GLOSSARY OF TERMS - I

Unstable conditions which arise out of a market disequilibrium or the lack of balance between the forces of supply and demand in any or all subcategories of commercial properties in one or more geographic submarkets over a given time period.

Any property with an unrealized capital loss such that current equity value is less than book value. Can be temporary, such as due to changes in market conditions, or permanent if such value decline is considered irreversible over the holding period.

diminution in value from the value which a comparable asset would enjoy were it not for circumstances unique to the specific asset or specific market.

A market in which product differentiation exists and is not fully adjusted for risk. Frequently caused by a lack of relevant information on the part of both buyers and sellers. Well informed investors have the advantage in such markets. Commercial real estate is bought and sold in an imperfect market.

A tax-deferred, like-kind exchange whereby the Qualified Intermediary and/or Exchange Accommodation Titleholder acquires title and holds title to the replacement property on behalf of Investor, during which time new or additional structures or improvements are constructed or installed on or within the replacement property. Also known as a build-to-suit exchange.

A lease in which the rental amount adjusts accordingly to changes and/or movements in a price index, commonly the consumer price index.

Commercial properties that are used for the purposes of production, manufacturing, or distribution.

The economic phenomenon by which all nominal prices tend to rise over time. In modeling the economics of a property, inflation affects the growth rates of all income, expense and capital items. See: CPI Adjustment; CPI Index.

An escalation provision which provides for periodic adjustments.

Investment that tends to increase in value at a rate greater than inflation.

Any non-anchor tenant located within or along a mall or strip center.

Covered in IRC Section 453. Taxpayer may defer capital gains income tax liabilities when carrying back a promissory note on the sale of an investment property. Taxes are deferred until principal payments are received over the term of the promissory note or note is sold at a discount on the secondary market and made part of exchange or assigned to the seller as a down payment on the replacement property. Depreciation recapture can not be deferred with an installment sale and would be recognized in the year of sale.

Various types of real estate properties generally owned or financed by tax-exempt institutional investors. Some institutions may be constrained by property age, geographic location and construction quality, and other factors. Term commonly applied to tax exempt entities such as corporate pension and profit sharing plans, endowments, foundations, union-sponsored benefit plans, and state and municipal employee retirement plans.

national organization for professional property managers and property management companies. Part of the National Association of Realtors and grants the professional credentials of Certified Property Manager (CPM), accredited Residential Manager (ARM), and Accredited Management Organization (AMO).

The value of the portions of the property that are physically destructible.

Attributes that are not directly measurable or quantifiable, and therefore must be expressed in a qualitative or abstract manner.

Loan payments are interest only, no payment on principal amount of loan. Can be used to increase cash flow because of lower monthly payments as compared to an amortized loan. Negative is that 100% debt remains.

National trade organization of property owners, tenants and professionals involved in the operation of retail properties.

Abbreviation for the Internal Revenue Code.

The percentage rate earned on each dollar that remains in an investment each year. The IRR of an investment is the discount rate at which the sum of the present value of future cash flows equals the initial capital investment. A measure of the cash out of your pocket and back in measured over time for a given investment for cash flow and potential residual value.