Chapter 19 - Commercial and Investment Properties 1

Question 1

Amenity Purchaser

Answer 1

Owner/user motivated to find a location from which to house and operate a business vs. an investor wants to put their money where it will make money.

Question 2

Anchor Tenant

Answer 2

Magnet store strategically located in shopping centers to generate traffic for smaller stores

Question 3

Clear Span

Answer 3

In industrial/manufacturing properties - open space between inside faces of support members. What can fit?

Question 4

Common Area Maintenance

Answer 4

Paid pro-rata by tenants - their share reflects what percentage of the building they are occupying.

Question 5

Consumer Price Index (CPI)

Answer 5

Basic indicator of inflation in the US. Some escalation clauses link to the CPI.

Question 6

Escalation Clause

Answer 6

Allows landlord to raise rent at an agreed on time during lease - typically in commercial leases, allows landlords to compensate for inflation over a long term lease

Question 7

Loft

Answer 7

Mixed use, minimally furnished interior, lower rent, originally manufacturing/industrial converted for retail, restaurant, office, and residential use

Question 8

Loss Factor / Load

Answer 8

100% - usable (net) sq ft / rentable (gross) sq ft

Question 9

Market Value

Answer 9

What a property will fetch in price at a specific place at a specific time.

Question 10

Net Lease

Answer 10

Tenant pays rent as well as some or all of three additional expenses: taxes, maintenance, and insurance. Number paid is reflected in single, double, or triple net lease. Easier for landlord and cheaper for tenant.

Question 11

Pass-Through

Answer 11

Allow landlords to pass along unexpected increases in operating costs to tenants. Tenants typically negotiate an expense cap.

Question 12

Porter’s Wage Escalation Formula

Answer 12

Ties escalation clauses to the wages of the building’s cleaning and building maintenance personnel - reflective of NYC economy.

Question 13

Pro-rata Share

Answer 13

Proportional basis. Commercial tenants pay building expenses based on their usable area relative to building’s. If a tenant has 25% of a building’s usable area, they pay 25% of its expenses.

Question 14

Rentable Square Footage / Gross Square Footage

Answer 14

Absolutely everything. Used to determine commercial leases.

Question 15

Retail Investment Property

Answer 15

Profitability dependent on location and demographics of customer base, market appeal, accessibility, traffic flow, parking, visibility and signage, competition, tenant mix, and anchor tenants

Question 16

Usable Square Footage / Net Square Footage

Answer 16

Space in tenant’s premises that can be used.

Question 17

Floor Area Ratio

Answer 17

Building square footage / Land square footage

Question 18

Percentage Lease

Answer 18

Tenant pays fixed monthly base as well as percentage of gross sales above a designated breakpoint. Common in retail/seasonal.

Question 19

Breakpoint

Answer 19

Percentage lease. Base rent / overage %. EX: $80,000 rent at an 8% overage = $1 million breakpoint, tenant pays $80,000 plus 8% of sales above $1 million.