Capitalization Rate – is determined by dividing a property’s net operating income by its purchase price (market price); generally, higher capitalization rates indicate higher returns and higher perceived risk.
Co-Investment – A direct investment into a portfolio company by limited partners alongside the general partner and generally done so on similar terms.
Debt Service Coverage – The annual net operating income divided by the annual debt service.
Direct Investment – An investment in which the Buyer has ownership interest in a property or group of properties.
Earnouts – A dollar amount held back until the event is completed. That is, a seller of a property will earn a portion of their price upon achieving a pre-established lease-up level.
Fair Market Value – An accounting term defined as the highest cash price a property would bring if exposed for sale in the open market by a willing seller to a willing buyer with both parties to the transaction being fully informed of all the uses and purposes to which the property is reasonably adaptive and available.
Holdbacks – A specified dollar amount held back from being distributed to the borrower until a certain event is completed.
Land Entitlement Risk – Land entitlement risk reflects the risks assumed by an investor when purchasing a parcel of land prior to the tentative map and other discretionary political approvals being granted by the appropriate regulatory bodies.
Leasehold – The right to use and occupy real estate for a stated term and under certain conditions. Leasehold interest is conveyed by a lease.
Loan to Value (LTV) – Debt divided by fair market value of assets.
National Council of Real Estate Investment Fiduciaries Index (NCREIF) – A property level performance benchmark for institutionally owned real estate. The benchmark is composed of an income return, an appreciation return and a total return and is calculated on a quarterly basis.
Sale Leaseback – A financing arrangement in which an owner-user sells a property to a buyer and then simultaneously arranges to lease the property back from the buyer for continued use.
Triple Net Leased Asset – A net lease under which the lessee assumes all expenses of operating the property, including taxes, insurance, and operating expenses.