CBRE FSG Glossary of Real Estate Terms Practice Questions And Well Elaborated Answers.

1031 Exchange - correct answer Section 1031 of the Internal Revenue Code permits like-kind property used in trade or business, or held as an investment, to be exchanged for other similar property tax-free. Abatement - correct answer A reduction or decrease; usually applies to the forgiveness of rent or a decrease of assessed valuation of ad valorem taxes after the assessment and levy. Above Building Standard - correct answer Specialized design and engineering services and all construction necessary to personalize tenant space. Absolute Net Lease - correct answer 1) A lease in which the tenant has agreed to pay the landlord (or owner) a basic rent. This amount usually covers debt service (mortgage, principal, and interest) and a profit for the landlord. Tenant also agrees to be responsible and separately pay for all maintenance, operating, and other expenses of the building and/or office suite. These separate items would include utilities (electric, gas), all building maintenance, operating expenses (HVAC, elevator contracts, etc.), janitorial services, real estate taxes, insurance premiums, etc. 2) Similar to a Triple Net lease except that the tenant pays for capital improvements and deferred maintenance costs as well as operating expenses. The tenant pays expenses usually associated with ownership. Absorbed Space - correct answer Net change in leased space between two dates. Absorption - correct answer The rate at which land or buildings will be sold or leased in the marketplace during a predetermined period of time, usually a month or a year. Also called "Market Absorption". Absorption Period - correct answer The number of months required to convert vacant space into leased space assuming no new delivered space. Computed by dividing the average monthly-absorbed space during a recent period into the current vacant space. Absorption Rate - correct answer A number usually expressed as the amount of total square feet (but sometimes as a percentage of the total amount of space that was vacant) of office space that has been put under a lease (not necessarily occupied) between two periods of time. Abstract - correct answer A detailed summary of a lease. Acceleration Clause - correct answer When used in a mortgage or deed of trust, a clause that contains provisions and conditions that, often at the lender's option, permit the time when the entire debt becomes due to be shortened. (See Alienation Clause) Acre - correct answer 43,560 SF Ad Valorem Tax - correct answer 1) According to value. Used in reference to general property tax, which is usually based on the official valuation of property. 2) A tax or duty based on value and levied as a percentage of that value. Adjacencies - correct answer A term used in space planning to describe how physically close to each other different staff or entire departments must be for an efficient work environment. Adjustable Rate Mortgage (ARM) - correct answer 1) A mortgage in which the interest rate is adjusted periodically to reflect changes in a specified index. 2) A long-term loan in which the lender may periodically "adjust" the interest rate based on a government index. Agency - correct answer 1) When a broker/agent is working for a landlord as the exclusive leasing agent for a building. Also, an agency exists when a broker/agent is working with an exclusive letter of representation from a tenant. 2) Legal relationship between a principal and an agent. An agency is considered a fiduciary relationship, where the agent represents the principal and acts only with the principal's consent and are subject to his direction and control. Aggregate Rent - correct answer Part of a financial analysis on the economic terms of a lease that imputes or provides an estimate of the total dollar value of the lease and the total dollar outlay a tenant will make or have made at various points in time, such as at the end of five or ten years. The financial analysis will take into account estimates for increases or escalations in base rent, increases in real estates taxes, increases in operating expenses, expenses for tenant improvements paid for by the tenant, credit for tenant improvements paid for by the landlord, rent abatement, plus any other dollar-valued item in the lease. Air Rights - correct answer The space or air above a piece of property that by definition legally belongs to or is attached to the property. The air rights of a property can be transferred, sold, or rented. The term is often associated with a building that has been built over property that is being used for another purpose (the building is said to be using the air rights). The most common examples of an air rights building are those built over a railroad track or right-of-way, or over a road or highway. Alienation Clause - correct answer A type of acceleration clause where a debt becomes due in its entirety upon the transfer of ownership of a secured property. (See Due on Sale Clause and Acceleration Clause) All Space Available - correct answer All existing space in a market available for lease by tenants, including sublet and prime space. Allowance - correct answer The quantities or dollar values of materials as specified in the building standard work letter. Alterations - correct answer A lease clause prohibiting any construction, structural or non-structural additions or improvements, or placement of any fixed decorations in a tenant's office space without the written consent of the landlord. A lease may require that all tenant alterations must be done by or through the landlord's contractor. Amenities - correct answer Any material goods, services, or intangible items that increase the comfort, attractiveness, desirability, and/or value of an office suite or an office building (for example, dry cleaning establishment, low-to-high-priced restaurants, in-building or covered parking, health club). Amortization - correct answer 1) The gradual repayment of debt by means of systematic, even payments of principal and/or interest over a set time period; at the end of the time period, there is a zero balance. 2) The reduction of the total value of a debt by taking equal (amortized) installments over its actual life. Amortization Schedule - correct answer Schedule portraying the systematic and continuous payment of an obligation through installments until such time as that debt has been paid in full. Amount Financed - correct answer The loan amount after the subtraction of prepaid finance charges, such as discount points, origination fee and prepaid interest. Anchor Tenant or Key Tenant - correct answer Any major tenant, such as a large department or discount store or supermarket, which forms the nucleus of a modern shopping center. The anchor tenant is the mainstay that draws the public and stabilizes the center by assuring a profitable operation for all the other tenants. Anchor tenants are usually sought out first by developers, and they are usually given favorable leases. Annual Percentage Rent (APR) - correct answer APR reflects the cost of a loan on a yearly basis. It may be higher than the note rate because it includes interest, loan origination fees, loan discount points and other credit costs paid to the lender. Annualized Sales - correct answer Expanding on an annual basis: a procedure whereby taxable income from sales for a fractional year is multiplied by a fraction equal to 12 divided by the number of months in the shorter period. The resulting tax is then reduced by application of the same formula reversed. Anticipatory Breach - correct answer Occurs when one party to a contract, prior to time of performance, informs the other of his or her intent not to perform. Example: the buyer informs the seller before the closing date of his or her intent not to buy. Appraisal - correct answer 1) The estimation and opinion of value placed upon a piece of land based upon a factual analysis by a qualified professional; the process of estimation and the report itself. 2) A process to determine or to estimate the quality and/or value of property. Appraisals are prepared by an individual (known as an appraiser) known to be an expert in or to have experience with assessing property value. Appreciation - correct answer An increase in the value of property caused by the improvement of the elimination of negative factors. Architecturals - correct answer A term used in lieu of "architectural drawings" and sometimes to mean "working drawings" or "construction documents". As Is Condition - correct answer Premises accepted by a buyer or tenant in the condition existing at the time of the sale or lease, including all physical defects. Asbestos - correct answer An incombustible, fibrous mineral once widely used in construction of buildings because of its fireproofing and insulating ability. Most forms of asbestos have been declared health hazards and are illegal in new buildings. Federal regulation and procedures control removal of asbestos from older buildings. Assemblage - correct answer The combining of two or more contiguous properties into one large property. An assemblage will often make the one large property more valuable than was the sum of its parts. In addition, assembling to a large property permits a single larger structure to be built. Assessed Value - correct answer 1) Assessed value applies in ad valorem taxation and refers to the value of a property according to the tax rolls. Assessed value may not conform to market value, but it is usually calculated in relation to a market value base. 2) The value placed on land and buildings by a township or county assessor for use in levying real estate taxes. Assessment - correct answer 1) An estimate of property value for the purpose of imposing taxes. 2) A fee imposed on property, usually to pay for public improvements such as streets and sewers. 3) The determination or setting of a tax or other charge based on an estimation of value of a building. A local government assesses a building and collects a tax from the landlord for the value of the property. Increases in the amount of tax paid by a landlord over some agreed-on base amount or base year estimated amount is passed on to all of a building's tenants in proportion to the amount of office space occupied. In certain instances, a landlord will (per the lease) estimate the next year's increase in taxes or operating expenses that are to be passed on to the tenants. Prior to the actual increase, the landlord will make an assessment and collect the estimated amount from all tenants. Assignment - correct answer 1) A transfer between parties of title to any property, real or personal, or of any rights or estates in the property. Common assignments include leases, mortgages and deeds of trust. 2) The transfer in writing of an interest in a lease, mortgage, or other instrument. The assignor, or lessee, transfers the entire remainder of the term created by the lease, and the assignee becomes liable to the original lessor for rent. The assignor remains contractually liable for the performance of the lessee's obligations under the lease, unless the lessor agrees otherwise. 3) The ability to transfer the office space and all obligations of the lease document to another party (individual or entity). 4) Lease clause regulating if and how a lessee may assign the rights and obligations of a lease to a third party. Atrium (inside) - correct answer A large open area inside an office building. Typically, an atrium will vertically span two or more floors.