Glossary of Terms

ACREAGE
A 2-dimensional measure of land equaling 160 square rods, 10 square chains, 4,840 square yards, or 43,560 square feet.

ADJUSTABLE RATE MORTGAGE
A mortgage with an interest rate that changes periodically according to an index that is selected when the mortgage is issued. The initial interest rate is lower than that of a fixed�rate mortgage, but monthly payments can go up or down as the rate is adjusted.

ADJUSTMENT INTERVAL
The period of time between changes in the interest rate for an adjustable�rate mortgage. Typical adjustment intervals are 6 months and 1 year.

AMENITIES
Noted in the appraisal, the non�monetary benefits derived from property ownership.

AMORTIZATION PERIOD
The period, or length of time, over which the principal portion of a mortgage loan is scheduled to be paid down through periodic payments.

ANCHORED
Refers to a piece of commercial real estate property, which will serve as the main tenant in a shopping center.

ANCHORS
A long term, credit-worthy tenant. The presence of one or more "anchors" enhances the value and the ability to obtain financing for a shopping center.

APPRAISAL
An estimate of the value of a property made by a qualified professional called an appraiser. (Lone Star Commercial Experts typically requires the appraiser to be MAI certified.)

ASSISTED LIVING
A type of senior-housing that usually includes independent-living and limited-assistance to its renters.

ASSUMABILITY
A mortgage loan which can be transferred to another person without a change in the terms of the loan. This typically requires a flat-fee to be paid to the lien-holder for transferring.

AVAILABLE SF
The square footage available for lease.

AVERAGE ANNUAL OCCUPANCY
The percentage of currently-rented units in a building, city, neighborhood or complex.

AVERAGE DAILY RATE
A hotel rate used to evaluate the average daily rate of a hotel inclusive of vacancy and seasonality.

B

BALLOON PAYMENT

One large payment of the remaining principal balance of a mortgage, due at a time specified in the contract (i.e. a 5-year balloon would have periodic payments made through 5 years and then a lump-sum payment made on the 60th month.)

BASIS POINT (BP)
1/100th of 1% usually expressed as a margin over an index rate.

BORROWING ENTITY TYPE
The legal form under which property is owned.

BRIDGE/SHORT TERM LOAN
A short�term or interim loan for borrowers who need more time to find permanent-financing or are repositioning a commercial property.

BUILDING PERMIT
A document issued by a government regulatory authority that allows a builder to construct or modify a structure.

BUILDING SF
The usable square footage of the building.

C

CALL
(see Balloon Payment) Essentially the lien-holder has a �call provision� noted in the contract in which they can call the note due in full. Typically this is a 5-year or a 10-year call.

CAP
The maximum amount an adjustable�rate mortgage may increase by, regardless of index changes. An interest rate cap limits the amount the interest can change, while a payment cap limits the increase in monthly payment to a specific dollar amount.

CAPITAL EXPENDITURES
Line items on a Profit and Loss statement that would not be expensed on an annual basis. This category would include replacement of major building systems, such as roofs, etc.

CAPITALIZATION RATE
The ratio of the first-year NOI to the asking price (NOI/Asking price). This is used by appraisers and lenders to reflect the supply and demand rate for like-properties in the immediate market area. This is not the rate of return.

CARVE OUT
The definition used for the inclusion of recourse in loan documents for fraud and misrepresentation.

CASH�OUT REFINANCING
When the principal amount of a new mortgage involved in refinancing is greater than the principal amount outstanding on the existing mortgage being refinanced, and all or a portion of the equity is converted to cash.

CENTRAL BUSINESS DISTRICT (CBD)
The downtown section of a city, generally consisting of retail, office, hotel, entertainment, and government land-uses with some high�density housing.

CLEARANCE
The distance between the building�s floor and effective storage ceiling.

CLIMATE-CONTROLLED
An industrial and self�storage term that represents temperature-controlled commercial space.

CLOSING
The meeting between the buyer, seller and lender (or their agents) where the property and funds legally change hands.

CLOSING COSTS
The costs and fees associated with the official change in ownership of the property and obtaining the mortgage, if any, that is assessed at the closing/escrow part of the transaction.

CMBS (Commercial Mortgage-Backed Security)
A bond or other financial obligation secured by a pool of mortgage loans.

COFI (Cost of Funds Index)
Index used to determine interest rate changes for adjustable rate mortgages. It is based on the cost of funds of the 11th District of the Federal Home Loan Bank.

COMMERCIAL LAND
Development and transitional land acquired for investment use: land for lots, site-selection and assembling of parcels.

COMPARATIVE MARKET ANALYSIS
An estimate of the value of a property based on an analysis of sales of properties with similar characteristics in the immediate marketing area.

CONDUIT
The financial intermediary that sponsors the link between the lender(s) originating loans and the ultimate investor. The conduit makes or purchases loans from third-party correspondents under standardized terms, underwriting and documents and then, when sufficient volume has been obtained, pools the loans for sale to investors in the CMBS market.

CONGREGATE CARE
A type of senior-housing that usually involves a central eating facility, smaller rooms, and a higher level of care for its tenants.

CONSTANT MATURITY TREASURE (CMT)
An index based on the U.S. Treasury that is used in the pricing of debt for banks.

CONSTRUCTION LOAN
A short-term loan to pay for the construction of commercial buildings. These loans typically provide periodic disbursements to the builder as each stage of the building is completed. When construction is completed, a �take�out� or permanent loan is used to pay off the construction loan.

CONSTRUCTION TYPE
The type of construction used for a commercial building (i.e. concrete tilt�up, etc.).

CONTINGENCY
An element of an agreement that must be satisfied before the total agreement can be consummated.

COUPON
The coupon on U.S. Government securities expressed as an annual percentage of face value, is the interest rate the U.S. Government promises to pay to the holder on an ongoing basis until maturity.

CREDIT TENANT
A tenant who has obtained a debt-rating by S&P or Moody�s of "BBB�" or better.

CREDIT-TENANT NET LEASE
A lease with a tenant that has a credit rating of BBB� or better.