Income & Expense Analysis

Front 1

Book Depreciation

Back 1

tax depreciation; generally accumulated tax depreciation

Front 2

Capital expenditures

Back 2

money spent on items that are not expensed because their life extends greater than one year

Front 3

Common area maintenance (CAM)

Back 3

the maintenance of areas shared by more than one tenant; e.g. parking areas, sidewalks, landscaping

Front 4

Continued occupancy clause

Back 4

a clause requiring the tenant to have uninterrupted occupancy, or be in default of the lease

Front 5

Contract rent

Back 5

the rent paid by tenant (lessee) to landlord (lessor) established by the lease

Front 6

Deficit rent

Back 6

the amount of contract rent paid under market rent

Front 7

Effective gross income (EGI)

Back 7

PGI less vacancy & collection loss; collected rents

Front 8

Effective rent

Back 8

total base or minimum rent paid over a lease less all concessions, including excess tenant finish & free rent, etc.

Front 9

Escalation clause

Back 9

provision whereby tenant pays in excess of base amount

Front 10

Escalation income

Back 10

income that increases

Front 11

Escape clause

Back 11

a clause allowing a tenant or landlord to void a lease before its expiration by the term of the lease

Front 12

Excess rent

Back 12

the amount of rent paid above market rent

Front 13

Exclusive use clause

Back 13

a clause in a lease specifying the allowed use of a property

Front 14

Expense cap

Back 14

the maximum amount that a landlord is required to pay for expenses; tenants are billed the amount spent over the expense cap

Front 15

Expense recovery

Back 15

the amount of money paid to the owner by the tenant to reimburse expenses

Front 16

Expense stop

Back 16

the amount the owner of property is required to pay (the tenant pays past the cap)

Front 17

Fixed expenses

Back 17

taxes and insurance, usually; those expenses that tend to remain fixed over a 1 year projection period

Front 18

Flat rental lease

Back 18

lease that stays fixed

Front 19

Forecast

Back 19

prediction of the future, or todays expectation of the future

Front 20

Going-in cap rate

Back 20

the first year's NOI divided by value or sale price

Front 21

Graduated rental lease

Back 21

a lease that goes up on a set schedule

Front 22

Gross lease

Back 22

a lease arrangement where the owner pays all expenses

Front 23

Gross rental clause

Back 23

one where the landlord pays all expenses

Front 24

Index lease

Back 24

rental adjustments based upon CPI or other index

Front 25

Kick-out clause

Back 25

a clause that allows a tenant to void a lease if certain sales are not reached or if an anchor leaves

Front 26

Landlord burden clause

Back 26

the requirements of a landlord under a lease agreement

Front 27

Lease

Back 27

legal agreement transferring and defining the right to use and occupancy

Front 28

Lease analysis

Back 28

critically studying lease(s) in order to forecast future income expectations

Front 29

Lease cancellation clause

Back 29

a clause that outlines conditions that cancel the lease

Front 30

Leasing commission

Back 30

money paid as commissions to brokers for bringing tenants to a property

Front 31

Line item (above the line/below the line)

Back 31

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)

Front 32

Management charge

Back 32

money either paid or accounted for the management function

Front 33

Market rent

Back 33

the rent that should be charged if available on the open market

Front 34

Mortgage debt service

Back 34

money paid for borrowed capital

Front 35

Net income ratio

Back 35

NOI divided by EGI

Front 36

Net lease (triple net lease)

Back 36

a lease where the tenant pays all expenses

Front 37

Net operating income (NOI)

Back 37

EGI minus expenses

Front 38

Net rental basis

Back 38

a lease where the tenant pays expenses

Front 39

Net sales proceeds (equity reversion)

Back 39

Sale price - expenses of sale - loan balance

Front 40

Non-complete clause

Back 40

an agreement in a lease that the owner of property will not lease to a competing tenant

Front 41

Non-realty interest

Back 41

intangibles & personal property

Front 42

Operating expense ratio (OER)

Back 42

Expenses divided by EGI; 1 minus NIR

Front 43

Operating expenses

Back 43

Fixed, variable & allowance for replacements

Front 44

Option to purchase

Back 44

a lease clause giving the tenant the right to buy under conditions of the clause

Front 45

Option to renew

Back 45

a lease clause giving the tenant the right to release under conditions of the clause

Front 46

Overage rent

Back 46

the amount paid over a base or minimum rent

Front 47

Percentage lease

Back 47

a lease with rent based upon percentage rent

Front 48

Percentage rent

Back 48

rent charged as a function (percentage) of some income (usually sales)

Front 49

Potential gross income (PGI)

Back 49

potential gross rental income + other income

Front 50

Pre-tax cash flow

Back 50

NOI - debt service

Front 51

Pro forma

Back 51

a financial statement, sometimes used as synonymous with reconstructed operating statement (but not suggested by the author)

Front 52

Reconstructed operating statement

Back 52

reworking income information to indicate an operating statement for appraisal purposes that normalizes some expenses & excludes others

Front 53

Renewal option

Back 53

the right to renew a lease by the terms of the option

Front 54

Rent spikes

Back 54

increases in rent

Front 55

Rental concessions

Back 55

lower rental or giving free rent or other favorable conditions to a tenant

Front 56

Replacment allowance

Back 56

accounting for items that tend to be replaced over a long period of time, but cannot be expensed

Front 57

Revaluation lease

Back 57

lease with clause for reappraisal of rents

Front 58

Right of first refusal

Back 58

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

Front 59

Scheduled rent

Back 59

rent expected by contract

Front 60

Semi-gross lease

Back 60

one where the owner pays some expenses & tenant's others

Front 61

Step-up (down) lease

Back 61

lease that changes according to contract

Front 62

Tenant improvement allowance

Back 62

$ given for a tenant's build-out

Front 63

Terminal or residual capitalization rate (Rn)

Back 63

the capitalization rate used to get the value of the property at the end of the projection period

Front 64

Total mortgage debt service

Back 64

all debt service on borrowed capital

Front 65

Total operating expenses

Back 65

all expenses on a property

Front 66

Vacancy & collection loss

Back 66

money lost from vacant space or turnover, or $ accounted for the same

Front 67

Variable expenses

Back 67

expenses that tend to vary with occupancy change over a projection period

Front 68

Lease Types

Back 68

Flat rental, Graduated rental, Revaluation, Index, & Percentage

Front 69

Lease types

Back 69

1. Flat rental
2. Graduated rental
3. Revaluation
4. Index
5. Percentage

Front 70

Contract rent

Back 70

actual

Front 71

Market rent

Back 71

in the open market

Front 72

Scheduled rent

Back 72

in leases adjusted for concessions & not including % rent

Front 73

Effective rent

Back 73

base rent adjusted for rental concessions, excess tenant finish, moving expenses, lease buyouts, cash allowances, etc.

Front 74

Excess rent

Back 74

amount over market rent

Front 75

Deficit rent

Back 75

rent below market rent

Front 76

Percentage rent

Back 76

based as % of sales

Front 77

Overage rent

Back 77

rent over a base amount

Front 78

Exclusions from reconstructed operating statement

Back 78

1. Book depreciation
2. Income tax
3. Special corporation cost
4. Addition to capital