Glossary of Terms

P

PERCENTAGE LEASE
Commonly used for large retail stores. Rent payments include a minimum or "base rent" plus a percentage of the gross sales "overage." Percentages generally vary from 1% to 6% of the gross sales depending on the type of store and sales volume.

PHASE I
(see environmental report) An assessment and report prepared by a professional environmental consultant who reviews the property � both land and improvements � to ascertain the presence or potential presence of environmental hazards at the property such as underground water contamination, PCB�s, abandoned disposal of paints and other chemicals, asbestos and a wide range of other potentially damaging materials. This Environmental Site Assessment (ESA) provides a review and makes a recommendation as to whether further investigation is warranted (a Phase II Environmental Site Assessment). This latter report would confirm or disavow the presence of an environmental hazard and, should one be found, will recommend additional review and/or mitigation efforts that should be undertaken.

POINTS (LOAN DISCOUNT POINTS)
Each point is equal to 1% of the total amount of a mortgage. Typically charged in connection with originating or funding a loan.

POTENTIAL GROSS RENT
Gross income of a building if fully rented.

PRE�LEASED PERCENT
To obtain lease commitments in a building or complex prior to its being available for occupancy.

PREPAYMENT PENALTY
Fees paid by borrowers for the privilege of retiring a loan early.

PRIME RATE
The rate at which banks lend to their most creditworthy customers.

PRINCIPAL
1. The amount of debt, not including interest, left on a loan. 2. The face amount of the mortgage.

PRO FORMA
(from Latin pro forma, "according to form") Financial statements showing what is expected to occur.

PROPERTY ADMINISTRATOR
Person in broker's employ who is responsible for updating and renewing a property listing, if it is different from the contact name.

PROPERTY GRADE
A stratification of property type that is indicative of the property�s ability to command rental rates.

PROPERTY SUBTYPE
A property description that provides additional information to the lender.

PROPERTY TAX
Taxes based on the market-value of a property. Property taxes vary from state to state.

Q

R

R & D
These facilities are generally used in high technology markets and are broadly defined to include wide variations in markets across the country. R & D properties could have lab facilities, offices, warehouse facilities, or services such as carpentry or machine repair. Typically, each property allows a variable combination of office and other uses. The percentage of office space ranges from 20 to 100 percent, depending on the market and individual needs of the user.

RAIL-SERVED
Whether the building is served by railroad.

RANCH
Land devoted to raising livestock under range conditions with forage grass as main source of feed.

RATE INDEX
An index used to adjust the interest rate of an adjustable mortgage loan (e.g., the change in U.S. Treasury securities (T�Bills) with 1�year maturity. The weekly average yield on said securities, adjusted to a constant maturity of 1 year, which is the result of weekly sales, may be obtained weekly from the Federal Reserve Statistical Release H.15 (519). This change in interest rates is the "index" for the change in a specific Adjustable Mortgage Loan.

RECOURSE
Personal liability.

RECREATIONAL LAND
Land devoted to commercial outdoor sporting activity and relaxation.

REFINANCE
To replace an old loan(s) with a new loan(s).

REGIONAL CENTER
A shopping center with one or two department stores and a variety of smaller stores. It is larger than 300,000 square feet and draws from an eight mile radius or more.

RENT ROLL
A list of tenants leasing a property, which details terms of lease, area leased, and the amount of rent being paid.

RENT STEP�UP
A lease agreement in which the rent increases every period for a fixed amount of time or for the life of the lease.

RENTABLE SQUARE FEET (same as Net Leasable Area)
In a building or project, floor space that may be rented to tenants. The area upon which rental payments are based. Generally excludes common areas and space devoted to the heating, cooling, and other equipment of a building.

REPLACEMENT RESERVES
An amount set aside from net operating income to pay for the eventual wearing out of short�lived assets. Monthly deposits that a lender may require a borrower to reserve in an account, along with principal and interest payments for future capital improvements of major building systems; (i.e., HVAC, parking lot, carpets, roof, etc.)

RESERVE FUNDS
In CMBS, portion of the bond proceeds that are retained to cover losses on the mortgage pool. A form of credit enhancement (also referred to as "reserve accounts").

RETAIL
A property type which sells goods to consumers.

RV (REVERSIONARY VALUE)
The value of property at the expiration of a certain time period. In transportation, recreational vehicle.