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NOI is a calculation used to analyze the profitability of income-generating real estate investments. NOI equals all revenue from the property minus all reasonably necessary operating expenses. Example: A property that generates $200,000 in annual rental income with$50,000 in operating expenses would have an NOI of $150,000.$

Cap Rate is a real estate valuation measure used to compare different real estate investments. It's calculated by dividing the property's NOI by its current market value. Example: If a property is purchased for $1,000,000 and has an NOI of$100,000, the cap rate would be 10%.

LTV is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased. It's calculated by dividing the amount borrowed by the appraised value of the property. Example: A $75,000 loan on a$100,000 property results in a 75% LTV.

In a Gross Lease, the tenant pays a flat rental amount, and the landlord pays for all property charges regularly incurred by the ownership. Example: A tenant pays $5,000 per month regardless of the property's maintenance, taxes, or insurance costs.$

In a Triple Net Lease, the tenant agrees to pay all real estate taxes, building insurance, and maintenance on the property in addition to any normal fees expected under the agreement. Example: A retail store that pays its own property taxes, insurance, and maintenance in addition to rent.

Usable Square Footage refers to the space that a tenant can actually use in a commercial building, including their private offices, workstations, and storage. It excludes common areas like lobbies, stairs, and elevators. Example: An office suite with 3,000 square feet of personal workspace.

Rentable Square Footage includes both the Usable Square Footage and a proportionate share of the building's common areas. This is the number often used to calculate the rental rate. Example: An office with 3,000 usable sq ft and 1,000 sq ft of common areas would have 4,000 rentable sq ft.

An Anchor Tenant is a larger store or chain retailer that serves as a primary draw to a commercial property, often in a shopping mall or strip mall setting. Example: Large supermarkets or department stores that attract customers, encouraging other retailers to lease nearby spaces.

Build to Suit refers to a method of leasing property whereby the developer or landlord constructs a new building or adapts an existing building according to the tenant's specifications. Example: A company has a commercial space designed specifically for its needs, like a custom warehouse.

CAM charges are fees paid by tenants to landlords to cover costs associated with the upkeep and maintenance of common areas. Example: Tenants in a mall may pay CAM charges for the cleaning, landscaping, and upkeep of shared spaces like hallways and parking lots.

DSCR is a measure of a property’s cash flow available to pay current debt obligations. It is calculated by dividing the property's NOI by its total debt service. Example: If a property’s NOI is $125,000 and its total debt service is$100,000, its DSCR would be 1.25.

The Due Diligence Period is the time allowed, after a buyer’s offer has been accepted and before the sale closes, for the buyer to inspect the property and confirm it meets their needs and expectations. Example: A 30-day period to inspect a commercial building for structural issues.

An Escalation Clause in a lease allows for the rent to increase at a pre-determined rate or based on a prescribed formula, such as tied to inflation or cost of living increases. Example: A 2% annual increase in rent over the lease term to account for increased property management costs.

FMV is the price that a property would sell for on the open market. It is an estimate of the market value of a property, based on what a knowledgeable, willing, and unpressured buyer would likely pay to a knowledgeable, willing, and unpressured seller in the market. Example: A commercial lot valued at $1,500,000 based on similar recent sales in the area.$

Leasehold Improvements are alterations made to rental premises in order to customize it for the specific needs of a tenant. These may include changes to walls, floors, ceilings, and lighting among others. Example: A restaurant adds a commercial kitchen and booth seating to an existing retail space.

Liquidity in real estate refers to how quickly an asset can be sold without impacting its market value. Commercial real estate typically has lower liquidity compared to other investments like stocks. Example: A prime retail space in a desirable location sells faster than a specialized industrial facility.

Mixed-Use Property is a type of real estate that combines residential, commercial, cultural, institutional, or industrial uses, where those functions are physically and functionally integrated. Example: A building with retail shops on the ground floor and apartments above.

The Occupancy Rate refers to the ratio of rented or used space compared to the total amount of available space. It's often used as a metric to assess the performance of commercial properties. Example: In a commercial plaza with 10 units, if 9 units are rented, the occupancy rate is 90%.

In a Percentage Lease, the rent includes a base rate plus a percentage of the tenant's revenue. This is common in retail. Example: A retailer pays $10,000 per month plus 7$200,000.

A REIT is a company that owns, operates, or finances income-producing real estate. It allows individual investors to buy shares in commercial real estate portfolios. Example: Investors purchase shares of a REIT that owns a portfolio of office buildings.

Subleasing occurs when the tenant leases out a portion or all of their leased space to another party (subtenant). Example: A company occupying 10,000 sq ft of office space needs only 6,000 and subleases the remaining 4,000 sq ft.

TI refers to the customized alterations a building owner makes to rental space as part of a lease negotiation, to configure the space for the needs of that tenant. Example: The landlord builds partition walls and installs new lighting fixtures in an office space.

Vacancy Rate is the percentage of all available units in a rental property, such as a hotel or apartment complex, that are vacant or unoccupied at a particular time. Example: If a 100-unit apartment complex has 10 vacant units, the vacancy rate is 10%.