Commercial Real Estate Terms – A

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Abatement: Often referred to as free rent or early occupancy and may occur outside or in addition to the primary term of the lease
Above building standard: Upgraded finishes and specialized designs necessary to accommodate a tenant’s requirements

Absorption Rate:
The rate at which rentable space is filled. Gross absorption is a measure of the total square feet leased over a specified period with no consideration given to space vacated in the same geographic area during the same time period. Net absorption is equal to the amount occupied at the end of a period minus the amount occupied at the beginning of a period and takes into consideration space vacated during the period.

Ad Valorem
: Meaning “according to value,” this is a tax imposed on the value of property that is typically based on the local government’s valuation of the property.

Administrative Fee:
Usually stated as a percentage of assets under management or as a fixed annual dollar amount



Adviser: A broker, consultant or investment banker who represents an owner in a transaction. Advisers may be paid a retainer and or a performance fee upon the close of a financing or sales transaction.

Alternative or Specialty Investments
: Property types that are not considered conventional institutional-grade real estate investments. Examples include congregate care facilities, self-storage facilities, mobile homes, timber, agriculture and parking lots.

Amortization: The liquidation of a financial debt through regular periodic installment payments. For tax purposes, the periodic deduction of capitalized expenses such as organization costs

Anchor
: The tenant that serves as the predominant draw to a commercial property, usually the largest tenant in a shopping center

Annual Percentage Rate (APR): The actual cost of borrowing money. It may be higher than the note rate because it represents full disclosure of the interest rate, loan origination fees, loan discount points and other credit costs paid to the lender.


Appraisal: An estimate of a property’s fair market value that is typically based on replacement cost, discounted cash flow analysis and/or comparable sales price. See our Appraisal Guide

Appreciation:
An increase in the value or price of an asset

Appreciation Return:
The portion of the total return generated by the change in the value of the real estate assets during the current quarter, as measured by both appraisals and sales of assets

Arbitrage: Buying securities in one market and then selling them immediately in another market to make a profit on the price discrepancy. In real estate, one can flip homes or contracts.

As-is Condition:
The acceptance by the tenant of the existing condition of the premises at the time a lease is consummated, including any physical defects or when a property is sold “AS-IS” with all responsibilities placed on the buyer.

Assessment
: A fee imposed on property, usually to pay for public improvements such as water, sewers, streets, improvement districts, etc.

Asset Management:
The various disciplines involved with managing real property assets from the time of investment through the time of disposition, including acquisition, management, leasing, operational/financial reporting, appraisals, audits, market review and asset disposition plans. Also known as Property Management. See our Property Management Guides.

Asset Management Fee:
A fee charged to investors based on the amount invested into real estate assets for the fund or account.

Asset Turnover
: Calculated as total revenues for the trailing 12 months divided by the average total assets



Assets Under Management: The current market value of real estate assets for which a manager has investment and asset management responsibilities

Assignee Name:
The individual or entity to which the obligations of a lease, mortgage or other contract have been transferred

Assignment:
A transfer of the lessee’s entire stake in the property. It is distinguishable from a sublease where the sublessee acquires something less than the lessee’s entire interest.

Attorn
: To agree to recognize a new owner of a property and to pay him/her rent.

Average Downtime:
Expressed in months, the amount of time expected between the expiration of a lease and the commencement of a replacement lease under current market conditions

Average Free Rent:
Expressed in months, the rent abatement concession expected to be granted to a tenant as part of a lease incentive under current market conditions. Commonly used in hard to rent centers or to allow for tenant improvements.

Average Occupancy: The average occupancy rate of each of the preceding 12 months. A high occupancy rate is nice to have.

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