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CRE Glossary

Essential commercial real estate terms and definitions

A

Absorption Rate

The rate at which available space is leased in a given market over a specific period, indicating demand strength.

Used in:Valuation Engine

Assignment and Subletting

The transfer of lease rights to a third party, either fully (assignment) or partially (sublease), usually requiring landlord consent.

Used in:LOI RedliningLease Abstract

B

Break-Even Occupancy

The minimum occupancy level at which a property's income covers all operating expenses and debt service.

Used in:Valuation Engine

C

CAM (Common Area Maintenance)

The shared operating expenses for a commercial property that are allocated to tenants based on their proportionate share of leasable area. Includes items like landscaping, parking lot maintenance, security, and common area utilities.

Used in:CAM ReconciliationValuation Engine

Cap Rate (Capitalization Rate)

The ratio of net operating income to property value, used as a quick metric to estimate the return on a real estate investment.

Used in:Valuation EngineCap Rate Calculator

Cash-on-Cash Return

Annual pre-tax cash flow divided by total cash invested, measuring the annual yield on the equity portion of an investment.

Used in:Valuation Engine

Co-Tenancy Clause

A lease provision allowing a tenant to reduce rent or terminate if specified anchor tenants close or occupancy falls below a threshold.

Used in:LOI RedliningLease Abstract

COI (Certificate of Insurance)

A document issued by an insurance company verifying that a tenant carries the required coverage types and limits specified in their lease.

Used in:COI Compliance

CPI Escalation

A rent increase tied to changes in the Consumer Price Index, providing inflation protection for the landlord.

Used in:Valuation EngineLease Abstract

D

DCF (Discounted Cash Flow)

A valuation method that projects future cash flows from a property and discounts them back to present value using a required rate of return.

Used in:Valuation Engine

Debt Yield

Net operating income divided by total loan amount, used by lenders as a measure of loan risk independent of interest rates.

Used in:Valuation Engine

DSCR (Debt Service Coverage Ratio)

The ratio of net operating income to annual debt service payments, measuring a property's ability to cover its mortgage obligations.

Used in:Valuation Engine

E

Equity Multiple

The total cash distributions received from an investment divided by the total equity invested, measuring total return on invested capital.

Used in:Valuation Engine

Estoppel Certificate

A signed statement by a tenant confirming the key terms and status of their lease, typically required during property sales or refinancing.

Used in:Estoppel Certificate

Exclusive Use Clause

A lease provision restricting the landlord from leasing other spaces in the property to competing businesses.

Used in:LOI RedliningLease Abstract

G

Going-In Cap Rate

The capitalization rate at the time of acquisition, calculated by dividing the first year's stabilized NOI by the purchase price.

Used in:Valuation Engine

Gross Lease

A lease where the landlord pays all operating expenses from the gross rent collected, with no additional charges to the tenant.

Used in:Lease AbstractValuation Engine

H

Holdover

The period when a tenant remains in possession after their lease expires, typically subject to a penalty rate of 150% of the last rent paid.

Used in:LOI RedliningLease Abstract

I

IRR (Internal Rate of Return)

The discount rate that makes the net present value of all cash flows from a property investment equal to zero.

Used in:Valuation Engine

L

LOI (Letter of Intent)

A non-binding document outlining the key business terms of a proposed lease transaction between landlord and tenant before a formal lease is drafted.

Used in:LOI Redlining

M

Modified Gross Lease

A hybrid lease where the landlord and tenant share operating expenses, with a base year or expense stop determining the split.

Used in:Lease AbstractValuation Engine

N

NNN (Triple Net Lease)

A lease structure where the tenant pays base rent plus their proportionate share of property taxes, insurance, and common area maintenance expenses.

Used in:Valuation EngineLease Abstract

NOI (Net Operating Income)

Gross revenue from a property minus all operating expenses, excluding debt service, capital expenditures, and income taxes.

Used in:Valuation EngineOwner Report

O

Operating Expense Ratio

Total operating expenses divided by effective gross income, measuring operational efficiency of a property.

Used in:Valuation EngineOwner Report

P

Percentage Rent

Additional rent paid by a retail tenant calculated as a percentage of gross sales above a specified breakpoint threshold.

Used in:Valuation EngineLease Abstract

R

Rent Roll

A document listing all tenants in a property with their suite numbers, square footage, lease dates, and current rent amounts.

Used in:Rent Roll ParserValuation Engine

T

Terminal Cap Rate

The assumed capitalization rate used to estimate the resale value of a property at the end of the holding period in a DCF analysis.

Used in:Valuation Engine

TI (Tenant Improvements)

The customized alterations a landlord makes to rental space to accommodate a tenant's specific needs, often funded through an allowance.

Used in:LOI RedliningLease Abstract

V

Vacancy Rate

The percentage of all available units or space in a property that are unoccupied at a given time.

Used in:Valuation EngineRent Roll Parser

W

WALT (Weighted Average Lease Term)

The average remaining lease term across all tenants, weighted by each tenant's square footage or rent contribution.

Used in:Rent Roll ParserValuation Engine

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