Commercial Real Estate Glossary

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LEASE TYPES

Triple Net (NNN) - Tenant is obligated to pay all expenses including, but not limited to property taxes, insurance and common area maintenance.

Full Service - Typically found in Office leasing. Landlord pays all expenses including janitorial and utilities.

Gross - Landlord is obligated to pay all expenses including, but not limited to property taxes, insurance and common area maintenance.

LEASE TERMS

Base Rent - The square footage price not including other expenses.

Tenant Finish (TI) - Improvements to the leased space which can include paint, carpet and reconfiguration of the space.

Vanilla Shell - an interior space with a concrete slab, walls ready to paint, a finished ceiling and heating/cooling, lighting, electrical switches and outlets, and restrooms.

Common Area - Those areas that are common to a property consisting of multiple units, such as parking lots.

CAM - Common area maintenance.

LOI - Letter of Intent.

Fixed Rent - The yearly base rent amount is "fixed."

Escalator - A percentage or amount that the base rent is raised usually on a yearly basis.

Other Commercial Real Estate Terms

Annual Property Operating Data (APOD) - A form that lists a property's net operating income, individual operating expenses resulting in net operating income, similar to a profit-and-loss statement.

Build-out - Refers to the interior construction of a tenant's space whether new construction or the reconfiguration of existing space.

Capitalization Rate (Cap Rate) - The ratio between a property's net operating income and purchase price as a function of rate of return.

Certificate of occupancy - Presented by city building department to landlord or tenant completion of tenant improvements and satisfactory inspections by city building department inspectors

Commission - The fee paid to a real estate broker as procuring cause and/or for his or her services rendered in a real estate transaction. May be paid by either party in a transaction; it is usually governed by a prior written agreement.

Common Area Maintenance (CAM) - This is the amount of additional rent charged to the tenant, in addition to the base rent, to maintain the common areas of the property shared by the tenants and from which all tenants benefit. Examples include: snow removal, outdoor lighting, parking lot sweeping, insurance, property taxes, etc. Most often, this does not include any capital improvements that are made to the property.

Covenants - Wording found in deeds that limits/restricts the use to which a property may be put demising wall: The wall which separates a tenant's suite from another tenant's suite, or building common areas. In most cases, a demising wall will be constructed from floor to either the building roof deck or floor deck. The wall may also be a fire rated wall (see "partition wall").

Exclusive Agency - An agreement in which one broker has exclusive rights to represent the owner or tenant. If another broker is used, both the original and actual broker are entitled to leasing commissions.

Joint Tenancy - Ownership of real property by two or more individuals, each of whom has an undivided interest with the right of survivorship.

Lessee - An individual (i.e., tenant) to whom property is rented under a lease.

Lessor - An individual (i.e. landlord) who rents property to a tenant via a lease.

Letter of Intent - An informal, usually non-binding, agreement among parties indicating their serious desire to move forward with negotiations.

Listing - An employment contract between principal and agent that authorizes the agent (such as a broker) to perform services for the principal and his property.

Market Value - The expected price that a property should bring if exposed for lease in the open market for a reasonable period of time

Net Operating Income (NOI) - A property's Gross Operating Income less the sum of all operating expenses. NOI represents a property's profitability before consideration of income taxes, financing or recovery.

Personal Property - Any property which is not real property. Examples include furniture, clothing, and artwork.

Real Property - Land and any capital improvements (e.g., buildings) erected on the property

Tenant Improvements - Work done on the interior of a space, can be paid for by landlord, tenant, or some combination of both, depending on the terms of the lease.

Trade fixtures - Certain fixtures installed at the premises which are unique to tenant's business, and which may generally be removed by tenant at the end of the term of the lease

Variance - Government authorization to use or develop a property in a manner which is not permitted by the applicable zoning regulations.

Zone - An area, delineated by a governmental authority, which is authorized for and limited to specific uses.

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