Call date - A lender's periodic or continuous rights that can cause a call for the payment of the total principal balance of a loan prior to the contractual date of maturity. Also the date at which a bond may be redeemed by its issuer prior to maturity date.
CAM - Maintenance charges for the upkeep of a building's common areas.
Capital appreciation - A property's or a portfolio of properties' change in market value adjusted for capital improvements and any partial sales.
Capital expenditures - Investment of cash, or the borrowing of funds, for the expenditures resulting in the acquisition of or addition to fixed assets.
Capital gain - The difference between the net proceeds from the sale of an asset or property and the asset's or property's book value.
Capital improvements - Expenditures necessary to repair a property or to add new improvements and thus increase its life.
Capital markets - Markets where businesses or individuals can raise or borrow equity from a public placement or a private placement.
Capitalization -
- The total monetary value of different securities a company issues.
- The process of imputing an income stream's value by dividing the annual net income pre-tax income and before depreciation by a rate of return expressed in decimal. Used in real estate appraisals and lending.
Capitalization rate - Rate at which net operating income is discounted to determine a property's value. The net operating income divided by the sales price or value of a property expressed as a percentage.
Cap Rate - An investor's rate of return if the investor was to pay cash for a property with commercial income.
Carrying charges - Incidental property ownership costs that a landlord absorbs during a building's initial lease-up and during any vacancy periods afterwards.
Cash flow - The net amount of cash generated by a corporation's or property's operation. Net post-tax revenue minus expenses.
Cash flow recapture clause - A provision in a loan agreement that requires a borrower to apply excess cash flow or a percentage thereof toward reducing the balance of the outstanding debt.
Cash-on-cash yield - The relationship between a property's net cash flow and the average invested capital amount measured for an operating year, given as a percentage.
Certificate of occupancy - A local government agency's or building department's document certifying that a building and/or the leased area was inspected and found in a condition satisfactory for occupancy.
Chapter 7 - A chapter in the Federal Bankruptcy Code that deals with business dissolution that does not involve the filing of a plan of repayment as in Chapter 13. Instead, the bankruptcy trustee gathers and sells the debtor's nonexempt assets and uses the proceeds of such assets to pay creditors. Part of the debtor's property may be subject to liens and mortgages that pledge the property to other creditors. Debtors are allowed to keep certain "exempt" property; but a trustee will liquidate the debtor's remaining assets.
Chapter 11 - That portion of the Federal Bankruptcy Code that deals with business reorganizations. Under chapter 11, a debtor may seek an adjustment of debts, such as a reduction of the debt or by extending the time period for the debt's repayment.
Circulation factor - Square footage of interior space needed for internal office circulation which is not considered part of the net square footage
Class "A" - A real estate rating indicating a property that generates the highest rents per square foot due to its high quality and/or desirable location.
Class "B" - Indicates good assets that charges reasonable rents for reasonable quality, but lack attributes that permits an owner to charge the highest rents.
Class "C" - Properties that offer tenants few amenities but are otherwise in acceptable physical condition, providing cost-effective space to tenants who are not particularly image-conscious
Clear-span facility - A building, such as a warehouse, with no internal support walls or columns, the roof is supported by the external walls or columns.
Closed-end fund - An investment fund with a fixed number of shares and a predetermined life, which is not obligated to redeem outstanding shares prior to the end of the fund.
Closing - A period of time after a registration statement is effective and an offering starts, usually less than a week, which gives underwriters time to receive payments for the securities offered.
CMBS (Commercial Mortgage-Backed Securities) - Securities backed by commercial property loans.
Cognovit note - From the Latin "he confesses", a promissory note which includes wording to the extent that the debtor acknowledges liability and allows the creditor to obtain a judgment without a suit. Not permitted in all states.
Collateralized Mortgage Obligation (CMO) - A type of mortgage backed security created by dividing the rights to receive the principal and interest cash flows from the underpinning pool of mortgages into separate tiers called tranches. A multi-class bond collateralized by mortgage loans or mortgage pass-through securities.
Co-investment - Co-investment occurs when two or more pension funds or groups of funds share ownership of a real estate investment. In co-investment vehicles, relative ownership is always based on the amount of capital contributed. It also refers to an arrangement in which an investment manager or adviser co-invests its own capital alongside the investor.
Co-investment program - An investment partnership that enables two or more pension funds to co-invest their capital in a single property or portfolio of properties. This allows investors to gain a greater investment diversification or invest in larger properties typically outside their reach, with a more control than is afforded in the usual property investment fund offerings.
Collateral - Asset(s) promised as a security to a lender to ensure full payment of a loan in case of default.
Commercial hard money loan - A loan issued to a business entity or individual signing on behalf of a commercial entity, such as a corporation. It is usually secured against a commercial property. If it is also secured against a residence or additional property in conjunction with the commercial property, it is additionally referred to as a Blanket Mortgage.
Commingled fund - Money pooled for a common purpose. A fund that enables qualified employee benefit plans to pool their capital in order to gain professional management, more diversification or investment positions in larger properties.
Commercial evaluation - A commercial appraiser will use Market Approach, Income Approach, and Cost Approach to Valuation to arrive at an opinion of value. This is one of the reasons why a commercial appraisal report is more expensive than a residential appraisal. Lenders pay most attention to the Income Approach to Value.
Common area - For lease purposes, the areas of a building and its grounds that are available for the non-exclusive use of all its tenants, such as stairwells, restrooms, lobbies, and hallways.
Common area maintenance - The portion of a tenant's rent that is added to the base rent for the upkeep of the common areas. Upkeep examples are snow removal, lighting, insurance, and property taxes.
Comparables - Other real estate properties with similar characteristics used to determine the fair market lease rate or sale price.
Comparative Market Analysis - An estimate of the real estate value based on an analysis of sales of comparable properties.
Concessions - Cash or its equivalent, such as rental abatement, additional tenant finish allowance, or moving allowance, used by the landlord to persuade a potential tenant to sign a lease agreement.
Condemnation - A government's process of taking private property through the power of eminent domain, without the consent of the owner, for public use.
Conduit - An alliance between mortgage brokers and an non-affiliated organization that regularly purchases loans, usually with a goal of pooling and securitizing them.
Construction loan - Short-term financing for the construction of a property that gets replace by long-term mortgage upon completion of construction.
Construction management - The act of ensuring that all the stages of the construction project are completed on time and according to all the necessary codes.
Consultant - A legal entity or individual providing the following services to institutional investors: definition of real estate investment policy; adviser or manager recommendations; real estate portfolio analysis; monitoring of and reporting on portfolio performance, commingled fund and property asset; and review of specified real estate, securities and portfolio investment opportunities. Consultants do not source or execute transactions and do not directly manage assets.
Consumer price index (CPI) - Measures inflation in relation to the changes in the cost of goods and services bought by a specified population during a base period of time. The CPI is commonly used to protect the landlord's rental stream against inflation or a generalized way to provide a safety cushion for increases in operating expense.
Contiguous space - Multiple rental units that are next to each other on the same floor of a building, or a block of space located on multiple adjoining floors in a building, that can be combined and rented to a single tenant.
Contract documents - The complete set of specifications, materials list, design plans and any other documents needed for a building's construction.
Contract rent - The lessee's monetary rental obligation, sometimes called face rent, specified in a lease.
Contract sale or deed - A real estate agreement that does not take effect or transfer the title until certain conditions are met.
Convertible debt - In real estate, a mortgage that gives the lender the option of converting to a partial or full property ownership within a specified time frame.
Convertible preferred stock - Stock that is convertible to preferred stock under certain conditions and by certain formulas specified by the stock's issuer.
Conveyance - Usually refers to the transfer of title to property between parties by deed. May also include most of the instruments with which an interest in real estate is assigned, created, or mortgaged.
Core properties - The major types of property: office, retail, industrial and multifamily. Core assets tend to be built within the past five years or recently renovated; fully or nearly fully leased with desirable, higher-credit tenants with well-structured long-term leases and the majority of tenants are still in the early term of their lease. Core assets generate good, good appreciation, and are expected to generate high returns up to about 12%.
Cost-approach improvement value - The current cost to build a replacement for an existing structure minus any accrued depreciation
Cost-approach land value- The estimated value of the fee simple interest in land as if vacant and able to be developed to its best and highest use.
Cost-of-sale percentage - The total cost of selling an investment property, denoted as a percentage of sales price, including broker's commissions, fees, closing costs and other expenses relating to the sale.
Coupon - A promissory note's or mortgage's interest rate charged to a borrower.
Covenant - A written agreement inserted into a property's deed or other legal instruments dictating a property's uses or performance of certain acts or obligations related to the property.
Credit enhancement - The credit support needed in addition to the mortgage collateral to make a debt more credit worthy. Credit enhancements most often used are guarantees, subordination, over-collateralization, letters of credit and reserve funds.
Cross-collateralization - A pool of mortgages or properties that serves together to secure one debt.
Cross-defaulting - A feature allowing the trustee to call all loans in a group of loans into default if any single loan defaults.
Cumulative discount rate - Expressed as a percentage of base rent, it is the rate at which a rent is discounted after taking into account all landlord lease concessions.
Current occupancy - The percentage of a property's currently leased area or units out of the property's total area or units.
Current yield - For commercial mortgage-backed securities, the coupon divided by the price equals the current yield.
