The Comprehensive Glossary of Commercial Real Estate Terms: A Guide by Evermore

1

• 1031 Exchange: A tax-deferral strategy used in real estate, where an investor sells a property and uses the proceeds to buy a like-kind property, deferring capital gains taxes.

A

• Absorption: The rate at which rentable space in a market is filled.
• Accredited Investor: An individual or entity recognized by financial regulations as having sufficient experience and assets to engage in higher-risk investments, including certain real estate investments.
• Acquisition Cost: The total cost of acquiring a property, including purchase price and all related fees.
• Acquisition Fee: A fee paid to the fund manager for identifying, researching, and acquiring new investments.
• Active Rent: The actual rent being paid under a lease.
• Adjustable Rate Mortgage (ARM): A mortgage with an interest rate that changes based on market conditions.
• Ad Valorem Tax: A tax based on the assessed value of a property.
• Amortization: The process of spreading out a loan into a series of fixed payments over time.
• Amortization Schedule: A timetable for mortgage payments.
• Anchor Tenant: A main tenant in a shopping center or mall.
• Appraisal: A professional estimate of a property’s market value.
• Appreciation: The increase in the value of a property over time.
• Arbitrage: The practice of taking advantage of a price difference between two or more markets.
• As-Is Condition: The condition of a property in its current state.
• Assessment: The valuation of property for the purpose of levying a tax.
• Asset Management: Overseeing a property to maximize its value.
• Asset Under Management (AUM): The total market value of the assets that an investment company or financial institution manages on behalf of investors.
• Assignment: A transfer of a property interest, especially a lease.
• Assumable Debt: A type of loan arrangement where an outstanding mortgage and its terms can be transferred from the current owner to a buyer.
• Average Annual Return (AAR): A financial term used to describe the average return generated by an investment over a specific period, typically expressed as a percentage on an annual basis

B

• Bad Debt: Unpaid rent and other receivables deemed uncollectible.
• Balloon Loan: A loan which has a series of monthly payments with the remaining balance due in a large lump sum at the end.
• Base Rent: The minimum rent in a lease that uses a percentage for additional rent.
• Basis Point: One-hundredth of a percentage point.
• Benchmarking: Comparing a property’s costs and performance to industry standards.
• Blended Interest Rate: An average rate of multiple loans combined into one balance, weighted by their respective loan amounts.
• Break-Even Occupancy: The occupancy level at which the total revenues of a property equal its total expenses.
• Bridge Loan: A short-term loan to bridge the gap between major financing.
• Build-Out: The construction or renovation of a space.
• Building Code: Regulations that set forth the standards for constructed structures.
• Building Permit: Authorization from a governmental body to build or modify a structure.
• Build-to-Suit: A custom designed construction meeting the specific needs of a tenant.
• Bullet Loan: A loan that requires a large payment at the end of the term.

C

• Cap Rate (Capitalization Rate): A measure used to calculate the value of an income-producing property.
• Capital Call: A demand by a private equity fund to its investors to transfer the promised investment amount into the fund.
• Capital Expenditure: Funds used by a company to acquire or upgrade physical assets such as property or equipment.
• Capital Gain: The profit from the sale of a property or an investment.
• Capital Improvement: Any improvement that extends the life of the property.
• Capital Reserve: A reserve of funds used for future capital expenditures.
• Capital Stack: The capital stack represents the different layers of financing sources that go into funding real estate transactions. It is often visualized as a vertical stack, with the most senior claims (like secured debt) at the bottom and the riskiest (like common equity) at the top.
• Carried Interest: A share of the profits earned by the fund’s managers, typically a percentage of the total profits above a specified hurdle rate or return threshold. Also known as “promote” in the real estate industry.
• Carve-Out: A provision in a contract that creates a right or benefit for a party.
• Cash Flow: The amount of cash generated or lost by a business.
• Cash-on-Cash Return: A rate of return on a real estate investment property.
• Cash-Out Refinance: This is a financial strategy where a property owner refinances their property for a higher amount than the existing mortgage, thereby extracting equity from the property in the form of cash. This cash received is non-taxable as it is considered a loan.
• Catch-Up Clause: A provision in an investment fund agreement where, after the initial profits are distributed to limited partners, the general partner begins to receive a larger percentage of additional profits until a specific balance is achieved between the GP and LP returns.
• Certificate of Occupancy: A document issued by a local government agency or building department certifying a building’s compliance with applicable building codes and other laws.
• Clawback Clause: A clause in a fund’s agreement that requires the general partner to return previously distributed profits to the limited partners if it turns out that the GP received an overpayment based on the fund’s ultimate performance.
• Closing Costs: Expenses over and above the price of the property in a real estate transaction.
• Collateral: Property or other assets that a borrower offers a lender to secure a loan.
• Commercial Mortgage-Backed Securities (CMBS): A type of mortgage-backed security backed by commercial and multifamily mortgages.
• Commercial Real Estate: A category of property used solely for business purposes, such as offices, malls, shopping centers, hotels, and apartment complexes intended for lease.
• Common Area Maintenance (CAM) Charges: Charges paid by tenants to help cover the costs associated with areas common to all tenants.
• Common Equity: Common equity in real estate refers to the portion of a property’s financing provided by investors in exchange for ownership stakes. Investors holding common equity are usually positioned at the highest level of risk, as they have the last claim on assets and cash flows. Despite this risk, common equity is attractive due to its potential for the highest returns, including unlimited upside potential, as it allows investors to directly benefit from the property’s success and value appreciation.
• Comparables (Comps): Properties with characteristics that are similar to a subject property.
• Concessions: An incentive offered by landlords to attract or retain tenants. This can include reduced rent, free rent for a certain period, payment of moving expenses, or other financial incentives.
• Construction Loan: A short-term, interim loan for financing the cost of construction.
• Credit Tenant: A tenant with strong financial standing that presents low risk to the landlord.
• Cross-Collateralization: The act of using an asset, which is already serving as collateral for an initial loan, as collateral for a second loan.

D

• Debt: In real estate, debt refers to the amount of money borrowed by the property owner or developer, which is secured against the property. It typically includes loans or mortgages that need to be repaid with interest.
• Debt Guarantor Fee: A fee paid to an entity or individual who guarantees the debt in a real estate transaction.
• Debt Service: The amount of money required to make payments on the principal and interest on outstanding loans.
• Debt Service Coverage Ratio (DSCR): A measure of a property’s ability to cover its mortgage payments, calculated by dividing Net Operating Income by total debt service.
• Debt Yield: A ratio in commercial real estate lending that measures the return a lender would receive if it had to take over the property. It is calculated by dividing the property’s Net Operating Income (NOI) by the loan amount.
• Deed of Trust: A legal document by which title in real estate is transferred to a trustee as security for a loan.
• Default: Failure to fulfill a contractual obligation.
• Defeasance: An alternative to a prepayment fee, common in commercial real estate loans, where the borrower substitutes collateral with securities that provide the lender with the same amount of income as the original loan.
• Demising Walls: The partition wall that separates one tenant’s space from another or from the building’s common areas.
• Depreciation: A decrease in the value of an asset over time.
• Development Fee: A fee charged by developers or fund managers for overseeing the development process of a real estate project.
• Disposition Fee: A fee paid to the fund manager for selling or disposing of assets within the fund’s portfolio.
• Distressed Property: Real estate in poor condition or under financial strain, often presenting opportunities for investors to buy at a discount and add value through rehabilitation.
• Diversification: An investment strategy that involves spreading investments across various financial instruments, industries, or other categories to minimize risk.
• Due Diligence: The process of examining a property’s legal, financial, structural, and other conditions before completing a transaction.
• Due-on-Sale Clause: A provision in a mortgage allowing the lender to demand full repayment of the loan if the property is sold.
• Dwelling Units per Acre (DUA): The number of residential units per acre of land.

E

• Earnest Money: Money paid to confirm a contract.
• Effective Gross Income (EGI): Total income generated by a property including loss and vacancy deductions.
• Effective Rent: The average rent paid per unit over the term of a lease, after accounting for concessions and incentives offered by the landlord.
• Eminent Domain: The right of a government or its agent to expropriate private property for public use, with payment of compensation.
• Encroachment: An intrusion on a person’s territory or property.
• Encumbrance: A claim, lien, charge, or liability attached to and binding real property.
• Entitlements: The legal methods of obtaining approvals for the right to develop a property for a particular use.
• Equity: This refers to the difference between the current market value of a property and the amount owed on any mortgages or loans against that property. It represents the owner’s financial stake in the property. As the market value of the property increases or the mortgage balance is paid down, the owner’s equity in the property grows.
• Equity Capital: Funds raised through the sale of stock or ownership stakes rather than borrowing. This capital represents ownership interest in the property or project.
• Equity Multiple: A metric used in real estate investment to measure the total return on equity over the life of the investment, calculated as the total distributions received from the investment divided by the total equity invested.
• Escalation Clause: A clause in a lease that allows the landlord to increase rent or pass on increases in operating costs to tenants.
• Exit Strategy: The method by which a fund plans to dispose of its investment in a company or property to realize its profits.

F

• Fair Market Value: The estimated value of a property if sold in the open market.
• Feasibility Study: An analysis and evaluation of a proposed project to determine if it is technically feasible and financially viable.
• Fiduciary Duty: A legal duty to act solely in another party’s interests.
• First Right of Refusal: A right given by the seller to a prospective buyer to have the first chance to buy a property before the seller accepts an offer from another party.
• Fixed Expenses: Operating expenses that generally do not change in response to the level of activity of a property.
• Fixed-Rate Mortgage: A mortgage with a fixed interest rate for the entire term of the loan.
• Fixture: Personal property that becomes real property when attached in a permanent manner to real estate.
• Flex Space: A type of industrial space that is flexible in terms of what it can be used for, such as warehousing, office, or retail.
• Floor Area Ratio (FAR): The ratio of a building’s total floor area to the size of the piece of land upon which it is built.
• Foreclosure: The legal procedure by which a lender acquires ownership of a property when the borrower fails to make mortgage payments.
• Fund: A pooled investment entity, often structured as a limited partnership or a limited liability company, that gathers capital from multiple investors to acquire, manage, and sell a diversified portfolio of properties or real estate assets. Managed by professionals, it allows investors to participate in a broader market segment with reduced individual risk.
• Fund of Funds (FoF): An investment strategy in which a fund invests in other types of funds, including private equity funds, rather than investing directly in stocks, bonds, or other securities.

G

• General Contractor: The main contractor responsible for the oversight of a construction project.
• General Partner (GP): In a private equity fund, the general partner is responsible for managing the fund’s investments and operations.
• Gross Area: The total floor area in a building, measured from the exterior of the walls (not just the space that can be rented).
• Gross Lease: A lease where the tenant pays a flat rental amount, and the landlord pays for all property charges regularly incurred by ownership.
• Ground Lease: A lease of land in which the lessee is typically required to build a building on the property and return the land with the building at the end of the lease.
• Gross Potential Rent (GPR): The total rental income assuming 100% occupancy and no credit loss.
• Gross Rent Multiplier (GRM): A real estate valuation metric that provides a simple way to estimate the approximate value of an income-producing property. It is calculated by dividing the property’s price by its gross rental income.
• Guarantor: An individual or entity that guarantees to cover a borrower’s debt obligations in case of default.

H

• Hard Costs: Direct costs associated with the physical construction of buildings or improvements.
• Highest and Best Use: The most profitable, legally permissible, feasible, and physically possible use of a property.
• Hurdle Rate: A minimum rate of return that private equity funds must achieve before the fund managers can claim their share of carried interest.
• HVAC: An acronym for Heating, Ventilation, and Air Conditioning; a system that provides heating and cooling to residential and commercial buildings.

I

• Improvements: Any additions or changes to land or a building that affects the property’s value.
• Income Capitalization Approach: A valuation method used in real estate appraisal that estimates property value based on the income the property is expected to generate. The formula is Property Value = NOI ÷ Cap Rate (%).
• Industrial Property: Property used for industrial purposes, like factories, warehouses, and research facilities.
• Interest: In real estate finance, this refers to the charge paid by a borrower to a lender for the use of borrowed money. Typically, it is expressed as an annual percentage of the loan principal. The interest rate can be fixed, remaining constant throughout the loan term, or variable, fluctuating with market conditions.
• Internal Rate of Return (IRR): A metric used in capital budgeting to estimate the profitability of potential investments.

J

• Joint Tenancy: An equal ownership arrangement between two or more people, where if one party dies, the other automatically inherits the deceased’s share.
• Joint Venture: A business arrangement in which two or more parties agree to pool their resources for a specific task, typically for a limited time.
• Judgment Lien: A lien placed on property as a result of a court decision.
• Junior Debt: A loan or debt that has a subordinate claim to collateral and cash flow relative to more senior debt. In the event of default or liquidation, junior debt is paid after senior debts have been settled.

L

• Land: Undeveloped property or vacant land. Depending on its location and zoning regulations, land can be used for various purposes, including residential, commercial, industrial, or agricultural development.
• Landlord: The owner of a property that is rented or leased to another party (tenant).
• Lease: A contractual agreement by which a lessor (owner) allows a lessee (tenant) to use property for a specified period of time in exchange for payment.
• Lease Option: An agreement where a renter has the option to purchase the leased property at a predetermined price during or at the end of the lease term.
• Lease-Up Period: The time it takes for a property, especially a new development, to reach a stabilized occupancy level.
• Letter of Intent (LOI): A non-binding document outlining the preliminary terms between a buyer and seller or a landlord and tenant, preceding a formal agreement.
• Leverage: The use of borrowed capital to increase the potential return of an investment.
• Leveraged Buyout (LBO): A strategy of buying out a company primarily with borrowed funds, with the intention of improving its financial and operational efficiency and selling it for a profit later.
• Lien: A legal right or interest that a creditor has in the debtor’s property, lasting until the debt obligation is paid.
• Limited Liability Company (LLC): A flexible form of business entity that blends elements of partnership and corporate structures. An LLC provides limited liability to its owners and is a common structure for real estate investment funds.
• Limited Partners (LPs): Investors in a limited partnership who provide capital and receive income, capital gains, and tax benefits. They have limited liability and are not involved in the day-to-day management of the fund.
• Limited Partnership (LP): A common structure for private equity funds where investors are limited partners who provide capital but have limited liability and are not involved in the day-to-day management of the fund.
• Liquidity: The ability to quickly convert an asset to cash.
• Liquidity Event: An event that allows investors in a property or fund to cash out some or all of their equity, such as a sale or refinancing.
• Loan Covenant: Terms set by a lender that the borrower must comply with to maintain the loan.
• Loan-to-Cost Ratio (LTC): A financial metric that represents the ratio of the loan amount to the total cost of the project or property. The LTC is expressed as a percentage and is calculated by dividing the loan amount by the total cost of acquiring, constructing, and renovating a property.
• Loan-to-Value Ratio (LTV): A financial metric used by lenders to assess the risk associated with a mortgage loan. It represents the ratio of the loan amount to the appraised value or purchase price of the property. Expressed as a percentage, the LTV ratio helps determine the level of exposure a lender has in the event of borrower default and potential foreclosure.
• Lock-Out Period: A term in a loan agreement where the borrower is prohibited from repaying the loan before a specified period, reducing the lender’s prepayment risk.
• Loss to Lease: The difference between the actual rent received for a property and the market rent that could potentially be earned.

M

• Management Fee: A periodic payment made by an investment fund to its manager for investment and administrative services.
• Market Analysis: An assessment to determine the feasibility and potential success of a real estate project, considering factors like location, demographics, and economic trends.
• Market Rent: The rent that a property would likely command in the open market, indicated by current rents paid for comparable space.
• Market Value: The most probable price a property should bring in a competitive and open market.
• Mechanic’s Lien: A lien granted to workmen, contractors, and material suppliers who have performed work or furnished materials in the erection or repair of a building.
• Mezzanine Debt: A hybrid of debt and equity financing that gives lenders the rights to convert to an ownership or equity interest in the company in case of default.
• Mixed-Use Property: A property that combines residential, commercial, industrial, and/or cultural uses.
• Mortgage: A legal agreement by which a bank or other creditor lends money at interest in exchange for taking title of the debtor’s property.
• Mortgage Broker: An intermediary who brings mortgage borrowers and lenders together, but does not use its own funds to originate mortgages.
• Multifamily Property: A type of residential property that contains multiple separate housing units for residential inhabitants within one building or several buildings within one complex.

N

• Net Lease: A lease in which the tenant pays not only rent but also some or all of the property expenses, such as taxes, insurance, and maintenance, which normally would be paid by the property owner.
• Net Operating Income (NOI): The total income from a property minus operating expenses, excluding capital expenditures and debt service.
• Non-Recourse Loan: A loan where the borrower is not personally liable and the lender’s only recourse in case of default is to repossess the property being financed or used as collateral.
• Notice of Default: A notice given to a borrower stating that they have not met their obligations under the loan contract.

O

• Occupancy Rate: The ratio of rented or occupied space compared to the total amount of available space.
• Office Property: A type of commercial real estate used for conducting business and professional activities. Office properties range from small, single-tenant buildings to large skyscrapers housing multiple businesses.
• Off-Market Transaction: A real estate deal where the property is sold without being publicly advertised or listed.
• Open-End Fund: A mutual fund that does not have restrictions on the amount of shares the fund can issue, allowing for unlimited investment from investors.
• Operating Agreement: A document that outlines the structure and operations of a Limited Liability Company (LLC), including provisions for financial and functional decision-making.
• Operating Expenses: The costs of running and maintaining a property and its services.
• Opportunity Zone: Designated geographic areas where investors can receive tax benefits for investing in property or businesses located within these zones.
• Origination Fee: A fee charged by a lender on entering into a loan agreement to cover the cost of processing the loan.
• Other Income: In property management, other income refers to revenue generated from sources other than rent. This can include fees for amenities (like parking, storage, pet rent), service charges (like late fees, application fees), and income from on-site facilities (like laundry services, vending machines).

P

• Percentage Lease: A lease of property in which the rental amount is based on a percentage of the sales volume made on the leased premises.
• Potential Gross Income (PGI): This is the maximum amount of income that a property could generate when fully rented and all rents are collected, assuming 100% occupancy. PGI includes not only the income from rent but also any other potential income sources, such as parking fees, laundry services, and other amenities. It represents the ceiling of income potential.
• Preferred Equity: A type of equity investment in a real estate project that has a priority claim on distributions over common equity but is subordinate to debt.
• Prepayment Penalty: A charge levied when a loan is paid off earlier than the scheduled maturity date, compensating the lender for lost interest payments.
• Prime Rate: The interest rate that commercial banks charge their most credit-worthy customers.
• Principal: The amount borrowed or the remaining unpaid balance of a loan, separate from interest.
• Private Equity: Capital investment made into companies that are not publicly traded. In real estate, private equity funds invest directly in properties or mortgage securities, often aiming for medium to long-term returns.
• Private Placement Memorandum (PPM): A legal document provided to prospective investors in a private equity or real estate fund, detailing the objectives, risks, terms, and conditions of the investment.
• Pro Forma: A financial model projecting the future financial performance of a property.
• Promote: In real estate syndication, a profit share earned by the sponsor (or general partner) above a specified return threshold agreed upon with investors. Also known as “carried interest” in other industries.
• Property Management: The management of a property on behalf of the owner.

Q

• Qualified Opportunity Zone Fund (QOZF): A fund structured to invest in eligible property located in designated Opportunity Zones, offering tax benefits to investors.
• Quitclaim Deed: A deed that conveys a person’s interest in a property without stating the nature of the person’s interest or rights, and with no warranties of that person’s interest or rights in the property.

R

• Real Estate Owned (REO): Property owned by a lender, typically a bank, government agency, or government loan insurer, after an unsuccessful sale at a foreclosure auction.
• Real Estate Investment Trust (REIT): A company that owns, operates, or finances income-producing real estate and offers its shares to investors.
• Redemption Right: The right of an investor to sell back their shares to the fund or syndication at specified conditions.
• Refinance: The process of paying off one loan with the proceeds from a new loan using the same property as security.
• Rent Roll: A document or spreadsheet containing detailed information on each tenant leasing a property.
• Residential Real Estate: A category of property reserved primarily for living, such as single-family homes, condominiums, apartments, townhouses, and duplexes. Residential properties are often occupied by the owner or rented to tenants for living purposes.
• Retail Property: A subset of commercial property, these are spaces used for retail activities like shops, stores, and supermarkets.
• Right of First Refusal: A right to have the first chance to buy or lease property if the owner decides to sell or lease.
• Ratio Utility Billing System (RUBS): A method of allocating utility costs in multi-tenant properties like apartment complexes or office buildings. Instead of directly metering each tenant’s utility usage, costs are divided among tenants based on factors like the number of occupants, square footage, or a combination of these.

S

• Sale-Leaseback: An arrangement where the seller of an asset leases back the same asset from the purchaser.
• Secondary Mortgage Market: The market where home loans and servicing rights are bought and sold between lenders and investors.
• Secured Loan: A loan in which the borrower pledges some asset as collateral for the loan.
• Self-Storage Property: Type of commercial property designed to provide space for individuals or businesses to store their possessions securely.
• Senior Debt: The highest-priority debt in a financing structure, usually secured by a lien against the property.
• Soft Costs: Indirect expenses that are not tied to physical labor or building materials. These include costs such as architectural and engineering fees, legal fees, permits, and zoning costs, as well as expenses related to financing, marketing, and administration.
• Special Assessment: An additional charge on property for improvements or services.
• Sponsor: In a real estate syndication, the individual or entity responsible for finding, acquiring, and managing the investment property. Also known as the “operator”, “syndicator”, or “GP”.
• Stabilized Property: Real estate that has reached a steady state of occupancy and income generation. This is typically defined as a property has had at least 90% occupancy over the last 90 days.
• Step-Down Prepayment Penalty: A prepayment penalty structure where the fee decreases over time, usually structured as a percentage of the remaining balance and declining each year.
• Sublease: An arrangement in which the original tenant leases out the property to another tenant.
• Submarket: A segment of a larger real estate market, defined by geographic boundaries or property type.
• Subordinated Debt: Debt that has a lower priority than other debts in case of liquidation or bankruptcy.
• Subordination Clause: A clause allowing a current claim on an asset to take a lower priority in favor of another claim.
• Subscription Agreement: A contract between a real estate fund or syndication and the investor, outlining the terms of the investment.
• Syndication: A partnership where multiple investors collectively pool their resources to invest in a single property or project. Unlike a fund, each syndication deal is specific to a property and investors directly own a share of that property, with returns tied to its performance. The syndication is typically managed by a sponsor who oversees the investment.

T

• Tenancy in Common (TIC): A form of property co-ownership where each owner holds an individual, undivided ownership interest in the property.
• Tenant: An individual or entity who rents a property from a landlord for a predetermined period.
• Tenant Improvement Allowance (TIA): A sum provided by the landlord to the tenant to make improvements to the leased space.
• Tenant Mix: The variety and balance of tenants in a commercial property, such as a shopping center or office building.
• Term Loan: A loan from a bank for a specific amount with a specified repayment schedule and a fixed or floating interest rate.
• Title: The legal right to own, possess, use, control, and dispose of property.
• Title Insurance: Insurance that protects the holder from loss due to defects in the title.
• Trailing Twelve Months (T12): A financial term used to represent the past 12 consecutive months of a property’s or company’s financial performance.
• Tranche: In structured finance, different segments or layers of investment within a real estate fund or mortgage-backed security, each with varying degrees of risk and return.
• Triple Net Lease (NNN): A lease agreement where the tenant is responsible for all costs of the property, including real estate taxes, building insurance, and maintenance, in addition to rent and utilities.
• Turnkey Project: A project in which a developer is responsible for the complete construction and/or furnishing of the property before the tenant takes occupancy.
• Turnkey Property: A real estate property that is fully renovated and ready for immediate use, requiring no additional repairs or improvements.
• Turnover Rate: The rate at which tenants vacate and new tenants occupy a property.

U

• Undercapitalized: A condition in which a real estate project or an investment fund does not have sufficient capital to meet operational needs or investment objectives.
• Underwriting: The process a lender uses to determine the risk of offering a loan, including assessing the property and the borrower’s financial stability.
• Unencumbered: A property free from liens or any other encumbrances.
• Uniform Commercial Code (UCC): A standardized set of laws and regulations for transacting business, including the leasing of commercial property.
• Use Clause: A lease provision detailing the permitted uses of the leased premises.
• Usury Laws: Laws regulating the maximum interest rate that can be charged on a loan.

V

• Vacancy Rate: The percentage of all available units in a property that are vacant or unoccupied.
• Vacant Land: Land that has no buildings or structures. Typically, utilities are not present.
• Valuation: The process of estimating the market value of a property.
• Value-Add Property: Real estate properties that have the potential to increase in value with improvements and enhancements.
• Variable Interest Rate: An interest rate that fluctuates over the term of the loan based on a specified index.
• Vendor’s Lien: A lien given by law to a vendor for the unpaid purchase price of land.
• Vertical Integration: A business strategy where a company expands its operations to include multiple stages of the production and distribution process, rather than relying on external organizations. In real estate, vertical integration can encompass various phases of property development, management, and investment.

W

• Warehouse: A commercial building used for storage and distribution of goods.
• Warranty Deed: A deed in which the seller guarantees that they hold clear title to a piece of real estate.
• Waterfall Structure: The method of distributing returns from a real estate investment, detailing how cash flow is divided among equity investors and the general partner or sponsor.
• Working Capital: The capital used to finance the daily operations of a property or business.
• Wraparound Mortgage: A form of secondary financing in which new mortgage payments include payments for an existing mortgage.
• Write-Down: Reducing the book value of an asset because it is overvalued compared to the market value.

Y

• Yield: The annual income from an investment, expressed as a percentage of the investment’s current market value.
• Yield Curve: A graph showing the relationship between bond yields and maturities, often used as a predictor of economic activity.
• Yield Maintenance: A prepayment penalty structure where the borrower must pay a fee to make up for the lender’s lost interest, usually calculated to maintain the lender’s expected yield.

Z

• Zoning: The process of dividing land into zones for different purposes, such as residential, commercial, industrial, etc.
• Zoning Amendment: A change to the zoning laws, usually enacted by local governments.
• Zoning Ordinance: A law that sets out the types of buildings and uses that are permissible in particular areas.
• Zoning Variance: A permit allowing a property owner to deviate from the strict terms of zoning ordinances.
• Zone of Influence: The area outside a city that is influenced by the city’s zoning laws.