Commercial Development

Blend and Extend Amendments in Commercial Real Estate

Blend and Extend Amendments in Commercial Real Estate

In commercial leasing, a blend and extend amendment is allows a tenant to extend their lease and negotiate a new rate, merging, or “blending” the new and old rents. During periods of particularly high vacancy, commercial landlords will often offer agree to a blend and extend amendment that lowers a tenant’s rent, in order to keep their property occupied for an extended period of time.

Real Estate Debt Funds in Commercial Real Estate

Real Estate Debt Funds in Commercial Real Estate

For commercial real estate borrowers, debt funds often offer loans that banks can’t-- or won’t offer, including commercial construction loans, bridge loans/lease-up financing, and certain property rehabilitation and redevelopment loans. According to the Mortgage Bankers Association (MBA), debt funds originated nearly $70 in billion commercial real estate loans in 2018, around 10% of all CRE loans originated in that year.

MSA: Metropolitan Statistical Area in Commercial Real Estate

MSA: Metropolitan Statistical Area in Commercial Real Estate

Metropolitan Statistical Areas, or MSAs, are U.S. government designations for specific urban areas. MSAs are defined by the U.S. Office of Management and Budget (OMB). Currently, there are 383 Metropolitan Statistical Areas in the United States and 7 in Puerto Rico. An MSA generally groups several cities and counties that are closely interconnected, which makes it significantly easier for government agencies and businesses to compile statistics about a specific area

Submarket in Commercial Real Estate

Submarket in Commercial Real Estate

In commercial real estate, a submarket is a smaller part of a larger market. While a market may be a city or MSA, such as New York City, or the Dallas-Fort Worth-Arlington MSA, a submarket is likely to be a neighborhood or Suburb, such as Williamsburg, Brooklyn or downtown Dallas.

Capital Stack in Commercial Real Estate

Capital Stack in Commercial Real Estate

In commercial real estate finance, the capital stack is the legal organization of all the layers of debt that are used to purchase, build, or renovate a piece of real estate. The position of a piece of debt in a property’s capital stack determines what the order that lender will repaid in the case of a borrower default or bankruptcy.

Built to Suit in Commercial Real Estate

Built to Suit in Commercial Real Estate

In a built to suit lease, a developer builds a property specifically for the use of one tenant. Generally, a tenant will locate a developer who is willing to purchase or ground lease land (or already owns land), and is willing to engage in a built-to-suit transaction.

Infill Development in Commercial Real Estate

Infill Development in Commercial Real Estate

In commercial real estate, infill is defined as the development of unused land in urban areas. This commonly takes the form of developing an empty lot of land between two buildings, but can also involve the demolition of older or underused properties. Supporters of infill development believe that it makes efficient use of existing land and reduces burdens on municipal services, due to the fact the area is already being served by water, power, and communications infrastructure.

Recapture Clause in Commercial Real Estate

Recapture Clause in Commercial Real Estate

In commercial leasing, a recapture clause permits a landlord to terminate a lease early, and may also allow them to demand all or part of the remaining lease payments immediately. Recapture clauses can be triggered by a variety of events, but are are most often activated when a tenant closes their business and attempts to sublease the property.

Adaptive Reuse in Commercial Real Estate

Adaptive Reuse in Commercial Real Estate

In commercial real estate, adaptive reuse occurs when an older building is adapted for a different use than it was originally designed for. Adaptive reuse can have a variety of advantages for commercial real estate investors and developers. Primarily, this comes in the form of significant savings; demolition and new building construction can be extremely expensive, and adaptive reuse can lead to substantially lower construction costs.

Intercreditor Agreement in Commercial Real Estate

Intercreditor Agreement in Commercial Real Estate

In commercial real estate, an intercreditor agreement is an agreement between two lenders that stipulates the rights and responsibilities of each party. Intercreditor agreements are most commonly used when mezzanine debt is layered on top of a senior commercial real estate loan. Typically, the agreement creates a variety of safeguards that protect that senior lender’s interest in the property should the borrower default on their loan.

UBP: Unpaid Principal Balance in Commercial Real Estate

UBP: Unpaid Principal Balance in Commercial Real Estate

In commercial real estate finance, unpaid principal balance, or UPB, is the amount of a loan’s principal balance that has not yet been paid back to a lender. To calculate the UPB, a borrower cannot simply subtract their current mortgage payments from the initial loan amount; since they have also been paying interest, they will have to add this into their calculations.

Equity Kicker in Commercial Real Estate

Equity Kicker in Commercial Real Estate

If a commercial real estate borrower seeks out a mezzanine loan, but does not want to pay an extremely high interest rate, the lender may agree to reduce the interest rate in exchange for a piece of equity in the project, referred to as an equity kicker.

Accredited Investors in Commercial Real Estate

Accredited Investors in Commercial Real Estate

When a commercial real estate investment is solicited to investors, they must typically be accredited investors. According to the Securities and Exchange Commission (SEC), accredited investors have an annual income of at least $200,000 (or $300,000 if married) and a net worth of at least $1 million. This does not include the value of the investor’s primary residence.

BOMA: Building Owners and Managers Association in Commercial Real Estate

BOMA: Building Owners and Managers Association in Commercial Real Estate

BOMA, or the Building Owners and Managers Association, is an international trade association for commercial real estate professionals. The organization, which was founded in 1907, sets many of the standards for how commercial structures are measured. BOMA standards particularly focus on office, industrial, multifamily and retail properties

Syndication in Commercial Real Estate

Syndication in Commercial Real Estate

Real estate syndication is the process in which multiple investors pool their money together to purchase a commercial property. Syndication is similar to crowdfunding, and many real estate syndication deals are now crowdfunded on the internet, through platforms such as Fundrise, Realty Mogul, and a variety of others. Investors in a real estate syndication deal benefit by getting access to deals they would not be able to create on their own, as well as not having to worry about the day-to-day hassles of personally owning investment property (i.e. property management).

Usable Square Feet vs. Rentable Square Feet in Commercial Real Estate

Usable Square Feet vs. Rentable Square Feet in Commercial Real Estate

In commercial real estate, there are two major ways to evaluate a property’s size; usable square feet (USF) and rentable square feet (RSF). In general, this applies most to office and retail properties with multiple tenants, and is not usually applicable to multifamily and industrial properties.

Acceleration Clauses in Commercial Real Estate

Acceleration Clauses in Commercial Real Estate

In real estate, an acceleration clause is a loan provision that permits a lender to force a a borrower to pay off the remaining balance of a loan if the borrower violates certain elements of a loan agreement. Most commonly, an acceleration clause can be invoked if a borrower defaults on their mortgage, however, there are a variety of other breaches of contract that may be listed in a loan agreement.

Physical vs. Economic Vacancy in Commercial Real Estate

Physical vs. Economic Vacancy in Commercial Real Estate

In real estate, the vacancy rate is the amount of units that are unoccupied over a specific time period. It is usually referred to as a percentage. However, there are actually two distinct types of vacancy: physical vacancy, which refers to the amount of time a unit or units sits vacant, and economic vacancy, which refers to the amount of rent a property owner has lost due to the vacancy of their property.

Gross Scheduled Income in Commercial Real Estate

Gross Scheduled Income in Commercial Real Estate

Gross scheduled income (GSI), sometimes referred to as gross potential income (GPI), is the amount of money a commercial property can generate, assuming 100% rental occupancy. It is often compared to gross potential rent (GPR), but gross scheduled income includes other, non-rental sources of income, such as parking spots or income from vending machines.

Absolute Net Lease in Commercial Real Estate

Absolute Net Lease in Commercial Real Estate

An absolute net lease, sometimes known as an absolute NNN lease, is one of the strictest forms of commercial leases. In an absolute net lease, a tenant is generally responsible for insurance, taxes, maintenance and minor repairs, as well as larger structural repairs, such as roof replacement.