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78 Cards in this Set

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Book Depreciation
tax depreciation; generally accumulated tax depreciation
Capital expenditures
money spent on items that are not expensed because their life extends greater than one year
Common area maintenance (CAM)
the maintenance of areas shared by more than one tenant; e.g. parking areas, sidewalks, landscaping
Continued occupancy clause
a clause requiring the tenant to have uninterrupted occupancy, or be in default of the lease
Contract rent
the rent paid by tenant (lessee) to landlord (lessor) established by the lease
Deficit rent
the amount of contract rent paid under market rent
Effective gross income (EGI)
PGI less vacancy & collection loss; collected rents
Effective rent
total base or minimum rent paid over a lease less all concessions, including excess tenant finish & free rent, etc.
Escalation clause
provision whereby tenant pays in excess of base amount
Escalation income
income that increases
Escape clause
a clause allowing a tenant or landlord to void a lease before its expiration by the term of the lease
Excess rent
the amount of rent paid above market rent
Exclusive use clause
a clause in a lease specifying the allowed use of a property
Expense cap
the maximum amount that a landlord is required to pay for expenses; tenants are billed the amount spent over the expense cap
Expense recovery
the amount of money paid to the owner by the tenant to reimburse expenses
Expense stop
the amount the owner of property is required to pay (the tenant pays past the cap)
Fixed expenses
taxes and insurance, usually; those expenses that tend to remain fixed over a 1 year projection period
Flat rental lease
lease that stays fixed
Forecast
prediction of the future, or todays expectation of the future
Going-in cap rate
the first year's NOI divided by value or sale price
Graduated rental lease
a lease that goes up on a set schedule
Gross lease
a lease arrangement where the owner pays all expenses
Gross rental clause
one where the landlord pays all expenses
Index lease
rental adjustments based upon CPI or other index
Kick-out clause
a clause that allows a tenant to void a lease if certain sales are not reached or if an anchor leaves
Landlord burden clause
the requirements of a landlord under a lease agreement
Lease
legal agreement transferring and defining the right to use and occupancy
Lease analysis
critically studying lease(s) in order to forecast future income expectations
Lease cancellation clause
a clause that outlines conditions that cancel the lease
Leasing commission
money paid as commissions to brokers for bringing tenants to a property
Line item (above the line/below the line)
a line item is an expense or revenue source or category; above the line are items listed before calculation of NOI & below the line are items listed after NOI (e.g. TI's & leasing commissions)
Management charge
money either paid or accounted for the management function
Market rent
the rent that should be charged if available on the open market
Mortgage debt service
money paid for borrowed capital
Net income ratio
NOI divided by EGI
Net lease (triple net lease)
a lease where the tenant pays all expenses
Net operating income (NOI)
EGI minus expenses
Net rental basis
a lease where the tenant pays expenses
Net sales proceeds (equity reversion)
Sale price - expenses of sale - loan balance
Non-complete clause
an agreement in a lease that the owner of property will not lease to a competing tenant
Non-realty interest
intangibles & personal property
Operating expense ratio (OER)
Expenses divided by EGI; 1 minus NIR
Operating expenses
Fixed, variable & allowance for replacements
Option to purchase
a lease clause giving the tenant the right to buy under conditions of the clause
Option to renew
a lease clause giving the tenant the right to release under conditions of the clause
Overage rent
the amount paid over a base or minimum rent
Percentage lease
a lease with rent based upon percentage rent
Percentage rent
rent charged as a function (percentage) of some income (usually sales)
Potential gross income (PGI)
potential gross rental income + other income
Pre-tax cash flow
NOI - debt service
Pro forma
a financial statement, sometimes used as synonymous with reconstructed operating statement (but not suggested by the author)
Reconstructed operating statement
reworking income information to indicate an operating statement for appraisal purposes that normalizes some expenses & excludes others
Renewal option
the right to renew a lease by the terms of the option
Rent spikes
increases in rent
Rental concessions
lower rental or giving free rent or other favorable conditions to a tenant
Replacment allowance
accounting for items that tend to be replaced over a long period of time, but cannot be expensed
Revaluation lease
lease with clause for reappraisal of rents
Right of first refusal
a right for the tenant to match an offer to either lease additional space or buy, before the lessor can lease or sell to another
Scheduled rent
rent expected by contract
Semi-gross lease
one where the owner pays some expenses & tenant's others
Step-up (down) lease
lease that changes according to contract
Tenant improvement allowance
$ given for a tenant's build-out
Terminal or residual capitalization rate (Rn)
the capitalization rate used to get the value of the property at the end of the projection period
Total mortgage debt service
all debt service on borrowed capital
Total operating expenses
all expenses on a property
Vacancy & collection loss
money lost from vacant space or turnover, or $ accounted for the same
Variable expenses
expenses that tend to vary with occupancy change over a projection period
Lease Types
Flat rental, Graduated rental, Revaluation, Index, & Percentage
Lease types
1. Flat rental
2. Graduated rental
3. Revaluation
4. Index
5. Percentage
Contract rent
actual
Market rent
in the open market
Scheduled rent
in leases adjusted for concessions & not including % rent
Effective rent
base rent adjusted for rental concessions, excess tenant finish, moving expenses, lease buyouts, cash allowances, etc.
Excess rent
amount over market rent
Deficit rent
rent below market rent
Percentage rent
based as % of sales
Overage rent
rent over a base amount
Exclusions from reconstructed operating statement
1. Book depreciation
2. Income tax
3. Special corporation cost
4. Addition to capital