Glossary
Explore and understand some of the most common terms you will encounter when it comes to CRE asset management, debt management, and business intelligence.
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10-Year Treasury
The 10-Year Treasury rate is a crucial indicator influencing long-term borrowing costs within CRE financing. This rate, reflecting investors’ outlook on economic conditions and inflation, guides mortgage rates and investment strategies in the CRE market.
Accounts Payable
In CRE, accounts payable are outstanding debts owed by a property for goods or services received. Maintenance expenses, utilities, and professional services related to CRE operations may be included in this category.
Accounts Receivable
These are amounts owed to property owners or investors for leasing space within properties, encompassing rental income from tenants and other receivables linked to property operations. Across both commercial and residential properties, they play a crucial role in maintaining cashflow and property value.
Actuals
Actuals refer to the real, observed financial performance of a commercial property or portfolio over a specific period. Analyzing actuals helps stakeholders assess the profitability and operational efficiency of CRE investments. This comparison allows for insights into areas where performance may be exceeding or falling short of expectations, informing decision-making and potential adjustments to investment strategies.
Affordable Housing
Affordable housing refers to residential properties with rents or sale prices set at levels affordable to low- and moderate-income households. CRE investors may consider affordable housing projects for their potential social impact and financial returns.
Alpha
In CRE investment, alpha represents the excess return generated by a property or portfolio compared to a benchmark. It reflects the skill of the investor or asset manager in outperforming the market.
Amortization
Amortization means paying off a loan in regular installments over a longer period of time. It includes both principal and interest payments and affects the cashflow and equity buildup of property owners. he structure of amortization can vary depending on the type of loan, with fixed-rate loans having consistent payments throughout the loan term, while payments on floating-rate loans may fluctuate based on changes in interest rates, impacting the overall amortization schedule.
Appraiser
An appraiser in CRE evaluates the value of commercial properties in regard to location, size, condition, and comparable sales. Their assessments are crucial for determining property values, securing financing, and making investment decisions.
Appreciation
Appreciation refers to the increase in the value of a commercial property over time due based on market demand, improvements, or economic growth. It represents a key source of investment returns for CRE owners.
Artificial Intelligence
Artificial intelligence (AI) technologies are increasingly used in CRE for data analysis, market forecasting, and property management. AI-powered tools can optimize asset performance, improve decision-making, and enhance operational efficiency.
Asset
An asset refers to a commercial property or portfolio of properties owned for investment purposes. Assets generate income through rent or appreciation and may include office buildings, retail centers, multifamily complexes, and industrial facilities.
Asset Manager
An asset manager is responsible for maximizing the value and performance of commercial properties on behalf of owners or investors. They develop and implement strategies to optimize asset returns, mitigate risks, and achieve investment objectives.
Asset Management
Asset management involves overseeing and enhancing the performance of commercial properties to maximize value and returns. It encompasses strategic planning, financial analysis, lease management, and property operations.
Asset Management Software
Asset management software streamlines property management tasks, financial analysis, reporting, and portfolio optimization. It helps asset managers track performance metrics, monitor market trends, and make data-driven decisions.
Asset Optimization
Asset optimization involves maximizing the value and returns of commercial properties through strategic management and operational efficiencies. It aims to enhance cashflow, minimize risks, and achieve investment goals.
Asset Report
An asset report provides comprehensive insights into the financial and operational performance of commercial properties or portfolios. It includes data on revenue, expenses, occupancy rates, leasing activity, and market trends.
Asset Scenario
Asset scenarios involve analyzing different financial and operational scenarios to assess the potential impacts on property performance and investment returns. Stakeholders can develop strategic plans and make informed decisions using asset scenarios.
Asset Valuation
Asset valuation involves determining the market value of commercial properties for investment, financing, or sale purposes. It utilizes appraisal techniques, market comparables, and financial analysis to estimate property worth.
Balance Sheet
A balance sheet offers a glimpse into the financial health of a property at a specific point in time, providing a snapshot of a property’s assets, liabilities, and equity. It helps stakeholders assess solvency, leverage, and investment performance.
Benchmarking
Benchmarking in CRE involves comparing the financial and operational performance of commercial properties or portfolios against industry standards or peer groups. By identifying best practices and areas for improvement, it helps optimize assets’ returns.
Borrower
A borrower refers to an individual or entity that obtains a loan to finance the purchase, development, or refinancing of commercial properties. Borrowers may include property owners, investors, or developers.
Broker
A broker facilitates property transactions between buyers and sellers. They facilitate negotiations, provide market expertise, and assist clients in achieving their real estate objectives.
Budget
In CRE, a budget outlines the projected income and expenses for operating and maintaining commercial properties over a specific period. It helps property owners and managers plan and control costs, allocate resources, and achieve financial goals.
Business Intelligence
Business intelligence (BI) tools in CRE analyze datasets to provide insights into market trends, tenant behavior, and property performance. BI helps stakeholders make data-driven decisions to optimize asset returns and mitigate risks.
Capital Expenditure (CapEx)
CapEx refers to the funds spent on acquiring, upgrading, or improving commercial properties to maintain or increase their value. It includes investments in renovations, infrastructure, and tenant improvements.
Capitalization Rate (Cap Rate)
The cap rate is a key metric used to assess the investment potential of income-producing properties. It represents the ratio of a property’s net operating income (NOI) to its purchase price and helps investors compare returns across different properties.
Cash on Cash
On a CRE property, cash on cash measures how much cashflow it generates compared to how much equity is invested. By using this tool, investors can easily gauge the profitability of their real estate investments.
Cashflow
Cashflow represents the net income generated by a commercial property after accounting for operating expenses, debt service, and capital expenditures. Positive cashflow is essential for property owners to cover expenses and generate returns.
Cashflow Management
Cashflow management involves monitoring and optimizing the flow of cash to ensure sufficient liquidity and financial stability. It includes budgeting, forecasting, and controlling expenses to maximize cashflow.
Cashflow Management Software
Cashflow management software for CRE automates financial processes, budgeting, and forecasting to optimize cashflow and financial performance. It provides real-time insights and analysis to help property owners make informed decisions.
Cashflow Optimization
Cashflow optimization in CRE aims to maximize the net cashflow generated by commercial properties through efficient operations and strategic financial management. It involves minimizing expenses, maximizing revenue, and mitigating risks.
Chart of Accounts
A structured hierarchy of financial categories utilized for categorizing transactions and arranging financial data. It offers a uniform framework for recording and presenting financial details.
Commercial Mortgage-Backed Security (CMBS)
CMBS loans are mortgage-backed securities backed by commercial real estate loans. These loans are pooled together, securitized, and sold to investors, providing liquidity to the commercial mortgage market.
Commercial Property
Commercial properties in CRE include office buildings, retail centers, industrial facilities, multifamily complexes, and mixed-use developments. They generate rental income and may appreciate in value over time, providing investment returns to owners.
Common Equity
Common equity refers to the ownership interest held by investors or stakeholders in a commercial property or portfolio. It represents the remaining value of assets post the subtraction of liabilities and preferred equity, offering ownership entitlements and the prospect of returns via property appreciation and income generation.
Current Assets
Current assets encompass liquid assets or resources that can be made into cash within a short period, usually within one year. These may include cash, accounts receivable, inventory, and short-term investments, providing flexibility and liquidity to property owners or investors.
Current Exposure
Current exposure refers to the total financial risk or potential losses faced by property owners or investors due to current market conditions, contractual obligations, or external factors. It encompasses liabilities, derivatives, or financial instruments subject to changes in value or market fluctuations.
Current Liabilities
Current liabilities represent obligations or debts that are due within one year or the operating cycle of a business. These may include accounts payable, accrued expenses, short-term loans, or portions of long-term debt due within the current period, impacting cashflow and financial stability.
Data Ingestion
Data ingestion refers to the process of collecting, importing, or integrating various types of data from different sources into a centralized database or system. It involves capturing and organizing data to facilitate analysis, reporting, and decision-making in property management, investment analysis, or market research.
Data Silo
In CRE, a data silo refers to isolated or segregated databases, systems, or departments that store and manage data independently, hindering data sharing, collaboration, or integration across the organization. Data silos can impede efficiency, accuracy, and insights in decision-making processes and business operations.
Debt
Debt refers to borrowed funds or capital provided by lenders or financial institutions to property owners or investors for purchasing, developing, or refinancing commercial properties. It signifies a commitment to repay a borrowed sum, inclusive of interest, within a defined timeframe, influencing both cashflow and investment yields.
Debt Management
Debt management involves the strategic planning, analysis, and optimization of debt-related activities and obligations to minimize risks, reduce costs, and maximize returns for property owners or investors. It includes managing debt portfolios, refinancing strategies, and debt service coverage to enhance financial performance and flexibility.
Debt Management Software
Debt management software streamlines and automates the process of managing debt-related activities, obligations, and financial data for commercial properties or portfolios. It provides tools for analyzing debt terms, monitoring payment schedules, and optimizing debt strategies to achieve investment objectives and mitigate risks.
Debt Optimization
Debt optimization entails maximizing the efficiency and effectiveness of debt-related activities, structures, and terms to enhance financial performance and achieve investment goals for commercial properties or portfolios. It involves analyzing debt options, refinancing opportunities, and leverage ratios to minimize costs and risks while maximizing returns.
Debt Service
This refers to the periodic payments or obligations made by property owners or investors to lenders or financial institutions for servicing and repaying borrowed funds or capital. It includes both principal and interest payments on loans or mortgages and impacts cashflow, profitability, and investment returns.
Debt Service Coverage Ratio (DSCR)
A financial measure employed to evaluate a property’s capacity to produce ample income to meet its debt commitments, encompassing both principal and interest repayments. It measures the property’s cashflow relative to its debt service requirements, indicating its financial stability, risk level, and lending capacity.
Debt Yield
The debt yield is a financial metric gauging the return a property generates in relation to its outstanding debt or mortgage value. It represents the property’s net operating income (NOI) divided by its total debt, providing insights into its investment performance, risk profile, and lending value.
Delinquency
Delinquency refers to the failure or delay by tenants or borrowers to make timely payments on their lease agreements or loan obligations. It may result in financial losses, cashflow disruptions, and legal actions, impacting property operations, profitability, and investment returns.
Depreciation
Depreciation denotes the gradual decline in the worth of a commercial property or asset over time, attributable to factors like wear and tear, obsolescence, or economic conditions. It manifests as a non-cash expense, mirroring the property’s devaluation throughout its useful life, thereby impacting tax obligations and financial reports.
Equity
Equity represents the ownership interest or residual value of assets held by property owners or investors after deducting liabilities. It reflects the portion of the property’s value that belongs to the owner, providing potential returns through property appreciation, income generation, or distributions.
Expense Ratio
A financial gauge utilized to evaluate the effectiveness and profitability of a commercial property or portfolio. It achieves this by contrasting its operating expenses with its rental income or net operating income (NOI).
Expenses
Expenses encompass the costs incurred by property owners or investors in operating, maintaining, and managing commercial properties. These may include property taxes, insurance, utilities, maintenance, repairs, management fees, and other operating expenses essential for property operations and performance.
Financial Reporting
Financial reporting involves preparing and presenting financial statements, reports, and disclosures to stakeholders, including investors, lenders, regulators, and management. It provides insights into the financial performance, position, and cashflow of commercial properties or portfolios, facilitating decision-making, analysis, and transparency.
Fixed Assets
Fixed assets refer to long-term tangible assets owned by property owners or investors for use in property operations or investment activities. These may include land, buildings, equipment, machinery, furniture, and other assets with a useful life exceeding one year, essential for generating income and value.
Fixed Interest Rate
A fixed interest rate in CRE financing refers to a loan or mortgage with a stable interest rate that remains unchanged throughout the loan term. It provides predictability and stability in loan payments, protecting borrowers from fluctuations in market interest rates, and facilitating budgeting and financial planning.
Floating Interest Rate
A floating interest rate in CRE financing refers to a loan or mortgage with an interest rate that fluctuates or adjusts periodically based on changes in an underlying benchmark rate, such as the prime rate or LIBOR. It exposes borrowers to interest rate risk but may offer initial lower rates and potential savings over time.
Forward Curve
The forward curve is a graphical representation of the relationship between the expected future interest rates for various maturities. It helps investors and lenders forecast changes in borrowing costs, evaluate financing options, and manage interest rate risk in commercial real estate investments.
Human Intelligence
Human intelligence in commercial real estate (CRE) refers to the knowledge, expertise, and insights provided by industry professionals, stakeholders, and experts in analyzing markets, making investment decisions, and managing properties. It complements data-driven analysis and technology tools in CRE operations, investment, and decision-making processes.
Income
Income in CRE refers to the revenue generated by a property through various sources, including rental income from tenants, lease payments, parking fees, and other income-generating activities. It is a key determinant of property value, cashflow, and investment returns for property owners or investors.
Industrial Property
Industrial property in CRE encompasses buildings, warehouses, distribution centers, and facilities used for manufacturing, storage, logistics, or production activities. It serves as a crucial component of the supply chain and logistics infrastructure, providing essential space for businesses in various industries.
Interest Only Period
An interest-only period refers to a specific time frame during which borrowers are required to make only interest payments on a loan or mortgage, with no principal payments. It offers borrowers lower initial payments and increased cashflow flexibility but may lead to higher payments or refinancing risk after the interest-only period ends.
Interest Rate
Interest rates refers to the cost of borrowing funds or capital for commercial real estate investments, typically expressed as a percentage of the principal amount borrowed. It influences borrowing costs, investment returns, and property values, affecting financing decisions and investment strategies in the CRE market.
Investor
An investor in CRE is an individual, entity, or institution that allocates capital to acquire, own, or finance commercial properties for investment purposes. Investors encompass a broad spectrum, ranging from individuals to private equity firms, pension funds, real estate investment trusts (REITs), and institutional investors. Their motivations vary, including the pursuit of income, capital appreciation, or portfolio diversification through commercial real estate (CRE) investments.
In-Place Rent
In-place rent refers to the current rental income generated by a commercial property from existing tenants under lease agreements. It represents the contractual rent payments received and serves as a key component of property valuation and investment analysis.
I/E IQ Benchmark
The income/expenses (I/E) IQ benchmark in CRE provides a standardized measure of a commercial property’s financial performance relative to industry peers or benchmarks. It helps property owners, investors, and stakeholders assess operating efficiency, expense management, and investment returns for CRE properties.
Key Performance Indicator
Key performance indicators (KPIs) in CRE are quantifiable metrics used to measure and evaluate the performance, efficiency, and effectiveness of properties, portfolios, or investment strategies. They help stakeholders monitor progress, identify trends, and make informed decisions to achieve investment objectives and optimize asset returns.
Leasing Report
A leasing report provides comprehensive insights into leasing activities, trends, and performance metrics for commercial properties or portfolios. Common metrics include leasing, delinquency, upcoming lease expirations, and weekly traffic, helping property owners and managers optimize occupancy, rental income, and tenant retention.
Lender
A lender in CRE is an individual, financial institution, or entity that provides loans, financing, or capital to property owners or investors for purchasing, developing, or refinancing commercial properties. Lenders may include banks, mortgage companies, insurance companies, private equity firms, and government agencies offering a variety of loan products and terms.
Liquidity
Liquidity refers to the convenience with which assets, investments, or securities can be transformed into cash or traded in the market without triggering substantial price fluctuations or losses. It reflects the ability of property owners or investors to access funds quickly for operational needs, investment opportunities, or financial emergencies.
Loan Covenants
Loan covenants are contractual agreements or provisions included in loan agreements between borrowers and lenders to establish terms, conditions, and obligations related to the loan. They may include financial ratios, performance metrics, or restrictions aimed at protecting lenders’ interests, ensuring repayment, and mitigating risks.
Loan Defeasance
Loan defeasance in CRE is a process where a borrower substitutes collateral for a loan with other securities, typically government bonds, to release the original collateral and satisfy the loan obligations. It allows borrowers to prepay loans without incurring prepayment penalties while providing lenders with continued cashflow and security.
Loan Lockout Period
A loan lockout period refers to a specific time frame during which borrowers are prohibited from prepaying or refinancing a loan without incurring penalties or restrictions. It provides lenders with a guaranteed period of interest income and protects them from early repayment risks, ensuring stability and predictability in loan terms.
Loan Term
The length of time during which borrowers repay a loan or mortgage to lenders. This period involves regular payments of principal and interest by borrowers until the loan is fully amortized or repaid, impacting cashflow, expenses, and investment yields.
Loan Yield Maintenance
Loan yield maintenance is a prepayment penalty or fee imposed on borrowers for repaying a loan before its scheduled maturity date. It compensates lenders for lost interest income and ensures they achieve a specified yield or return on the loan, protecting their investment and cashflow.
Long-Term Liabilities
Long-term liabilities represent obligations or debts that are due beyond one year or the operating cycle of a business. These may include long-term loans, mortgages, bonds, or deferred tax liabilities, impacting cashflow, financial stability, and solvency for property owners or investors.
Market Data
Market data refers to information, statistics, and trends related to property transactions, leasing activity, vacancy rates, rental rates, and investment performance in specific markets or geographic areas. It helps stakeholders analyze market conditions, assess opportunities, and make informed decisions in property investment and management.
Mixed-Use Property
Mixed-use property refers to real estate development or building that combines two or more different types of uses or functions, such as residential, commercial, retail, office, or recreational spaces. It offers diversity, convenience, and synergy by integrating multiple uses within a single development or location, catering to diverse needs and preferences.
Mortgage
A mortgage in commercial real estate is a loan or financial instrument secured by a property as collateral, typically used by property owners or investors to finance the purchase, development, or refinancing of commercial properties. It represents a legal agreement between borrowers and lenders, specifying terms, conditions, and obligations for repayment.
Multifamily Property
A multifamily property refers to residential buildings or complexes with multiple rental units, such as apartments, condominiums, townhomes, or mixed-use developments containing residential units. It provides housing options for multiple tenants within a single property, generating rental income and investment returns for property owners or investors.
Net Exposure
Net exposure refers to the total financial risk or market exposure faced by property owners or investors after accounting for offsetting positions, hedges, or derivatives. It represents the difference between long and short positions, reflecting the extent of potential losses or gains from market movements or asset performance.
Net Operating Income (NOI)
A key financial metric used to measure the profitability and operating performance of income-producing properties. It represents the property’s total revenue from rental income and other operating sources minus operating expenses, excluding debt service and capital expenditures.
Non-Rentable Unit
A non-rentable unit refers to a portion of a property or space that is not leased or available for rent due to physical limitations, legal restrictions, or functional constraints. It may include common areas, utility spaces, or amenities that are not suitable for occupancy or generate rental income.
Occupancy Rate
The occupancy rate measures the percentage of leased or occupied space within a commercial property or portfolio relative to its total rentable space. It indicates the level of tenant demand, property performance, and income stability, influencing rental income, property value, and investment returns.
Office Property
Office property refers to commercial buildings or spaces primarily used for business, professional, administrative, or corporate activities, including office towers, business parks, and coworking spaces. It serves as a central hub for conducting business operations, accommodating employees, and hosting clients or customers.
Operating Cash
Operating cash in CRE refers to the cashflow generated by a property’s core business operations, including rental income, leasing activity, and other operating revenues. It represents the liquidity available for covering operating expenses, debt service, and capital expenditures, essential for property management and financial stability.
Operating Expense
Operating expenses represent the costs incurred by property owners or investors in operating, maintaining, and managing commercial properties. These may include property taxes, insurance, utilities, maintenance, repairs, management fees, and other expenses essential for property operations and performance.
Operating Statement
An operating statement provides a detailed breakdown of a commercial property’s operating revenues and expenses during a specified period, usually on a monthly, quarterly, or annual basis. It assists property owners and managers in monitoring financial performance, identifying trends, and making informed decisions to enhance property operations and maximize investment returns.
Owner/Operator
An owner/operator in CRE is an individual or entity that owns and directly manages commercial properties or portfolios. They are responsible for overseeing property operations, leasing, maintenance, financial management, and strategic decision-making to maximize property value and investment returns.
Physical Occupancy Rate
The physical occupancy rate measures the percentage of leased or occupied space within a commercial property or portfolio relative to its total rentable space, accounting for physical vacancies and vacancies due to lease terms or conditions. It reflects the actual utilization of space by tenants, indicating property performance and income stability.
Portfolio
A portfolio in CRE refers to a collection or group of properties owned or managed by an individual, entity, or institution for investment purposes. It may include diverse property types, locations, and investment strategies, providing risk diversification, income stability, and potential returns for investors.
Portfolio Diversification
Portfolio diversification involves spreading investment capital across different property types, locations, or investment strategies to reduce risk and enhance returns. It helps investors minimize exposure to specific market factors or economic conditions, improving overall portfolio performance and stability.
Portfolio Manager
A portfolio manager is tasked with supervising and administering a portfolio of properties on behalf of owners, investors, or institutions. They develop and implement investment strategies, optimize asset performance, and monitor portfolio metrics to achieve investment objectives and maximize returns.
Portfolio Management
Portfolio management involves overseeing and optimizing the performance of a collection or group of properties to achieve investment objectives and maximize returns. It includes strategic planning, asset allocation, risk management, and performance measurement to enhance portfolio value and financial outcomes.
Portfolio Management Software
Portfolio management software for CRE provides tools and capabilities to streamline and automate portfolio management tasks, analysis, and reporting for commercial properties or portfolios. It aids portfolio managers in monitoring performance metrics, tracking market trends, and making data-driven decisions to enhance asset returns and mitigate risks.
Portfolio Optimization
Portfolio optimization involves analyzing and adjusting the composition, allocation, and strategies of a property portfolio to maximize returns and minimize risks. It takes into account factors such as asset allocation, risk tolerance, market conditions, and investment objectives to attain an ideal equilibrium between risk and return for investors.
Preferred Equity
Preferred equity represents a hybrid form of capital that combines features of debt and equity financing. It provides investors with priority rights to distributions, repayment, and ownership interests in a property, offering fixed income-like returns with equity participation potential.
Prepayment Penalty
A fee levied on borrowers for repaying a loan or mortgage prior to its designated maturity date. It compensates lenders for lost interest income and protects them from early repayment risks, ensuring a minimum return on the loan.
Proforma
A proforma is a financial projection or forecast that estimates the future performance and financial outcomes of a commercial property or portfolio. It includes income, expenses, cashflow, and investment returns based on assumptions, market conditions, and expected changes in property operations or ownership.
Property Class
Property class categorizes properties into distinct classes or categories, considering factors such as age, location, size, amenities, and quality. It helps investors and stakeholders assess risk, value, and investment potential, distinguishing between prime, secondary, and tertiary properties in the market.
Property Management
Property management involves overseeing the day-to-day operations, maintenance, and administration of commercial properties on behalf of owners or investors. It includes tenant relations, leasing, maintenance, financial management, and strategic planning to maximize property value and investment returns.
Property Management System
A property management system (PMS) provides tools and capabilities to streamline and automate property management tasks, operations, and workflows. It helps property managers track leases, manage maintenance requests, collect rent, and generate reports to optimize property performance and tenant satisfaction.
Property Manager
They are responsible for overseeing and managing the operations, maintenance, and administration of commercial properties on behalf of owners or investors. They handle tenant relations, leasing, maintenance, financial management, and strategic planning to optimize property value and investment returns.
Property Type
Property types are the categories or classifications of commercial properties based on their primary use, function, or purpose. Common property types include office, retail, industrial, multifamily, hospitality, and mixed-use properties, each serving different market segments and investment objectives.
Refinance
Refinancing in CRE entails substituting an existing loan or mortgage with a new one, usually aimed at capitalizing on improved terms, rates, or financing alternatives. It allows borrowers to lower costs, adjust loan terms, or access equity in a property, improving cashflow and financial flexibility.
Rent Roll
A rent roll provides a detailed schedule or list of all lease agreements, tenants, rental rates, and terms for a commercial property or portfolio. It includes information on occupancy, lease expirations, rental income, and tenant demographics, serving as a valuable tool for property management, analysis, and financial reporting.
Retail Property
Retail property in CRE refers to commercial buildings or spaces primarily used for retail, shopping, or consumer-oriented activities, including shopping centers, malls, strip malls, and storefronts. It serves as a destination for consumers to purchase goods and services, generating rental income and foot traffic for retailers and property owners.
Return on Investment
Return on investment (ROI) quantifies the profitability and effectiveness of an investment compared to its cost or initial capital expenditure. It reflects the relationship between investment gains or income derived from a property and the initial investment sum, offering valuable insights into investment performance and value enhancement.
Risk Management
Risk management involves identifying, assessing, and mitigating risks associated with commercial property investments, operations, and ownership. It includes strategies, processes, and tools to minimize potential losses, protect assets, and optimize returns by addressing market, financial, operational, and regulatory risks.
Scenario
A scenario in CRE refers to a hypothetical or alternative situation, event, or outcome that may affect property performance, market conditions, or investment decisions. Scenarios help stakeholders evaluate potential risks, opportunities, and impacts on property value, cashflow, and investment returns in different market conditions. Examples of scenarios include increasing rent, refinancing, changes in occupancy rates, economic downturns, or shifts in local zoning regulations.
Secured Overnight Financing Rate (SOFR)
A benchmark interest rate that reflects the cost of overnight borrowing secured by Treasury securities. It serves as an alternative reference rate to LIBOR (London Interbank Offered Rate) for pricing financial instruments, including commercial real estate (CRE) loans and derivatives.
Statement of Cashflows
A concise summary of a commercial property’s cash inflows and outflows during a specified timeframe, typically on a monthly, quarterly, or annual basis. It categorizes cash transactions into operating, investing, and financing activities, facilitating stakeholders in scrutinizing the sources, applications, and alterations in cashflow.
Trailing 12 Months (T12)
Trailing 12 months (T12) refers to the most recent consecutive 12-month period preceding a specific date. It provides a snapshot of a property’s financial performance, income, expenses, and cashflow over the past year, helping stakeholders assess trends, compare periods, and make informed decisions.
Vacancy Rate
This measures the percentage of unoccupied or vacant space within a commercial property or portfolio relative to its total rentable space. It indicates market supply, demand, and property performance, influencing rental income, property value, and investment returns for property owners or investors.
Valuation
Valuation is the process of determining the market or fair value of a property or portfolio based on various factors, including income, comparable sales, replacement cost, and market conditions. It provides insights into property value, investment potential, and pricing decisions for buyers, sellers, lenders, and investors.
Waterfall
A waterfall refers to a hierarchical structure or distribution mechanism for allocating investment returns or cashflow among different stakeholders or participants in a property or fund. It defines the sequence, priority, and terms for distributing profits, preferred returns, and incentives based on predetermined criteria and thresholds.
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