usually given as an enticement for the tenant to lease space in the building. See also (Rent) Concession, Free Rent.

Provisions in a lease that excuse the tenant from paying rent or other charges for a specified period of time. Usually given as an enticement for the tenant to lease space in the building. See also (Rent) Abatement, Free Rent.

The amount of inventory or units of a specified commercial property type that become occupied during a specified period (usually a year) in a given market.

A current liability that will show the amount a company owes for items or services purchased on credit and for which there was not a promissory note. Often referred to as trade payables, as opposed to notes payable, or interest payable. In real estate, these would be the invoices for goods and services provided to the property.

A current asset resulting from selling goods or services on credit (or on account). In real estate, accounts receivable results from the monthly (or periodic) charges billed to a tenant based on that tenant's rental of real property.

The Automated Clearing House System is much better known as ACH. The system is designed for high-volume, low-value payments, and charges fees low enough to encourage the transfer of low-value payments. The system is designed to accept payment batches, so that large numbers of scheduled payments can be made at once. Given its convenience and reliability, the ACH system has replaced check payments to a considerable extent.

See Rentable-to-Useable Ratio.

See Contribution. Yardi software uses the term Anchor Deduction.

In retail, an anchor store, draw tenant, anchor tenant, or key tenant is one of the larger stores in a shopping mall, usually a department store or a major retail chain.

In computer programming, an API (application programming interface) is a set of routines, protocols, and tools for building software applications. In the context of Yardi or MRI software, an API is a method to pass data from an external source to the MRI or Yardi database and vice-versa. Yardi and MRI APIs rely on structured inputs and responses to send and receive data in specified formats. Yardi and MRI support XML and CSV formats, among others.

The minimum rent due to the landlord. Typically, it is a fixed amount. This is a face, quoted, contract amount of periodic rent. The annual base rent is the amount upon which escalations or rent steps are calculated.

The sales threshold over which percentage rent is due. It is calculated by dividing the annual base rent by the negotiated percentage applied to the tenant's gross sales.

Real property permanently affixed to land.

Common Area Maintenance. Charges paid by the tenant for the upkeep of areas designated for use and benefit of all tenants. CAM charges are common in shopping centers. Tenants are charged for items like: parking lot maintenance, snow removal, and utilities.

In the Yardi system, the chart of categories is used to classify expenses related to construction projects in the Construction and Job Costing module. Yardi clients generally only use one Chart of Categories and by default all jobs have access to all categories. Use this link to see an example of the types of classifications you might see.

A method of payment to a vendor.

Construction Industry Tax Deduction Scheme - Used in the UK, money is deducted from a subcontractor's payment and passed to HM Revenue and Customs. The deductions count as advance payment towards the subcontractor's tax and national insurance. Contractors must register. Subcontractors do not have to register, but deductions are taken from their payments at a higher rate if they are not registered.

Area of a property used by all tenants of a building. Examples include lobby, elevators/escalators, corridors, parking lot.

See Rentable-to-Useable Ratio.

A type of recovery in which all costs related to maintaining common areas of the building are passed through to the tenants as additional charges. Tenants pay their share of these expenses based on the amount of space they occupy in the building. The term CAM typically used in retail properties. Office and industrial properties often use the term Operating Expense Recovery.

Also known as Anchor Deduction. This is a concept in retail CAM calculations that deducts the square footage of anchor tenants as well as their CAM amounts (usually a fixed PSF amount) from the property or building's pool of expenses. The result is an increase in the pro rata share paid by the remaining in-line tenants. MRI software uses the term Contribution.

In the MRI system, cost codes are used to classify expenses related to construction projects in the JobCost module. Costs codes are individual elements of a Cost List (similar to the way accounts are individual elements in a Ledger Code). The MRI system allows clients to establish multiple Cost Lists. Use this link to see an example of the types of classifications you might see.

See Index Lease/Indexation.

Payment for goods or services received. Payment may be made when the good is received or the service rendered, or at a later date. See also Expenditure.

The process of examining a property, related documents, and procedures conducted by or for the potential lender or purchaser to reduce risk. Applying a consistent standard of inspection and investigation one can determine if the actual conditions do or do not reflect the information as represented.

An (Accounting) entity is a business for which a separate set of accounting records is maintained. To be called an entity an organization must engage in clearly identifiable economic activities, control economic resources, and is segregated from the personal transactions of its officers, owners, and employees.

The internal rate of return (IRR) or economic rate of return (ERR) is a rate of return used in capital budgeting to measure and compare the profitability of investments. It is also called the discounted cash flow rate of return (DCFROR).^[1] In the context of savings and loans, the IRR is also called the effective interest rate. The term internal refers to the fact that its calculation does not incorporate environmental factors.

Payment for goods or services received. Payment may be made when the good is received or the service rendered, or at a later date. See also Disbursement.

A decrease in owner's equity caused by using up of assets (in Accounts Payable, this is typically cash) in producing revenue or carrying out other operating activities.

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.

Financial Accounting Standards Board - this is a private, non-profit organization whose primary purpose is to establish and improve generally accepted accounting principles within the United States in the public's interest. FASB replaced the American Institute of Certified Public Accountants' (AICPA) Accounting Principles Board on July 1, 1973.

Costs that do not change with a building's occupancy rate. They include: property taxes, insurance, and some forms of building maintenance.

Provisions in a lease that excuse the tenant from paying rent or other charges for a specified period of time. Usually given as an enticement for the tenant to lease space in the building. See also (Rent) Abatement, (Rent) Concession.

A credit (Gain) or charge (Loss) taken against Gross Potential Rent (GPR) for leases signed on apartment units after their initial lease-up term has expired to simulate when the leases are either renewed or a new tenant moves in at a rent that is above (gain) or below (loss) the then-Gross Potential Rent. See https://www.getrefm.com/blog/model-for-success/in-plain-english-apartment-property-loss-to-lease-and-downtime/ for full definition and examples.

An evaluation of the differences between two items. For software consulting, REdirect might perform a gap analysis to demonstrate the differences between a client's current software and software they are considering purchasing.

The part of the accounting system that contains the balance sheet and income statement accounts used for recording transactions.

Ethical standards to be used by investment managers for creating performance presentations that ensure fair representation and full disclosure of investment performance results. Global Investment Professional Standards were created by the Chartered Financial Analyst Institute and governed by the GIPS Executive Committee. They are standardized guidelines for reporting the ability of an investment firm to make profits for investors.

The entire floor area of a building or the total square footage of a floor.

The total floor area designed for tenant occupancy and exclusive use, including basements, mezzanines, and upper floors, and it is measured from the center line of joint partitions and from outside wall faces. GLS is the area on which tenants pay rent; it is the area that produces income.

A lease in which all expenses associated with owning and operating the property are paid by the landlord.

The total rent possible from a property if it were 100% leased at market rates with no deductions for bad debt. It does not include ancillary income like laundry machines or late fees. (see: http://financial-dictionary.thefreedictionary.com/gross+potential+rental+income)

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 a property. A land lease separates ownership of the land from ownership of buildings and improvements constructed on the land.

A term/classification for buildings that are higher than twenty-five stories above ground level.

A lease in which the rental amount adjust accordingly to changes and/or movements in a price index, commonly the Consumer Price Index (CPI).

A document showing the details of a purchase or a transaction. Typically associated with Accounts Payable activities.

The internal rate of return (IRR) or economic rate of return (ERR) is a rate of return used in capital budgeting to measure and compare the profitability of investments. It is also called the discounted cash flow rate of return (DCFROR).^[1] In the context of savings and loans, the IRR is also called the effective interest rate. The term internal refers to the fact that its calculation does not incorporate environmental factors.

A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This can be a new project or any other business activity. A joint venture is typically a distinct business entity to which the owners contribute assets, have equity, and agree on how the entity may be managed. These things are agreed to by all parties, often without forming an actual legal partnership and without creating a new corporation (although they may create a new business entity for this purpose).

Key Performance Indicator

The lessor or owner of the leased property.

A contract that creates the relationship of landlord and tenant. A contractually binding agreement that grants a right to exclusive possession or use of property, usually in return for a periodic payment called rent.

Software that uses an algorithm to evaluate current and upcoming availability of units within a community, rental demand, and other factors to set the optimum lease price for units and to minimize vacancies. Some multifamily property companies use LRO software to set rental prices and lease terms (while others use a traditional method where a leasing agent or property manager sets rates and terms and might also include specials to entice renters). Yardi's LRO product is called RENTmaximizer. Rainmaker LRO is a popular product based in Alpharetta, GA. RealPage calls its version YieldStar Price Optimizer.

The specific timeframe the tenant has the legal right to occupy the space. Typically the lease start and end date or expiration date.

A 'book' containing accounts. For example, there is the general ledger that contains the balance sheet and income statement accounts. There is a subsidiary ledger, Accounts Receivable, that contains the detailed, customer account balances for the general ledger.

The person renting or leasing the property. Also known as a tenant.

The person who rents or leases a property to another. Also known as a landlord.

A letter of credit is issued by a bank to guarantee its client's ability to pay under the terms of a lease agreement. A letter of credit is often used instead of a security deposit.

A document that is supplied to a contractor, subcontractor, materials supplier, equipment lessor or other party to a construction project. The document states that the contractor (subcontractor, supplier, etc.) has received payment and waives any future lien rights to the property of the owner for the amount paid.

See Rentable-to-Useable Ratio.

A credit (Gain) or charge (Loss) taken against Gross Potential Rent (GPR) for leases signed on apartment units after their initial lease-up term has expired to simulate when the leases are either renewed or a new tenant moves in at a rent that is above (gain) or below (loss) the then-Gross Potential Rent. See https://www.getrefm.com/blog/model-for-success/in-plain-english-apartment-property-loss-to-lease-and-downtime/ for full definition and examples.

Fewer than seven stories high above ground level.

A line of characters at the bottom of a check used by scannign devices at a bank to determine the account number, transit number, and other information about the check.

Between seven and twenty-five stories above ground level.

Market Leasing Assumptions

The NCREIF Property Index is a quarterly time series composite total rate of return measure of investment performance of a very large pool of individual commercial real estate properties acquired in the private market for investment purposes only.

The value of rent after taking into account adjustments for concessions, allowances, and costs. For a long-term lease, a discount rate is applied to express future amounts in terms of the present value. Net Effective Rent is often less than the stated or contract rent. Brokers use the net effective rent calculation to compare the economics of deals.

A lease in which the tenant pays, in addition to rent, all operating expenses such as real estate taxes, insurance premiums, and maintenance costs.

The potential rental income plus other income, less vacancy, credit losses, and operating expenses.

Expressed as a percentage, it is the amount of space leased/occupied in a building. A space can be physically occupied, which means that the tenant is actively and legally using the space. A space can also be legally occupied, which means the tenant may not be actively using the space but a legal agreement entitles them to the use.

The actual dollars paid out by the tenant to occupy the space. It can be expressed in either pre-tax or after-tax dollars.

See recovery or common area maintenance (CAM).

A negotiable amount at which the owner's contribution to operating expenses stops. It also can be stated as the amount above which the tenant is responsible for its pro rata share of operating expenses.

Cash outlays necessary to operate and maintain a property. Examples of operating expenses include: real estate taxes, property insurance, property management and maintenance expenses, utilities, and legal or accounting expenses. Operating expenses do not include capital expenditures, debt service, or cost recovery.

A lease in which the rent amount is based on a percentage of gross sales (monthly or annually) made by the tenant.

The additional rent (over a base amount) that is paid by tenants to owners on tenant sales over a specified dollar amount. It is frequently found in retail leases. Also known as overage rent.

See Bond.

A positive pay system detects fraudulent checks at the point of presentment and prevents them from being paid. This means that checks that have had their payment amounts altered or which are derived from stolen check stock will be flagged by the bank. The basic positive pay steps are:

1. The issuing company periodically sends a file to its bank, in which are listed the check numbers, dates, and amounts of all checks issued in the most recent check run.
2. When a check is presented to the bank for payment, the bank teller compares the information on the check to the information submitted by the company. If there is a discrepancy, the bank holds the check and notifies the company.

Pro forma, a Latin term, literally means “for the sake of form” or “as a matter of form.” In the world of investing, pro forma refers to a method by which financial results are calculated. This method of calculation places emphasis on present or projected figures.

The percentage of the property that is occupied by a tenant. This percentage is also used for Common Area Maintenance or Recovery calculations to determine the proportionate share of common area or operating expenses for which the tenant is responsible. For example, if a tenant occupies 25% of a property, their lease might state that they are responsible for 25% of the common area expenses or 25% of the property's annual operating expenses.

The administration of residential, commercial, and / or industrial real estate. Property management typically involves the managing of property that is owned by another party or entity. The property manager acts on behalf of the owner to preserve the value of the property while generating income. Property managers are typically paid a fee and / or a percentage of the rent brought in for the property while under management.

The portion of a building's operating expenses that are above the Expense Stop or Base Year and are passed through to the tenants. Typically tenants pay their pro-rata share of these expenses as additional rent.

A type of security that invests in real estate through property or mortgages and often trades on major exchanges like a stock. REITs provide investors with an extremely liquid stake in real estate. They receive special tax considerations and typically offer high dividend yields. Video and additional information.

A lease provision that gives the tenant the right (but not the obligation) to renew their lease. The renewal period is typically pre-specified in the original lease.

The amount the tenant is obligated to pay the landlord under the lease agreement for use of the space. Rent is commonly quoted on an annual per rentable square foot basis. However, it can be quoted in other ways such as monthly, total annual amount, etc.

A period of free rent given to the tenant by the lessor.

New York State has two forms of rent regulation. Rent regulation is intended to protect tenants in privately-owned buildings from illegal rent increases and allow owners to maintain their buildings and realize a reasonable profit.

• Rent Control is the older of the two systems of rent regulation. It dates back to the housing shortage immediately following WWII and generally applies to buildings constructed before 1947.
• Rent Stabilization generally covers buildings built after 1947 and before 1974, and apartments are removed from rent control. It also covers buildings that receive J-51 and 421-a tax benefits.

See Escalation.

The computed area of a building as defined by the guidelines of Building Owners and Managers Association (BOMA) and typically measured in square feet, including both core/structure and useable area. The actual square foot area for which the tenant will pay rent. It is the gross are of an office building, less uninterrupted vertical space (such as stairways and elevators). Unlike useable area, rentable area includes common areas such as lobbies, restrooms, and hallways as well as the measurement of structural columns and architectural projections.

The increase in the rentable square footage over the usable square footage in a building. Also known as the add-on factor, load factor, or common area factor.

Construction accounting term. Retainage is a portion of the agreed upon contract price of a construction job (or sub-job) that is deliberately withheld until the work is substantially complete. This is to assure that the contractor or subcontractor will satisfy its obligations and complete the project.

A classification scheme used for general recording purposes by government and industry to categorize and account for economic and employment activity by sector using a series of standardized and universally accepted codes.

An Accounts Payable document listing the invoices or charges that have been accrued by a customer. Typically includes the current or new activity and the account balance.

See FASB 13.

A lease in which the original tenant (lessee) sublets all or part of the leasehold interest to another tenant (known as a subtenant) while still retaining a leasehold interest in the property. Also known as a sandwich lease due to the sandwiching of the original lessee between the lessor and the subtenant.

A property subdivision that is leased to a tenant.

• In residential properties a suite is typically a fixed unit.
• In non-residential properties, suite configurations often change as tenants move in and out of the building.

A person or entity who has possession of the property through a lease. A tenant may also be referred to as a lessee.

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.

See Lease Term.

Rentable area, less certain common areas that are shared by all tenants of the office building (such as corridors, storage facilities, and bathrooms). Also defined in office buildings as the area that is available for the exclusive use of the tenant. Useable area = rentable area x building efficiency percentage.

The number of units or amount of space vacant and available for occupancy at a particular point in time within a given market (usually expressed as a rate).

A desirable level of vacancy that is known to facilitate transactions and turnover in a housing market (for example, a vacancy rate that allows the market to operate smoothly and efficiently by enhancing household mobility); an index used for estimating housing demand.

Costs, such as utilities, that vary with a building's occupancy rate.

Value Added Tax is a consumption tax levied on goods and services in many countries around the world. In Canada VAT is called GST - Goods and Services Tax. In Japan it is JCT. In many cases, non-resident businesses are entitled to a refund of VAT - this is often referred to as VAT Reclaim. The reclaimed portion is based on a rate - in some cases, it is standard, in others, the rate it can be reduced on certain items.

A service povider or place where goods are purchased. In real estate accounts payable, this is any entity that would generate an invoice to a company.

A measure of investment performance that gauges the percentage return on each dollar invested. Also known as rate of return.

The designation of specific areas by a local planning authority within a given jurisdiction for the purpose of legally defining land use or land categories.