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Glossary

Gross Rent Multiplier (GRM) The factor used by appraisers for the income method of valuing properties. Sales prices of comparable properties are divided by gross income (either monthly or annual) to arrive at typical GRM levels; the average or a representative GRM factor is used to estimate the market value of the subject property.
Growth Management Laws Legislation enacted in several states to control land use and development; these laws often expand local zoning and place further restrictions on how and where development will be allowed.
Heavy Industrial A specialized sub-zone of industrial reserved for land uses including toxic material, flammables, or specialized use such as rail car storage, quarries and other manufacturing uses, and any land use that may pose an environmental or health threat.
Highest And Best Use A principle in valuation, stating that real estate valuation is maximized when land is utilized in the best possible way.
Hybrid REIT A real estate investment trust containing varying levels of equity, construction and mortgage features.
Improved Property That portion of real estate inventory including the top 25 percent of inventory, normally in ready to build condition and with basic services available.
Income Method In appraisal, a method for estimating market value of an income property based on its potential to generate income. In most calculations, the sales prices of comparable properties are divided by monthly or annual gross rental income, to arrive at a gross rent multiplier (GRM). The GRM for several comparable properties is used as a basis for identifying market value for the subject property.
Increasing Returns A concept in valuing real estate, recognizing that improvements to property may cause growth in market value to an extent, but not without limit.
Internal Rate of Return (IRR) A calculation of investment return including a calculation of market-rate comparative returns on periodic cash flow; return on capital invested based on the assumption that cash flow may be invested at a current assumed rate of return.
Inventory The available rental space in a specific area, either vacant or occupied, including space of a specific property type (residential, commercial, or industrial) but excluding property occupied by government offices, hospitals, schools, and other essential public facilities; expressed as a number of square feet of space.
Larger Malls Retail malls sized between 750,000 and two million square feet of retail space and with three or more anchor tenants, each with over 100,000 square feet of retail space. leisure travelers in lodging, guests whose primary purpose for travel is vacation and leisure. Interest is primarily on proximity to travel destinations, comfort, and convenience.
Lease Abstract A summary version of a lease, containing the most important facts about it in order to facilitate later reviews.
Leverage The use of borrowed funds; investors use leverage by investing a minimal amount and financing the balance. This is common practice in the stock market (via the use of margin accounts) and even more so in real estate. Some investment analysts identify three possible methods to invest: equity (ownership position such as stocks), debt (lending money through notes or bonds), and leverage (using a small amount of money to control a larger investment base).
Light Industrial The most common form of industrial zoning sharing similar impact levels with office zoning; light industrial areas often coexist with other land uses in mixed use office/industrial parks.
LIHTC Low Income Housing Tax Credits, a federal incentive program designed to encourage the development of low income and affordable housing. Developers are granted tax credits in exchange for constructing below-market rate housing.
Limited Partnership A type of investment program in which general partners manage investment properties and limited partners (who purchase equity units in the program) have limited liability but no management control. Losses from limited partnerships are passive losses and cannot be deducted except to the extent that they offset other passive gains.
Liquidity An attribute of investments, useful for comparisons between two dissimilar products. Directly-owned real estate is highly illiquid because cash can be removed only through borrowing of equity or sale of the property. In comparison, stocks are highly liquid because they can be bought or sold with minimal cost.
Load Factor In a lease, the load factor is the multiplier to a tenant's useable space that accounts for the tenant's proportionate share of the common area (restrooms, elevator lobby, mechanical rooms, etc.). The load factor is usually expressed as a percentage and ranges from a low of 10% for a full tenant to as high as 40% for a multi-tenant floor. Subtracting one (1) from the quotient of the rentable area divided by the useable area yields the Load Factor. At times confused with the "loss factor" which is the total rentable are of the full floor less the useable area divided by the rentable area. (If a full floor broken up into multiple tenancies has a useable area of 18,000 s.f. and a rentable area of 20,000 s.f., the load factor is 11.1% and the loss factor is 10%.
Loan-To-Value Ratio A ratio reporting the relationship between the current mortgage debt and market value the property. To calculate, divide the current amount due on mortgage loans, by the current value of the property.
Local Area The immediate neighborhood in proximity to a subject property.
Local Market Variables Factors contributing to real estate valuation, which are local in nature and not attributable to any regional or national economic trends.
Loss Factor A number that reflects the portion of rentable space that is attributed to the common areas of a commercial building, such as lobbies, corridors, restrooms, etc. Often also referred to as "common area factor". Usually expressed as a percentage.
LULU Acronym for Locally Unwanted Land Use, an alternate descriptor of anti-growth forces commonly called NIMBYs.
Market Analysis A study of the market for a project, to include site-specific issues as well as demand study, analysis of the competition, and other local factors.
Market Area The range in which the forces of supply and demand operate; often defined in terms of geographic markets, the true market area may involve a non-geographic base such as a type of traveler in a lodging facility; a family on vacation; or a family moving to find employment.
Market or Sales Comparison A method of appraising real estate based on market values of similar properties or on recent sales prices.
Market Share In analysis of competition, an estimate of the amount of current and future demand that a specific project is likely to absorb.
Market Study An analysis of level of demand and competition for a proposed project, to include identification of financing methods.
Marketability A feature of investments, reflecting the ability to buy or sell. In a soft market, it may be difficult to obtain an asked price for real estate, meaning that marketability is poor. An owner of limited partnership units may be unable to locate a secondary market purchaser, in which case marketability is at zero. Marketability may also refer to obsolescence, or to loss of equity value. For example, a highway store may be obsolete when the highway is rerouted, losing marketability; or a house may lose marketability because the cost required to make repairs exceeds the equity in the property.
Marketability Analysis Part of a market analysis, in which the market for a project is evaluated – which may mean a potential buyer or potential tenants or customers.
Mixed Use Land use involving a coordinated application of two or more different zoning types (residential, commercial and industrial); one variety mix use includes varying densities of housing.
Modified Accelerated Cost Recovery Systems (MACRS) The current system used for federal income tax calculations of depreciation, which has been in effect since 1986.
Modified Adjusted Gross Income An individual’s AGI with adjustments, used to determine the total amount allowed as a loss on real estate investments for federal income tax purposes.
Mortgage REIT A real estate investment trust formed specifically to lend money to developers to fund projects.
Multi-Unit Residential A variation of residential zoning with higher density than single-family housing; this includes duplex, triplex, four-plex and apartment projects.