Class Notes Flashcards
Three Core Components of Pre-Development
o Financial Analysis (Pro Forma); create, explain, verify, interpret o Entitlements (land use, zoning) o Due Diligence (the details of finding out)
Four basic investment categories
o Core-lowest risk: fully stabilized with credit quality tenants on long term leases. Well located and in very good condition.
o Core-plus moderate risk: same as above with some opportunity to increase the cash flow. Perhaps short-term lease roll over.
o Value- Add Medium to high risk: looking for that opportunity to add value and will accept some risk to do that. Property has high vacancy rate, physical obsolescence, etc. Lower quality tenants.
o Opportunistic- highest risk: entrepreneurial risk to achieve above average returns. Part of the property that may be empty, perhaps a use change is required.
Eight Stages of Real Estate Development
- Idea Inception
- Refinement
- Feasibility
- Contract Negotiations
- Formal Commitments
- Construction
- Completion
- Management
General Partnership
Refers to a relationship in which all partners contribute to the day-to-day management of the business. Each partner will have the authority to make business decisions and even legally bind the company in contracts.
Unlimited Liability
Preferred Return
First claim on profits until a target return has been achieved.
Limited Partnership
A relationship where the limited partner may not be involved in the day-to-day management of the business. This partner may have just contributed funds to the business, and often the funds that they contribute are the extent of their liability. Limited partnerships will still have at least one general partner to man the day-to-day operations of the business.
The Catch Up Provision
The catch up provision provides that the investor gets 100% of all profit distributions until a pre-determined rate of return has been achieved. Then, after the investor achieves the required return, 100% of profits will go to the sponsor until the sponsor is “caught up.”
pari passu structure
Pari-passu (sometimes you’ll see it hyphenated) is a Latin term used to describe funding and/or the return of capital pro-rata to investment proportions, simultaneously. Note the two dynamics at play here: 1) dollar amount, and 2) timing.
Refinancing is _
tax free
NOI does not include:
debt, property improvements, etc.
NOI does not include:
debt, property improvements, etc.
100/cap rate = ?
number of years it takes for the property to pay itself off
Net lot area
gross lot area – set backs
Common area factors are only _
Only horizontal spaces- not vertical. i.e. lobby, hallways etc.; elevators, shafts, stairs, not included.
Effective vs commencement dates
Effective is when you sign the lease agreement. Commencement is when you actually move in and start paying rent
Effective rent
= contract rent – any ‘freebees’ or deals
Effective rent
= contract rent – any ‘freebees’ or deals
Real Estate Waterfall
An investment waterfall is a method of splitting profits among partners in a transaction that allows for profits to follow an uneven distribution. The waterfall structure can be thought of as a series of pools that fill up with cash flow and then once full, spill over all excess cash flow into additional pools.
Real Estate Waterfall
An investment waterfall is a method of splitting profits among partners in a transaction that allows for profits to follow an uneven distribution. The waterfall structure can be thought of as a series of pools that fill up with cash flow and then once full, spill over all excess cash flow into additional pools.
Typical Developer fee is based on what?
Percent of hard costs
4 types of development by risk
Core, Core+, Value-Add, Opportunistic
Are management costs included in CAM?
Yes
3 basic sections of New Urbanism
Region, Neighborhood, Block
GMP
Guaranteed-Maximum-Price
Contractor compensated for actual costs plus a fixed fee subject to a ceiling. Any cost overruns are on the contractor except for change of scope change orders. Cost savings go to owner
Lump Sum/Fixed Price
Contractor agrees for a set price. Period. Some allowances if it is over budget. Savings go to contractor
Cost Plus
Owner pays the cost of the work plus a profit amount for contractor
Breakeven Occupancy
The minimum occupancy rate necessary for property cash flows to meet all outflows sometimes called the default rate
