FIN446 Midterm Definitions

**Adaptive Reuse**

A building converted to a different use in order to meet current demand. Examples include a factory converted to retail use or an office building converted to a school. (Also see conversion.)

**Amortization**

The rate of repayment of principal during the loan term.   An interest only loan has no amortization. Typically, but not always,  real estate loans have an amortization of 25 or 30 years.

**Anchor Tenant**

The primary and usually the largest tenant in a shopping center. Larger shopping centers may have more than one anchor tenant. Rent for anchor tenants is often significantly lower than rent for other tenants in a shopping center because they draw consumers to the center.

**Appraisal**

Report prepared by a third party specialist licensed to provide valuations of real estate used by lenders as support for the valuation of the collateral.  The valuation derived by the appraiser is often used to determine the denominator in the Loan to Value Ratio.

**Assignment of Leases and Rents**

Loan Document that evidences the lender’s collateral rights to the leases and rents at the Property.  Typically, a license is granted to the Borrower to collect and use the rents in the normal course of business absent an event of default under the loan.

**Automobile Parking Ratio**

A ratio calculated by comparing the number of automobile parking spaces at a project to the gross leasable area (GLA) of a building. This ratio is usually expressed in number of spaces per 1,000 square feet of gross leasable space. It varies by property use, with labor-intensive operations needing higher parking ratios. For example, a building with a GLA of 800,000 sf would have 800 spaces expressed as 8 spaces/1,000 sf.

**Big Box**

A freestanding structure occupied by a dominant retailer such as Home Depot. (See Retail Building Types Matrix.)

**Built-to-suit**

A building is designed and tailored for a specific tenant, often because the tenant is unable to find suitable space in the speculative market. Sometimes (but not always), a build-to-suit project includes specific design features not commonly found in the speculative market, thus compelling the tenant to have a special facility built. The build-to-suit project is usually contracted with a developer who owns and operates the completed facility occupied by the tenant. Generally, a build-to-suit project becomes a single-tenant building upon completion.

**Capitalization Rate or Cap Rate**

Unlevered initial return from the acquisition of a real estate asset calculated by dividing net operating income (NOI) by the property sales price. For example, a property’s capitalization rate (cap rate) is 10 percent if it is purchased for $10 million and produces $1 million in NOI during one year. The cap rate is typically calculated using the NOI generated in the first year of ownership so investors can normalize and compare potential returns among competing investment properties.

**Cash Flow Before Debt Service.** 

Could be equivalent to NOI but there may be non recurring cash outflows such as tenant improvement costs or leasing commissions that will differentiate this number from the NOI.

**Casualty**

A casualty loss can result from the **damage, destruction, or loss of your property from any sudden, unexpected, or unusual event such as a flood, hurricane, tornado, fire, earthquake, or volcanic eruption**. A casualty doesn't include normal wear and tear or progressive deterioration.

**Class A Building**

A classification used to describe an office building with rents in the top 30 to 40 percent of the marketplace. Class A buildings are well-located in major employment centers and typically have good transit, vehicular and pedestrian access. Additionally, they are located adjacent to or in proximity to a high number of retail establishments and business-oriented or fast casual restaurants. Building services are characterized by above-average upkeep and management.

**Class B Building**

A classification used to describe an office building with rents that are based between those of Class A and Class C buildings. Class B buildings are in good to fair locations in major employment centers and have good to fair transit, vehicular and pedestrian access. They are located adjacent to or in proximity to a moderate number of retail establishments and business-oriented or fast casual restaurants. Building services are characterized by average upkeep and management.

**Class C Building**

A classification used to describe an office building with rents in the bottom 10 to 20 percent of the marketplace. Class C buildings are in less-desirable locations relative to the needs of major tenant sectors in the marketplace. They can be older, neglected buildings in good locations or moderate-level buildings in poor locations, so transit, vehicular and pedestrian access may vary. Typically, fewer amenities and restaurants are found in or near these buildings, and they are usually of moderate to low quality. Building services are characterized by below-average upkeep and management.

**Commercial Mortgage-backed Securities (CMBS)**

CMBS are a type of bond that is commonly issued in U.S. securities markets and is backed by the cash flow from a pool of mortgages on commercial properties. The CMBS are often arranged into groups or “tranches” according to geography, property type or underlying credit rating.

**Community Center or Community Shopping Center**

A retail property with a wide range of apparel and general merchandise stores, as well as discount retailers or department stores such as Walmart, and Target.

**Competitive Inventory**

Single-tenant and multi-tenant buildings typically consist of 10,000 square feet or more that are owned by one party and are made available for lease to another party. Owner-occupied and government-owned buildings are typically excluded from the competitive inventory. Note: It is important to note that data providers each have their own set of buildings that make up the competitive inventory in their foundational data set. Some include buildings larger than 20,000 square feet, while others include buildings as small as 5,000 square feet. Those modest differences in the competitive set can cause variations in metrics such as vacancy and absorption reported by each shop.

**Concessions**

To secure a tenant when vacancy is high in a market or submarket, a landlord may need to grant concessions in the lease. Those concessions most often take the form of free rent but may also include lease buyouts, moving allowances and above-market tenant improvement allowances.

**Condemnation**

When a government seeks to take property from a private owner, either through eminent domain or some other governmental function. Generally, in a condemnation proceeding, the court must decide whether the taking is legal and appropriate compensation.

**Contract Rent (aka base rate)**

The rental rates stipulated in an executed lease agreement. Typically, the contract rate is based on the first year rate as opposed to the average rate over the term of the lease. (Synonym: base rate)

**Core Investment**

An investment in a high-quality real estate asset that is located in a highly accessible and highly desirable submarket. The asset commands among that submarket’s highest rents and requires virtually zero near-term capital expenditures. The asset is at least 80 percent leased, carries long-term leases with creditworthy tenants, and is among the most sought-after assets in the market, suggesting there is significant market liquidity.

**Co-tenancy Clause**

A co-tenancy clause in retail lease contracts allows tenants to reduce their rent if key tenants or a certain number of tenants leave the retail space. A large or key tenant is a big draw for traffic, and is often one of the major reasons a tenant chooses to locate in a specific mall. A co-tenancy clause provides the tenant with some form of protection in the form of __reduced rent__ to compensate for the loss of traffic. A co-tenancy clause is usually a hotly negotiated item in a retail lease. Landlords dislike co-tenancy provisions because they can't control the actions of other tenants or occupants in the shopping center. They believe a certain amount of vacancy is unavoidable, and their revenue from the shopping center can be severely impacted by a co-tenancy clause.

**Creditworthy Tenant**

A tenant with a business that has been in existence for numerous years, that has strong financial statements, or that has a large market presence that could be rated as investment grade by a rating agency. Financial and business stability implies that the tenant is highly likely to honor its lease commitment; the tenant is, therefore, viewed as a low-risk renter. Buildings with credit tenants as anchors are considered less risky investments for lenders.

**Debt Constant**

The sum of the annual principal and interest payments divided by the original loan amount.   For a $200,000 loan with annual principal and interest payments of $20,000, the Borrower’s debt constant would be 10%. The debt constant is equal to the interest rate on an “interest only” loan.

**Debt Service**

Scheduled principal and interest payments for a particular point in time.  Monthly Debt Service is the amount due on the monthly due date of the loan. 

**Debt Service Coverage Ratio**

The ratio of the net operating income to the mortgage payment.

**Debt Yield**

The ratio of the Net Operating Income to the amount of principal.  This measurement is used to assess the potential cap rate that a Lender might have to sell the property at to break even.   If the Loan Amount is $10,000,000 and the NOI is $1,000,000, the Debt Yield is 10%.   This might compare to a market cap rate of say 6% giving the Lender a cushion in the event of default. 

**Dock-high Door**

A loading dock door that is not at ground level but rather is elevated to 4 feet in order to be even with the standard tractor-trailer height for loading or unloading goods without a change in elevation. Some doors, called “semidock” or “half dock,” are constructed at a 2-foot height to accommodate smaller or lower delivery trucks.

**Drive-in Door**

A door through which trucks, forklifts, and other machinery or vehicles can enter and exit without a change in elevation.

**Effective Rent**

Expressed in dollars per square foot either per year or per month depending on market standards, it is a measurement of the value of the lease when all the concessions plus escalations are included. Effective rent calculations may vary according to local market practices; for example, in some markets, broker commissions are included.

Effective Rent Calculation

total rent - free rent - cash allowances / lease term / rentable square foot

**Environmental Indemnity**

Party providing an indemnity or guarantee against losses associated with environmental clean up costs and liability.  Lenders typically require of Borrowers.

**Event of Default  (aka “Default)**

An occurrence under the Loan Documents in which the Borrower has not performed its obligations thereunder.   Not paying the scheduled debt service is a typical Event of Default.  There may be a variety of covenants that are set forth in the Loan Documents that the Borrower is required to adhere to and the subsequent failure would be an Event of Default.

**Escrows**

Monthly payments usually due with the monthly debt service payment required by a Lender of a Borrower typically for real estate taxes and sometimes insurance premiums that a Borrower would owe to the assessor and or the insurer annually.  The Lender collects escrows to ensure control of the funds and to ensure that payments on such items are made timely. 

**Floor Plate**

The gross square footage of each floor in a multistory building. Individual floor plate sizes may vary according to the design of a building.

**Force Majeure**

An act of God or other unavoidable casualty, lock out, acts of the public enemy, the confiscation or seizure by a Government or public authority, insurrections, war or war like actions, blockades, embargoes, strikes, labor unrest, epidemics, pandemics, landslides, lightning strikes, etc.   This is usually a condition for a delay that is otherwise not permitted under the Loan.

**Freestanding**

A stand-alone retail structure that is not part of a complex (i.e., bank, bowling alley, Walmart, etc.). (See Retail Building Types Matrix.)

**Go Dark**

A clause in a retail tenant’s lease that allows a tenant to cease operations at a property if a defined event, such as the departure of an anchor tenant, should occur.

**Gross Lease**

A legally binding contract in which a landlord receives stipulated rent from a tenant and is obligated to pay all or most of the property’s operating expenses and real estate taxes. Note: Disclosure of the specified costs of operation is required in some states. (See Common Lease Types Matrix.) (Synonym: full service lease).

**Ground Lease**

A lease agreement (contract) whereby the landowner (lessor) agrees to lease a parcel of land for a set period of time to a third party (lessee). Depending on the agreement, the lessor can stipulate what the lessee can or cannot do with the property or build on the property. The lease term is typically 20 years or more, but many extend to 99 years. Upon expiration of the lease agreement, the lessor typically gains control and ownership of whatever is constructed on the land, unless the lease is renewed or an exception is created in the lease.

**Guarantor/Guaranty** 

A guarantor is a financial term describing ***an individual who promises to pay a borrower's debt in the event that the borrower defaults on their loan obligation***.  The form of document evidencing the promise to pay is a Guaranty.

**High Street Retail**

A concentration of shops in urban or urban-like areas that may also be referred to as “Main Street retail” in the United States and Canada.

**In-line Store**

A retail store placed adjacent to neighboring retailers so that the fronts of the stores are in a straight line and behind what is considered the lease line. Tenants operating in the common area are not considered in-line vendors.

**Industrial Building**

A structure used primarily for manufacturing, research and development, production, maintenance, and storage or distribution of goods or both. It can include some office space. Industrial buildings are divided into three primary classifications: manufacturing, warehouse or distribution, and flex. (The typical characteristics of the most common types of industrial buildings are shown in the Industrial Building Types Matrix.)

**Infill**

Infill is the development of one or more buildings on underutilized land situated between existing buildings. Infill development is typically done in dense environments where land is scarce. The slightly broader term “land-recycling” is sometimes used.

**Lease**

A legal agreement or contract between a Landlord and tenant that defines each parties rights to a space owned by the Landlord during a period of time including but not limited to the cost to use the space over that period of time.

**Leasing Broker**

Typically an agent of a property owner who is engaged to find tenants at the owner’s property.  Leasing Brokers typically get paid (known as a leasing commission) upon procuring a lease for the owner pursuant to the written agreement between Landlord and Leasing Broker.  The loan agreement regulates the mutual promises made by each party over a period of time.

**Leased Space**

Space under contract between a landlord and a tenant or between a tenant and a subtenant.

**Leasehold**

A leasehold is an ownership structure in which a temporary right to use land has been granted by the landowner to another party. (See ground lease.) Although the tenants do not own the land, they are able to improve the land and operate it as stipulated in the ground lease for the term of the lease.

**Letter of Intent (LOI)**

A letter of intent is an agreement(s) between two or more parties before an actual agreement, such as a lease, is finalized. It is similar to a term sheet or memorandum of understanding (MOU). While LOI’s may not be binding, provisions of them can be, e.g., non-disclosure and exclusivity. The intent is to protect both parties in the transaction until the transaction is executed.

**Lifestyle Center**

A type of retail property in an urban-like or Main Street setting with pedestrian circulation in the core and with vehicular circulation along the perimeter. Tenants are typically upscale, national-chain specialty stores, restaurants and theaters. 

**Loan to Value Ratio (LTV)**

The ratio between a mortgage loan and the value of the property pledged as security, usually expressed as a percentage.

**Master Lease**

The controlling lease identifying the terms and length of the lease. Note that a sublease cannot extend beyond the term of the master lease. (See Common Lease Types Matrix.)

**Maturity Date**

The end date under which a contract (such as a lease or loan agreement) occurs.  In a loan agreement, the Maturity Date is the date when any unpaid amounts become due and payable. 

**Medical Office Building (MOB)**

A structure with at least 75 percent of its interior built out to accommodate healthcare providers such as doctors and dentists or healthcare technicians who perform exams with specialized equipment. Typically, the buildings have more robust mechanical, electrical and plumbing systems as well as reinforced floors to accommodate numerous exam rooms and heavy medical equipment.

**Mezzanine Office**

Office space that is built in an industrial facility. It is usually along the perimeter of a facility and creates an intermediate floor.

**Mixed-use Development (MXD)**

The grouping of multiple significant uses within a single site or building such as retail, office, residential or lodging facilities. Examples include office buildings that contain ground-level retail and housing, plus projects that have separate office, retail and multifamily properties. Clustering of at least three different uses such as office, retail, residential and/or hotel adjacent to or in close walkable proximity to one another. Uses can be contained in the same building or dispersed in different buildings that are adjacent to or close to one another.

**Modified Lease**

A lease in which the landlord receives a stipulated rent, and payment of the property’s operating expenses is divided between the lessor and lessee via specified terms in the lease; also called “Modified Gross,” “Net-net” (Double Net), “Net-net-net” (Triple Net), etc., depending on the degree to which the tenant or landlord are responsible for operating costs. (See Common Lease Types Matrix.)

**Neighborhood Shopping Center**

This type of retail property is most commonly found in the United States. Anchored by supermarkets and drug stores, the centers are typically one-level, rectangular structures with surface parking in the front and merchandise loading areas in the back. They provide for the sale of convenience goods (food, drugs, etc.) and personal services (laundry, dry cleaning, etc.) for the day-to-day living needs of the immediate neighborhood. (See Retail Building Types Matrix.)

**Net Absorption**

The net change in occupied space over a specified period of time. This change is measured in square feet at the building, submarket and market levels. This figure reflects the amount of space occupied as well as the amount of space vacated. Net absorption can be either positive or negative and must reflect increases and decreases in inventory levels.

**Net Cash Flow**

Net cash flow is the annual income produced by an investment property after deducting allowances for capital repairs, leasing commissions, tenant inducements (after the initial lease is up) and debt service from net operating income.

**Net Lease**

A lease in which the tenant pays a share of operating expenses in addition to the stipulated rent. Disclosure of the specific expenses to be paid directly by the tenant is required.   Triple Net Lease is one where the tenant reimburses the Landlord on a pro rata basis, the amount of real estate taxes, insurance premiums and common area maintenance.

**Net Operating Income (NOI)**

The income generated after deducting operating expenses but before deducting taxes and financing expenses.  When this metric is used in other industries, it is referred to as “EBIT,” which stands for earnings before interest and taxes.   For purposes of this class, Net Operating Income will be reduced by the replacement reserve and a revenues by a vacancy factor which will be the greater of (a) actual or (b) 5%.

**Occupied Space**

Space that is physically occupied by a tenant, subtenant or owner. Occupied space is calculated by subtracting total vacant space from total competitive inventory. If subtenant space is excluded from the calculation, then the term “direct occupied space” is recommended.

**Office Building Types and Sizes**

**Low-rise:** Fewer than 7 stories above ground level

**Mid-rise:** Between 7 and 25 stories above ground level

**High-rise:** More than 25 stories above ground level

**Owner Occupied Building**

Buildings that are occupied by the owner and that generally are not included in the competitive inventory.

**Operating Expenses**

The costs to operate, maintain and manage the Property that are incurred on a regular monthly or periodic basis including taxes and insurance.  Operating Expenses are deducted from the revenues of the property to determine NOI.

**Power Center**

Among the largest types of retail properties, they typically feature three or more big box retailers such as Home Depot, Target and Walmart. Various smaller retailers are usually clustered together in a community shopping center configuration. Power centers are typically made up of multiple large buildings that are one-level, rectangular structures with surface parking in the front and merchandise loading areas in the back. Often, more money is spent on features and architecture at these locations than at big box shopping centers.

**Prime Rate**

The term prime rate refers to the interest rate that commercial banks charge their most creditworthy customers. The __Federal Reserve (Fed)__ sets the federal funds overnight rate which serves as the basis for the prime rate, which is the starting point for other interest rates.1

The prime rate (sometimes referred to simply as "prime") is the most commonly used __benchmark__ used by banks and other lenders when setting their interest rates for various products, such as credit cards and home loans.

**Pro Rata Share**

The percentage that, when multiplied by reimbursable expenses (less an expense stop if referring to a gross lease), equals the amount to be reimbursed by a tenant to the landlord for expense recoveries. Typically, the percentage is calculated by dividing the net rentable area of a tenant’s leased premises by the net rentable area of the building, although this is not always the case. 

**Real Estate Investment Trust (REIT)**

A REIT is a company that owns or finances income-producing assets, such as apartments, shopping centers, offices and warehouses. It may also invest in air or water rights, unharvested crops, permanent structures and structural components that are part of a structure but don’t themselves produce income. Shares of REITs can be traded like stocks and can allow owners of the shares to participate in the real estate market.

**Real Estate Owned (REO)**

A sale in which a lender, either institutional or private, sells a property that the lender has taken back through foreclosure.

**Recourse Loan**

The recourse loan holds the real estate borrower or guarantor accountable for repaying the outstanding balance.  This typically is only in the case that the Borrower can not repay.

To be more specific, let us say a borrower defaults on a loan and the collateral used to secure the loan is not enough to cover the total unpaid loan amounts. Then the lender can have the right to seek additional personal collateral of the borrower or guarantor to cover the difference.

**Non Recourse Loan**

The nonrecourse real estate loan allows the borrower or guarantor not to be personally liable for the obligations of the Borrower (just the property).   If the collateral is insufficient to repay the loan, the lender incurs a loan loss. With a non-recourse loan, the principals of the borrower can transfer ownership of the loan collateral to the lender. They then can walk away from the debt without having to pay anything further to the lender.

**Bad Person Guaranty with Non-Recourse Loans**

The bad person guaranty is a provision that protects the nonrecourse lenders from events such as borrower fraud, misrepresentation, failure to pay taxes, committing a crime and failing to maintain required insurance.   While non recourse loans may not require personal liability in the normal course of business, if the Borrower commits a Bad Person event, the Borrower and Guarantor will usually be liable personally.

**Regional Shopping Center**

Among the largest types of retail properties, the center typically features large anchor tenants that sell general merchandise and fashion. Regional shopping centers were historically configured like traditional suburban malls, but many have evolved to Town Center or Main Street retail formats. Parking is accommodated via surface or structure spaces or both. (See Retail Building Types Matrix.)

**Relet Space**

Sometimes called “second-generation space,” it refers to existing space that was previously occupied by a tenant.   Certain tenants (in retail, usually discounters) target vacant big boxes to lease because they feel they can get a great deal on the rent.   They are referred to as second generation tenants. 

**Rentable Building Area (RBA)**

The total square footage of a building that can be occupied by or assigned to a tenant for the purpose of determining a tenant’s total rental obligation. Generally, RBA includes common areas in the building including hallways, lobbies, bathrooms and phone/data closets. (Synonym: gross building area)

**Rent Roll**

A rent roll is an important document that lists all the tenants in the property.  In real estate investing, it is an important part of the due diligence process, and it is typically provided by the current owner or property management company.  The format of the rent roll can vary – sometimes it is an Excel file, other times it is a printed report – but they all contain the same general information:

**Return on Investment (ROI)**

A measure of the value created by a real estate investment. It is the difference between the net gains from investing in the property less the net cost from investing in the property divided by the purchase price of the property. Usually, it is reported as a percentage.

**Sale or Leaseback**

An owner-occupied property that is sold to a third-party investor. The previous owner becomes the tenant that pays rent to the new owner. This tactic allows property owners to convert their ownership (equity) into cash while still occupying the property. The seller’s (now the tenant’s) lease term must be for two or more years.

**Shadow Space**

A portion of leased space that is not being used by the tenant. This area can include unused space that a tenant leased and is holding for expected future growth. It can also include unused space that was previously occupied but is no longer used as a result of downsizing the company’s workforce. Shadow space is difficult to measure because it is not officially marketed or tracked in industry databases. (Synonym: phantom space)

**Shell Space**

Space within a property that is currently not built out.

**Short Sale**

When the sale price of an asset is less than the amount owed to the lender and when the lender accepts this amount as full payment for the loan. Those funds not repaid to the lender will be written off.

**Special Purpose Entity**

A __special purpose entity__ or single purpose entity (SPE) — also known as a special purpose vehicle (SPV) — is a legal entity used to acquire and finance a specific investment while limiting risk for all parties involved. The main benefit of an SPE is that it is bankruptcy remote, which means that if the firm that owns the entity declares bankruptcy, there is only a limited risk that the SPE will become ensnared in the bankruptcy proceedings.

In addition, the isolated nature of a special purpose entity makes it easier to sell or transfer commercial real estate in the future. Plus, the fact that SPEs are held “off balance sheet” of the parent company, and are legally segregated, can add an additional layer of anonymity for investors and companies who wish to keep their dealings more private.

 

**Speculative**

A building developed and constructed without any preleasing in place. Construction commences without a prelease when the developer believes there is so much demand for that type of building in that market or submarket that a lease commitment is bound to come through.

**Stabilized Cap Rate or (Cap Rate)**

A stabilized cap rate is the ratio between the net operating income produced by a property upon achieving target occupancy, and its purchase value.   This is the unlevered return expected by a buyer based on the NOI of the Property. 

**Stacking Plan**

A floor-by-floor and suite-by-suite graphical representation of each floor and suite within a building. The plan shows the suite number, the square footage of each suite and the tenant occupying each. On many stacking plans, lease expiration dates are also provided to give a quick view of the occupancy exposure within a building.

**Straight-line Rent**

The accumulation of rental income (including months that have free rent, discounted rent and fixed-rent increases) divided by the term of the lease will generate a straight-line rent. Straight-line rent provides a way to compare rents on various properties using a consistent methodology.

**Strip Shopping Center**

A strip shopping center is an attached row of stores or service outlets that are managed as a coherent retail entity with onsite parking usually located in front of the stores. Open canopies may connect the storefronts, but a strip center does not have enclosed walkways linking the stores. A strip center may be configured in a straight line or may have an “L” or “U” shape.

**Submarket**

Submarkets are geographic divisions of markets. These smaller divisions or boundaries are generally recognized and accepted by the real estate industry and the business community in a market and region. Submarkets are geographic boundaries that delineate core areas that are competitive with one another, and together they constitute a generally accepted secondary set of competitive areas. In the real estate industry, submarkets are building-type specific and are nonoverlapping contiguous geographic designations with a cumulative sum that matches the boundaries of a market. They contain properties sufficient to provide meaningful information for aggregate statistics.

**Suburban**

Suburban means a geographic area that contains a variety of property types arranged in a setting that is less dense than neighboring urban areas. This broad term can be defined or measured a number of ways and is often defined relative to urban and exurban areas.

**Tenants or Tenancy in Common (TIC)**

An estate held by two or more persons, each of whom has an undivided interest, which means that each party has the right to sell or transfer the ownership of his or her ownership interest.

**Total Inventory**

The total number of buildings and total square footage (net rentable area) in the competitive inventory. Buildings under construction are not part of total inventory. Total inventory increases when a new building is delivered and decreases when an existing building is demolished or changes use. Total inventory includes properties under renovation if the building remains inhabitable during the renovation but excludes properties converting to a different use. Total inventory is typically measured at the submarket and market levels. A description of the characteristics and numeric thresholds that make up the total inventory should be provided. The total inventory figure may vary from one data provider to another as a result of tailored definitions of what constitutes the competitive inventory. 

**Transit Score**

Transit score is a number between 0 and 100 that measures the relative usefulness of nearby routes. “Usefulness” is typically measured by a weighted algorithm of characteristics such as distance to the nearest stop; mode of the route such as bus, ferry or rail; and frequency of service.

**Transit-oriented Development (TOD)**

Real estate projects that are built around transit to maximize access to shared transportation modes. Typically, the TOD project is dense and walkable, and it includes a mix of uses such as residential, office, retail, hotel and entertainment.

**Triple Net Lease**

A lease agreement whereby the tenant pays taxes, maintenance and property insurance as well as all operating costs associated with the tenant’s occupancy, including personal property taxes, janitorial services and all utility costs. The landlord is responsible for the roof and the structure and sometimes the parking lot. (See Common Lease Types Matrix.)

**Trophy Building**

A landmark property that is located in a highly desirable submarket, is designed by a recognized architect, and features high-end finishes and modern or efficient systems. This building commands among the highest rents in the market and is more than 80 percent occupied by the market’s premier tenants. It is highly sought after by institutional investors such as pension funds and insurance companies as well as by foreign investors. These properties are more desirable than Class A buildings.

**Turn-key**

A term used to describe a landlord’s agreement to provide and pay for improvements to a tenant’s premises. The landlord is required to deliver the premises in a condition ready for the tenant’s stipulated use.

**Usable Area**

This relative term is best compared to rentable area. Usable area is the amount of space that can actually be used by tenants within the space they lease. For example, columns inside a tenant space are counted in the measure of rentable area, but the space occupied by the column cannot be used by the tenant. A tenant’s usable area does not include common areas in the building.