Rating - A grade designating the credit quality or creditworthiness of a company or security based on its underlying assets, assigned by an independent third party rating agency. Major rating agencies are Fitch Ratings, Standard & Poor's and Moody's Investors Service.
Raw land - Unimproved land in its natural state, with no man-made improvements such as utilities, roads and drainage.
Raw space - Shell space in a building without any improvements.
Real estate fundamentals - The factors driving the value of real property, such as supply, demand and pricing for land or developed space in a given geographic region or economic market.
Real property - Land and whatever is affixed to the land that would be personal property if not attached, such as buildings. Federal banking regulations governing appraisals define real property as an identified parcel or tract of land including improvements, easements, rights of way, undivided or future interests, and similar rights but excluding mineral rights, timber rights, or growing crops.
Real rate of return - Yield to investors less a factoring for inflation. The formula for calculating the real rate of return is [(1 + nominal yield) divided by (1 + inflation rate)] minus 1.
Recapture - When the IRS recovers the tax benefit of a taxpayer's previously taken deduction or credit, which is usually a factor in foreclosure because of a forgiveness of debt. A clause in leases giving the lessor a percentage of profits above a fixed amount of rent; or a clause in a percentage lease granting the landlord the right to terminate the lease if the tenant fails to realize minimum sales.
Recourse - The right of a lender, in the event of default on the debt by a borrower, to recover against the secondarily liable party's personal assets.
Red herring - An initial public offering's preliminary prospectus that bears a legend printed in red ink stating that the offering has been filed but is not yet effective. Underwriters may use the preliminary prospectus to market the offering before the registration statement becomes effective.
Regional diversification - The diversification of investments along predefined lines such as a geographic or economic region. Definitions for the various regions vary among managers, consultants and plan sponsors.
Registration statement - Forms filed with the Securities and Exchange Commission or appropriate state regulatory agencies in connection with a new securities' proposed offering or the outstanding securities' listing on a national exchange.
Rehab - Extensive renovation intended to cure obsolete or out of fashion parts of a building or project.
REIT (Real Estate Investment Trust) - A business corporation formed as a trust that combines the investors' capital to purchase or provide financing for real estate. A trust that qualifies for REIT status generally does not pay Federal corporate income tax. Instead, it pays out at least 90 percent of its taxable income as dividends.
REMIC (Real Estate Mortgage Investment Conduit) - An outgrowth of the Tax Reform Act of 1986. REMICs are designed to hold a pool of mortgages for the single purpose of issuing multiple classes of mortgage-backed securities in such a way as to avoid corporate double taxation.
Renewal option - A lease agreement clause giving a tenant the right to extend the term of a lease.
Renewal probability - The average rate of tenants in a building that are expected to renew their leases at market rental rates upon their lease's expiration. Used to help estimate a property's leasing-related costs and downtime.
Rent - Monetary compensation or fee paid to an owner, lessee or landlord for the right to occupy and use of any real or private property such as rental property, land, buildings, and equipment.
Rent commencement date - The date on which a tenant starts to pay rent.
Rent Step-Up - A lease agreement, the rent increase for every rental period, usually annually, for a fixed amount of time or for the life of the lease.
Rentable/usable ratio - The total rentable area of a building divided by its usable area. It represents the tenant's pro-rata share of the building's common areas and can determine the square footage upon which the tenant will pay rent. The inverse ratio describes the proportion of building space that an tenant can actually expect to use.
Rental concession - What landlords offer tenants in return for the tenants' agreement to lease. Examples of rental concessions are: rental abatement, below-market rental rates, increase in the tenant improvement allowance, signage, and moving allowances.
Rental growth rate - Expected pattern in market rental rates over the period of analysis, expressed as a yearly percentage increase or decrease.
Rental Income Expenses - A commercial income property's actual or projected expenses expressed as a percentage and an amount. Expenses include: management fees, insurance, rental vacancy factor, replacement and reserve expenses, and ongoing operating expenses such as water, gas, licenses, waste, and property taxes.
Rent-up period - The period during and following the building of a new structure when tenants are actively being sought to when the project approaches full occupancy.
REO (Real estate owned) - Real estate owned by a savings institution as a result of borrowers' default and the savings institutions' subsequent foreclosure.
Replacement cost - The estimated current cost, using modern materials and current standards, design and layout, to construct a building with equivalent use as the building under appraisal.
Replacement reserves - A reserve account or allowance that provides funds for the periodic replacement of a structure's components, such as HVAC, parking lot, carpets, and roof, which wear out more rapidly than the structure itself and need to be replaced during the building's economic life.
Request for proposal (RFP) - A formal request, sent by a plan sponsor or its consultant, inviting investment managers to submit data on their firm's investment strategy, historical investment performance, current investment opportunities, management fees, and other pension fund client relationships. Firms that meet the plan qualifications are requested to make a formal presentation to the board of trustees and senior staff members. At the completion of this process, finalists are chosen and contract negotiations are begun.
Reserve account - An account, such as a capital expenditure account or a deferred maintenance account, that a borrower funds to protect the lender.
Resolution Trust Corp. (RTC) - The RTC, a Federal asset management corporation, established by Congress in 1989 to contain, manage and sell failed savings institutions and recover banks' and taxpayer funds through the management and sale of the institutions' assets.
Retail investor - Investors who purchase and sell small amounts of securities for themselves, as opposed to an institutional investor.
Retention rate - The percent of trailing 12-month earnings that have been invested back into a company, calculated by subtracting the trailing 12-month payout ratio from 100.
Return on assets - The percentage calculated by dividing the average total assets by the income after taxes for the trailing 12 months.
Return on equity - The percentage calculated by dividing the average common equity by the income available to common stockholders for the trailing 12 months.
Return on investments - The percentage calculated by dividing the average total long-term debt, other long-term liabilities and shareholders equity by the income after taxes for the trailing 12 months.
Reversion capitalization rate - The overall capitalization rate used to determine reversion value based on the end of the year NOI.
Reversion value - The lump-sum benefit received by an investor at the close of an investment.
RevPAR (Revenue per available room) - A hospitality facility's calculation of total room revenue divided by the average number of available rooms for a given period.
Risk management - A systematic way to identify and separate insurable risks from non-insurable risks, and evaluating the availability and costs of covering those risks with third-party insurance.
Risk-adjusted rate of return - Used to identify investment alternatives that, after considering their expected volatility, are likely to deliver a positive premium. The expected rate of return of a given asset, minus the expected return for Treasury bills, divided by the expected standard deviation of the returns for the assets.
Road show - A tour made by executives of a company about to go public to various cities to meet with and make presentations to underwriters and analysts regarding their company and its IPO. Road shows takes place during the marketing period before the registration statements becomes effective.
Roll-over risk - Risk that a tenant's lease may not be renewed.
