Glossary
Green Street's Glossary of Finance and Commercial Real Estate Terms
January 2022
This glossary provides simple explanations, calculations, and Green Street's unique perspective on commonly used
terms in finance and real estate within the US and European Union. Terms are flagged according to region and if
applicable, both regions. Important terms are marked with a Green Street icon.
Important Green Street Term
U.S.
Pan-European
Adjusted Funds from Operations (AFFO)
A metric crafted by the REIT industry to evaluate a REIT's earnings potential. A key part of AFFO is that it
acknowledges landlords must constantly reinvest (capex) in their properties to maintain their competitive
position.
AFFO Yield
A valuation metric used to compare REIT valuation by dividing a given year's AFFO/sh and the share price.
AFFO yield may also serve as a warning regarding the quality of a company's real estate portfolio, balance sheet,
or management team.
Alpha
per Share
AFFO Yield = AFFO
Price per Share
A metric used to measure the value-add of an investment manager by comparing the manager's performance to
that of a risk-free investment or a broad index. Also known as the 'excess return' provided by an investment or
fund.
Alternative Asset
A category of investments that includes arbitrage vehicles, commodities, distressed securities, hedge funds,
managed funds, oil-and-gas partnerships, private equity, real estate, timber, venture capital, carbon credits or
other assets whose returns aren't typically correlated to the stock and bond markets.
Anchoring Bias
The cognitive bias associated with fixating on a particular number or value, typically an arbitrary benchmark
figure such as an expected price or economic forecast. New information is interpreted relative to the reference
point instead of objectively.
Annualized Base Rent
An income metric used most commonly in the retail and industrial sectors that measures rent to be paid by a
tenant over a 12-month period. It excludes property operating expense reimbursements, which are expenses
borne by the tenant rather than the landlord and passed through as incurred.
Annualized Base Rent = Monthly Rent (excl. Op-Ex reimbursements) * 12
Annualized Return
A measure of performance that accounts for the compounded growth in value and dividends received over a
period of years, divided by the number of years. Investors prefer measuring performance using annualized return
as it reflects the true return of an investment.
Annualized Return =
Ending Value (1/n)
- 1 , where n = number of periods
Beginning Value
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Green Street's Glossary of Finance and Commercial Real Estate Terms
Assets Under Management
The total market value of all the assets controlled by an investment manager. Note that regulatory AUM is
calculated on a gross basis, including leverage, and thus can be much higher than a manager’s net investor
capital.
Backtest
A process used to estimate the effectiveness of an investment strategy or quantitative model by applying it it in
past periods.
Balloon Loan
A type of loan that does not fully amortize over the loan’s term. A balloon payment is usually required to pay off
the remaining principal balance at maturity date or a refinancing to a new loan.
Base Station
Buildings at the bottom of a cell tower site that house tenant equipment and generators.
Beta
A broad term used to measure risk. Most commonly defined as the sensitivity of an investment relative to a
benchmark, with higher betas implying higher risk and vice versa.
Blended Cap Rate
A Green Street proprietary weighted average cap rate for a REIT based on all real estate segments in which that
REIT participates. Generally, cap rates listed for REITs covered by Green Street are blended cap rates of multiple
properties and markets.
Blended Cap Rate= 𝑤 𝑟 + 𝑤 𝑟 + 𝑤 𝑟 ....+ 𝑤 𝑟
where
𝑤 = 𝑛 𝑠𝑒𝑔𝑚𝑒𝑛𝑡 𝑤𝑒𝑖𝑔ℎ𝑡
𝑟 = 𝑛 𝑠𝑒𝑔𝑚𝑒𝑛𝑡 𝑐𝑎𝑝 𝑟𝑎𝑡𝑒
Bottom-Up
A valuation approach grounded in company- or market-level research first and then the broader sector and
economy. Green Street employs a bottom-up approach to determine company- and market-level
recommendations.
Brick-and-Mortar Retail
Refers to physical stores that customers visit in-person for commerce. See also Ecommerce
Bridge Facility
A short-term credit facility used by companies or individuals until permanent financing is secured or an existing
obligation is removed.
Build-To-Rent (BTR) Housing
A type of residential property built specifically for the rental market.
Bulk Distribution Industrial
A fast-growing industrial segment, reflecting what most investors envision as industrial real estate. These large,
single-story structures range in size from 250k to well over 1M square feet and are primarily used for the storage
and distribution of goods across a wide geographic area.
Buy-to-Let Housing
A type of residential property that is not purpose built and that an investor buys with the intention to lease to
tenants. These assets are often in buildings with both tenants and owner-occupiers. Lower quality, fewer
amenities, and little lease flexibility are all common traits of these assets.
Capital / Market Value
The estimated price at which a property or a group of properties would transact.
Important Green Street Term
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Green Street's Glossary of Finance and Commercial Real Estate Terms
Capital Expenditures (Cap-Ex)
The costs associated with the long-term ownership of commercial real estate are typically underestimated.
Maintaining the competitive position of a property usually requires a substantial capital reinvestment by the
owner. Cap-ex includes maintenance and leasing costs. Many of these expenditures are capitalized – not
expensed – for accounting purposes. Nevertheless, they have a sizeable impact on property level cash flows. In
Europe, we may quote the number as a percent of NRI. This is not comparable to the US cap-ex as a percent of
NOI.
Green Street normalizes these cap-ex items to reflect an expected average over the life of the building. Cap-ex is
often quoted as a percentage of nominal NOI (i.e., NOI before cap-ex).
Cell Site
An area within a wireless carrier's network that is able to be serviced by an antenna. Cell sites are referred to as
"rings".
Cell Tower
A vertical structure built on a parcel of land, installed on a utility pole, or attached to a building.
Telecommunication equipment (i.e., antennas and/or radios), responsible for transmitting and receiving radio
waves, reside at the top of the structure and are connected via coaxial/fiber cabling at the base of the tower to
various wireless networks and the internet.
Chattel Loan
A loan on a mobile or manufactured home, not including the land on which it sits. Assets used as collateral for a
chattel mortgage must be movable or non-permanent in nature.
Closed-end Fund
A mutual fund with a fixed number of shares outstanding that are publicly traded at a premium or discount to
the fund's net asset value.
Collateralized Debt Obligation (CDO)
A leveraged investment vehicle that issues notes to fund the purchase of pools of bonds, loans, preferred stock,
hedge-fund shares or other CDOs. CDOs can take a variety of forms, including collateralized bond obligations
(CBOs), which are backed almost entirely by other debt securities, collateralized loan obligations (CLOs), which
are backed entirely by corporate loans, and collateralized fund obligations (CFOs). Despite the similarity of the
term, collateralized mortgage obligations (CMOs) are not part of the CDO category.
Collateralized Fund Obligation (CFO)
A type of collateralized debt obligation (CDO) that is backed by zero-coupon bonds to fund the purchase of
shares in hedge funds, private-equity funds or multi-manager vehicles known as funds of funds. CFOs are often
structured as zero-coupon bonds that make lump-sum payments by redeeming the underlying fund-of-fund
shares at maturity. Others have been arranged as convertible issues.
Colocation Data Center
A type of Enterprise Data Center specifically catering to smaller data center tenants. Leases tend to be short (<5
years), and are usually for less than half a megawatt. Tenants lease individual racks or cabinets in a multi-tenant
suite, rather than an entire suite.
Commercial Property Price Index (CPPI)
A Green Street proprietary time series of U.S. commercial property values that captures the prices at which
commercial real estate transactions are currently being negotiated and contracted.
Important Green Street Term
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Green Street's Glossary of Finance and Commercial Real Estate Terms
Community Center
A type of retail strip center that sells general merchandise or convenience-oriented goods/services. Offers a wider
range of apparel and other soft goods than neighborhood centers. The center is usually configured in a straight
line, as a strip, or may be laid out in an L or U shape, depending on the site and design.
Comprehensive Leverage
A Green Street proprietary metric used to assess balance sheet risk. Excessive near-term maturities result in
considerably higher comprehensive leverage, whereas the use of non-recourse debt reduces overall balance sheet
risk and thus, the ratio. Lastly, unfunded liabilities (e.g., development) are treated as a contingent liability and a
contingent asset, which pushes the comprehensive leverage ratio higher.
Confirmation Bias
A cognitive bias where one has tendency to seek and interpret information that confirms one's own existing
ideas, beliefs, or theories and ignore or undervalue information that contradicts their beliefs.
Construction-in-Progress (CIP)
The cumulative cost of in-process development projects incurred since inception. CIP should include the cost of
the land and other “soft costs” such as capitalized interest and professional fees, although not all companies do.
Continental Net Initial Yield
A yield quoted as Net Rental Income / Property Value and excludes Purchaser's Costs in the denominator.
Continental Net Intital Yield =
Net Rental Income
Property Value
Convertible Bonds
A corporate bond that can be exchanged, at the option of the holder, for a specific number of the company's
common or preferred shares.
Corporate Governance
The collection of mechanisms, processes and relations used to operate a corporation. Green Street publishes
proprietary Corporate Governance scores for REITs under coverage and these scores can influence our REIT
valuation methodology.
Cost of Capital
A general term describing the rate of return required. From a company's view, considered to be the minimum
required rate of return necessary to make a project NPV positive. From an investor's point of view, it is the
required rate of return on a security or portfolio used to assess available opportunities.
Cost of Debt
The effective interest rate a company pays on its debt obligations such as bonds, loans, etc.
Important Green Street Term
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Green Street's Glossary of Finance and Commercial Real Estate Terms
Cost of Equity
The required rate of return to compensate for associated risk in an equity investment (e.g., common stock).
Cottage Community
A unique form of student housing characterized by off-campus communities of detached cottage-style student
living units. In this acommodation, students often share community amenities with other residents.
Credit Facility
A line of credit extended by a bank or other financial institution to a government, corporation, or individual that
allows one to draw funds as needed.
Currency Risk
The risk associated with fluctuations in currency exchange rates. Many institutions hedge currency risk through
the use of derivatives.
Current Expected Credit Loss (CECL)
An accounting standard to assess how financial institutions account for expected credit losses and establish
credit loss reserves. It replaces ALLL (allowance for loan and lease losses) standard. The Financial Accounting
Standards Board (FASB) CECL standard will apply to any institution issuing credit, including banks, savings
institutions, credit unions and holding companies filing under GAAP accounting standards. The CECL standard
implementation has been pushed back to January 2023.
Current Value of Net Income (CVNI)
The sum of common dividends paid by a company plus changes in NAV/Share over time. CVNI is calculated
similarly to total returns, but designed to measure theoretical NAV growth if dividends are reinvested in the
company.
Custodian
A bank, trust company or other financial institution that holds and protects a fund's assets and provides other
services, including collecting money from investors, distributing redemption proceeds, maintaining margin
accounts, registering investments and exercising options.
Data Center
A highly specialized facility designed to house racks of mission-critical computer servers and the associated
infrastructure required.
Debt Service Coverage Ratio (DSCR)
Calculated as annual NOI divided by annual loan payment.
DSCR = _Net Operating Income_
Annual Loan Payment
Debt / EBITDA
A measure of leverage used to assess a company's balance sheet risk and financial health. Often quoted in terms
of a multiple (e.g., 1.2x). green Street calculates this as Net Debt / Forward 12 month Cash EBITDA
Debt / EBITDA =
Derivative
_____Net Debt_____
12M Fw Cash EBITDA
A financial instrument whose performance is linked to an underlying security, index or financial instrument.
Examples include forward contracts, futures contracts, swaps and options.
Important Green Street Term
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Green Street's Glossary of Finance and Commercial Real Estate Terms
Development Hurdle Rate
A Green Street proprietary estimate for the required profit margin on a particular development. Hurdle rates
vary by sector and pre-leasing levels and are based on the perception of risk associated with each project in the
development pipeline.
Development Properties
Properties that are under construction or redevelopment and are not ready for occupancy by a tenant.
Development Yield
Measures the NOI expected to be generated from a development property upon stabilization as a percentage of
development cost. Total development cost should include land and the cost of capital during the lease-up period.
Development Yield = Expected NOI at Stabilization
Total Development Cost
Dilapidation Charges
Repairs or cash payment made by a tenant upon leaving previously rented space. Under fully Repairing and
Insuring lease covenants (in the U.K.), a tenant is required to reinstate the property back to the condition when
originally leased, after allowing for reasonable wear and tear. Generally does not apply if the property is to be
redeveloped upon the tenant vacating the premises.
Discretionary Account (Managed Account)
A vehicle in which investors give a manager or broker discretion to buy and sell securities, futures or other assets
on their behalf, either with or or without restrictions.
Distributed Antenna System (DAS)
Wireless communication systems that use small antennas (both indoors and outdoors) to "fill-in" coverage needs
when existing macro tower sites are not available.
Dividend Yield
A valuation metric typically used to compare dividend return potential. Represented as the expected annual
dividend per share as a percentage of the current share price where Dividend Pace = Four times the most recent
quarterly dividend.
Dividend Yield =
_Dividend Pace_
Share Price
Divident Payout Ratio
A metric that measures the percent of a REIT’s common dividend that is covered by recurring cash flow. Green
Street measures the dividend payout ratio after factoring in normalized cap-ex (i.e., based on AFFO).
Dividend Payout Ratio =
_Dividend Pace_
AFFO
Dorms & Residence Halls
A basic on or off-campus accomodation that is primarily owned by universities. These properties are leased by
the bed and have shared facilities for residents to use.
Down-REIT
An uncommon REIT structure where each asset is held by the REIT and its contributor separately. A Down-REIT
has the appearance of a REIT with several joint ventures. See also Up-REIT .
Important Green Street Term
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Green Street's Glossary of Finance and Commercial Real Estate Terms
Earnings Yield
A valuation metric used to compare the return potential of securities and calculated as as a percentage of share
price. This metric uses FFO or AFFO in assessing the "earnings" yield of real estate companies.
Earnings Yield = AFFO / FFO
Share Price
EBITDA
A measure of operating performance defined as Earnings Before Interest, Taxes, Depreciation, and Amortization.
Often used in the valuation of Hotel REITs as an alternative to Net Operating Income (NOI) and in assessing the
cash flow generation of any portfolio as part of calculating debt/EBITDA.
Net Income
(+) Taxes
(+) Interest Expense
(+) Depreciation & Amortization
= EBITDA
Ecommerce
The buying and selling of goods over the internet. See also Brick-and-Mortar Retail
Economic Cap Rate
A superior measure of the estimated yield of a transaction or property that takes cap-ex into consideration.
Economic cap rates provide a much better tool for comparing properties that have high cap-ex (e.g., office)
against those with low cap-ex (e.g., self-storage). Green Street uses an economic cap rate as the starting point for
Internal Rate of Return (IRR) calculations.
Economic Cap Rate = Economic Net Operating Income
Property Value
Economic Net Operating Income
The forward 12-month estimated income from a property or portfolio after operating expenses and cap-ex are
deducted from cash rents. Economic NOI provides a better estimate of underlying cash flow than nominal NOI.
See also Net Operating Income (NOI) and Nominal Cash Operating Income
Headline Rent
(-) Tenant Incentives
(-) Structural CapEx
(-) Operating exp.
= Economic NOI
Edge Data Center
A type of enterprise data center located very close to end-users that attempts to offer the lowest possible latency
experience (time it takes for data to travel).
Effective Density
Office density based on total workers supported by the office (total office space / total employee base).
Effective Rent
A rent metric designed to measure the economics of a lease after adjusting for free rent and other landlord
concessions. The adjustments are generally made on a straight-line basis, amortized to the earlier of the life of
the lease or first break.
Important Green Street Term
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Green Street's Glossary of Finance and Commercial Real Estate Terms
Embedded Net Operating Income / Loss
The amount of 'built up' rent growth (or decline) that has yet to be captured by existing leases. Refers to NOI
generated if all leases were instantaneously marked to market on a occupancy-neutral basis.
Empty Rates
A U.K term to describe business rates (a.k.a. property taxes) paid by a landlord on space that is vacant. By
contrast, in the U.S., landlords have always been responsible for property taxes (although they may pass through
to the tenant) on a given building whether it is rented or not. Generally, the tax liability in the U.K. is over 30%
of headline rent vs about half as much in the U.S.
Enterprise Data Center
Data centers that serve the needs of corporate IT departments and large-scale Internet enterprises. These
facilities are more exposed to new competition than "network-dense" data centers.
Environmental, Social, and Governance (ESG)
A term often used as an alternative for sustainability and socially responsible investing. Refers to the
consideration of environmental, social, and governance factors in the investment decision process.
EPRA "topped-up" Net Initial Yield
This yield incorporates an adjustment to the EPRA NIY in respect of the contractually agreed expiration of rentfree periods or other unexpired lease incentives such as discounted rent periods and step rents. See also Net
Initial Yield
EPRA Cost Ratio
A key measure to enable meaningful measurement of the changes in a company’s operating costs. Calculated as
administrative & operating costs (including costs of direct vacancy) divided by gross rental income.
EPRA Cost Ratio =
Costs (including direct vacancy costs)
Gross Rental Income
EPRA Diluted Earnings
A key EPRA measure of a company’s underlying operating results, taking into account the financial instruments
with a potential dilutive impact at the closing date, and an indication of the extent to which current dividend
payments are supported by earnings.
EPRA Net Disposal Value (NDV)
Represents the shareholders’ value under a disposal scenario, where deferred tax, financial instruments and
certain other adjustments are calculated to the full extent of their liability, net of any resulting tax.
EPRA NDV = NAV at Fair Value
excl. goodwill as a result of deferred tax
excl. goodwill per IFRS
incl. fair value of fixed interest rate debt
EPRA Net Initial Yield (EPRA NIY)
An EPRA metric for net initial yield calculated as net rental income divided by market value or price of property
plus any applicable (estimated) purchaser's costs.
EPRA NIY =
Net Rental Income
Property Value + Purchaser's Cost
Important Green Street Term
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Green Street's Glossary of Finance and Commercial Real Estate Terms
EPRA Net Reinstatement Value (EPRA NRV)
An EPRA NAV metric that assumes an entity never sell assets and aims to represent the value required to rebuild
the entity.
EPRA NRV = NAV at Fair Value
excl. deferred tax in relation to fair value gains
excl. fair value of financial instruments
excl. goodwill as a result of deferred tax
incl. revaluation of intangibles at fair value
incl. real estate transfer taxes
EPRA Net Tangible Assets (EPRA NTA)
An EPRA NAV metric whereby the caculation assumes that entities buy and sell assets, thereby crystalizing
certain levels of deferred tax liability. This metric is most similar to Green Street's Spot NAV calculation.
EPRA NTA = NAV at Fair Value
excl. deferred tax in relation to fair value gains
excl. fair value of financial instruments
excl. goodwill as a result of deferred tax
excl. goodwill per IFRS
excl. intangibles per IFRS
incl. real estate transfer taxes
EPRA NNNAV (triple net asset value)
An EPRA NAV metric adjusted to reflect the fair value of debt and derivatives and to include deferred taxation on
revaluations. As of October 2019, both EPRA NAV and EPRA NNNAV has have been replaced by EPRA Net
Reinstatement Value, EPRA Net Tangible Assets, and EPRA Net Disposal Value.
EPRA NNNAV = EPRA NAV
+ deferred taxes on revaluations
+/(-) adj. for fair value of debt and derivatives
EPRA Vacancy Rate
A measure of investment property space that is vacant, based on ERV. Estimated Market Rental Value (ERV) of
vacant space divided by ERV of the whole portfolio.
EPRA Vacancy Rate = _ERV of vacant space_
ERV of whole portfolio
Estimated Market Rental Value (ERV)
The total potential rent for a property leased at current market rental rates (typically assuming 100% occupancy)
and if applicable, calculated net of ground rent.
European Public Real Estate Association (EPRA)
An association that represents Europe's publicly listed property companies. Similar to NAREIT in the U.S.
Event Risk
The likelihood that an investment's value will change as the result of unexpected events, such as corporate
restructurings, a takeover, regulatory shifts or natural disasters.
Expected Loss (EL)
This metric can be expressed either as a dollar amount or as a percentage. Expected Loss % is calculated by
multiplying Probability of Default and Loss-given-default. If expressed as a dollar amount, the Expected Loss %
will be multiplied by the loan balance.
Fair Value
The price at which a single unit of a security would trade between parties that don't have interests in the issue.
Fair value does not take into account various premiums or discounts that would be assessed for large or illiquid
positions.
Important Green Street Term
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Green Street's Glossary of Finance and Commercial Real Estate Terms
Flex / R&D Industrial
These industrial properties can have a mix of office, warehouse, manufacturing, and showroom space. Flex
buildings are popular in technology industries as their hybrid structures allow for various functions in a single
location.
Floor Area Ratio (FAR)
The ratio of building area to ground area. Land values, zoning, and entitlements are often quoted in these terms.
FAR =
Total Building Area (sf or sqm).
Total Land (sf or sqm).
Franchise Value
Franchise Value represents the value management can add to a company above and beyond that of which is
captured in NAV. Total returns, Management Value Add, Balance Sheet Acumen and any recent impact from
management changes are used by analysts to estimate a company’s Franchise Value. It is also the largest
component in calculating a REIT’s warranted premium/discount to peers in Green Street’s Pricing Model.
Free Rent
A form of tenant incentive granted by the landlord to induce a tenant to complete a lease deal. It is generally
aperiod at the beginning of a lease when a tenant has control of a unit but does not pay rent. This is generally
measured in months.
Fully Repaired and Insuring (FRI)
A common U.K. lease provision specifying that most building maintenance and insurance costs will be borne by
the tenant. The tenant incurs some costs directly and is billed by the landlord via the Service Charge for other
costs.
Fund of Funds
An investment vehicle whose holdings consist of shares in hedge funds and private-equity funds.
Fundamental Analysis
An analysis of the fundamental factors that drive a company's earnings to arrive at an approximation of its value.
Common fundamental factors include operating performance, cash flow generation, management effectiveness,
and balance sheet risk.
Funds from Operations (FFO)
A metric crafted by the REIT industry to evaluate a REIT's earnings potential. A key flaw in FFO is that it fails to
ackowledge that landlords must constantly reinvest (capex) in their properties to maintain their competitive
position.
Also see Adjusted Funds from Operations (AFFO)
FFO = Net Income - Preferred Share Dividends + Depreciation - Gains/Loss from Sales of Property
G&A Expense / Load
The overhead expense burden of a company to manage day-to-day operations.
G&A Load =
G&A Expense
Total Assets
Gateway Markets
Key global cities that are typically characterized by robust job growth, high median household income, high-tech
orientation, and a higher cost of living.
Important Green Street Term
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Green Street's Glossary of Finance and Commercial Real Estate Terms
Gearing
Another term for measuring leverage and refers to the extent to which a company's operations are funded by
lenders vs. equity holders.
General Partner
The individual or firm that organizes and manages a limited partnership, such as a hedge fund, and assumes
unlimited legal responsibility for its liabilities.
Green Street Commerical Property Return Index (CPRI)
The total return (capital value + income) version of Green Street’s CPPI. See Commercial Property Price Index
Grocery Anchored Shopping Center
A type of retail center with a grocery store as an anchor. Historically, these centers have had relatively resilient
foot traffic as consumer's have to buy food regardless of macroeconomic conditions.
Gross Initial Yield
A yield metric that is calculated as gross rent divided by property value.
Gross Intital Yield =
Gross Rent
Property Value
Gross Leasable Area (GLA)
Represents the total floor area within a property and typically excludes common space. Within the mall sector,
GLA is subdivided between Anchors and Shops because of rent disparities.
Gross Rental Income
Rent Receivables (including contractual rent increases, if any) adjusted for the amortization of Free Rent, Tenant
Improvements borne by the landlord, and Leasing Commissions (if not reflected in Property Outgoings).
Headline Rent
(-) Tenant Incentives / Leasing Commissions
= Gross Rental Income
Ground Rent
Rent paid by the landlord (in this case a leaseholder) of a building to the owner of the land on which the building
sits. This is more common in the U.K. than the U.S.
Haircut
The amount by which a lender discounts the market value of collateral pledged by a borrower.
Headline Rent
Rent paid by a tenant without giving effect to Free Rent or other concessions and ignores ground rent (if
applicable).
Hedge Fund
A private investment vehicle with the primary objective to preserve investors' capital by taking positions whose
returns are not closely correlated to those of the broader financial markets. Such vehicles may employ leverage,
short sales, a variety of derivatives and other hedging techniques to reduce risk and increase returns. Usually
only open to high net worth individuals with a large tolerance for risk.
High-Barrier Markets
Markets where development is difficult and expensive due to regulation, high land costs, and/or lack of available
sites. Commercial real estate in high barrier markets generally produces superior long-term NOI growth relative
to low barrier markets, but with greater short-term volatility. It is rare for a market to truly have high barriers to
new supply.
Important Green Street Term
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Green Street's Glossary of Finance and Commercial Real Estate Terms
High Street Retail
Primary pedestrian shopping street in a town or city centre.
High-water Mark
A provision serving to ensure that a fund manager only collects incentive fees on the highest NAV previously
attained at the end of any prior fiscal year.
Hurdle Rate
The required minimum rate of return on a project or investment in order to offset its associated costs. The rate is
determined by assessing the cost of capital, risks, and other factors that may directly affect an investment.
Hyperscale Data Center
Large business-critical data centers designed to efficiently support robust, scalable applications and are often
associated with big cloud companies such as Google, Amazon, Facebook, IBM, and Microsoft.
Implied Cap Rate
A measure used to describe the property yield embedded in a REIT's current stock price. Represents the cap rate
at which Green Street’s NAV-per-share estimate equals the current share price.
Implied Cap Rate =
Implied Cost of Equity
____Implied NOI___
Implied Asset Value
=
_________Total Assets * Nominal Cap Rate___________
Market Capitalization + Total MTM Debt + Preferred Stock
The discount rate where the present value of expected cash flows equals the current share price.
Implied Economic Cap Rate
The economic cap rate at which Green Street’s NAV per-share estimate equals the current share price. See also
Implied Cap Rate
Implied Economic Cap Rate =
_Implied Econ. NOI_ = _________Total Assets * Economic Cap Rate________
Implied Asset Value
Market Capitalization + Total MTM Debt + Preferred Stock
Implied Internal Rate of Return
The discount rate that equates estimated discounted cash flows and the net present value implied by the share
price. As with the standard Green Street IRR, cash flows for an implied IRR are derived from the economic cap
rate (see: Economic Cap Rate), and both near- and long- term same-store NOI growth rates. The implied IRR
uses an assumed net present value as reflected by the discount or premium to gross asset value assigned by the
market.
Implied IRR = Implied Economic Cap Rate + Intermediate NOI Growth + Long-Term NOI Growth
Implied Value per Unit
A measure used to describe the implied value of property (either by square feet or residential unit or hotel room)
embedded in a REIT’s current stock price. Calculated as the value per unit at which Green Street's NAV-pershare estimate equals the current stock price.
Inception Date
The day on which a fund starts trading.
Infrastructure Fund
A specialized fund that invests in public assets and infrastructure including toll roads, airports, electric & utility
services, gas pipelines, water & sewage, waste management, and agriculture.
In-Office Density
Office density based on workers in the office on any given day (total office space / average employees in office per
day).
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Green Street's Glossary of Finance and Commercial Real Estate Terms
In-place Rent
Current rent paid by a tenant without giving effect to Free Rent or other concessions and ignores ground rent (if
applicable).
Internal Rate of Return (IRR)
The discount rate that sets estimated discounted cash flows equal to the initial investment. For properties,
portfolios, markets, or REITs, Green Street bases initial cash flows on economic cap rates while intermediate
cash flows are based on the initial cash flow and grown at the corresponding NOI growth rates. Terminal values
are calculated by applying a long-term growth rate, which is typically a negative spread to estimated inflation
(i.e., long-term growth is less than inflation).
International Financial Reporting Standards (IFRS)
Financial reporting standards for most jurisdictions outside of the U.S and set by the London-based
International Accounting Standards Board (IASB). They constitute a standardised way of describing a company’s
financial performance and position such that financial statements are understandable and comparable across
international boundaries.
Intrinsic Value
The "true" value of an asset that can differ from its current market value.
Investment Properties
The properties owned by a landlord that are not development properties or trading properties. Similar to
Operating Properties in the U.S.
Joint Venture
An agreement amongst multiple parties to work together and combine resources for a specific development,
property, or portfolio.
Landlord and Tenant Act of 1954
A law specifying the duties and obligations of tenants and landlords in the U.K (see Section 25 of the Act). Gives
most tenants the right to stay in a property unless certain criteria are met by the landlord, and the right to
compensation even if those criteria are satisfied.
Leasing Commissions
Fees paid by a landlord to an agent (i.e., broker) that has helped secure a lease from a tenant.
Leverage Ratio
A metric used to provide a snapshot of a company's or asset's balance sheet strength by measuring the amount of
debt carried by the entity relative to the market value of its assets. Green Street commonly cites "net leverage"
and net Debt-to-EBITDA to assess a company's leverage.
Leverage Ratio =
Total Liabilities
Total Assets
Net Leverage =
Total Liabilities - Cash
Total Assets - Cash
Life Science Building / Lab Space
A type of building that is a combination of health care space, lab space, and/or office space which life science
organizations utilize to conduct scientific research. Building exteriors resemble offices, while the interior is a mix
between a lab space and an office.
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Green Street's Glossary of Finance and Commercial Real Estate Terms
Lifestyle Center
A type of strip center that is typically comprised of upscale retailers as well as significant dining and
entertainment options. Most lifestyle centers have an outdoor setting, many of which attempt to replicate a
"Main Street" feel.
Like-for-Like
Like-for-like metrics compare financial results in one period with those for the previous period, taking into
account the same assets between periods. See also Same-Store
Limited Partnership
A type of business structure managed by one or more general partners who are fully liable for its debts and
obligations, while the limited partners are liable only to the extent of their investments.
Liquidity
Refers to the ease in which an asset can be transacted without affecting its price. Cash tends to be the most liquid
asset, while more complex investments (i.e oil and gas partnerships) may possess liquidity risk. See also
Liquidity Risk
Liquidity Risk
The risk that an asset cannot be transacted with ease without accepting a substantial discount.
Loan Maturity Schedule
Displays the outstanding loan balance at maturity date (applies to balloon loans).
Loan Seasoning
A loan’s age, also referred as Months on Book. Usually expressed as the number of months since origination date.
Lock-up
The period of time during which investors are prohibited from redeeming shares. Often used with regards to
hedge fund investments or initial public offerings.
Long-term Inflation
Inflation expectations from year 6 into perpetuity. Green Street utlizes public market pricing through TIPS and
swaps to estimate country-level long-term inflation expectations.
Loss Adjusted Price or Loan Price
Represents present value of the loan cashflows, calculated by discounting its loss adjusted principal and interest
cashflows at the loan’s interest rate.
Loss Given Default or Severity (LGD)
A measure which quantifies the severity of the loss at the loan’s resolution date for a defaulted loan. Its value also
ranges from 0% (zero loss) to 100% (zero recovery).
Low-Barrier Markets
Markets where new development is a constant competitive threat to existing properties due to abundant amounts
of land and limited regulatory challenges. Commercial real estate in low-barrier markets generally produces
lower long-term NOI growth relative to high-barrier markets, but rents also tend to be less volatile.
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Green Street's Glossary of Finance and Commercial Real Estate Terms
Macro
A broad term referring to a national or global topic.
Macro Cell Tower
A cell tower with large poles, typically >100 ft tall, designed to provide wireless coverage over large areas and can
typically house 1-4 wireless carriers.
Mall / Shopping Centre
A large retail property that can be located in town or a suburban location. These are known as malls in the U.S.
Management Fee
The charge that a fund manager imposes to cover operating expenses.
Management Value Added (MVA)
A Green Street proprietary metric used to measure the value added from a REIT's management team. MVA is the
difference between NAV-per-share growth and the leveraged growth in same-store portfolio value over a specific
time period.
Manufactured Housing / Manufactured Home Park
Also known as Manufactured Home Parks, these are communities that provide an affordable living alternative to
renting an apartment or buying/renting a traditional site-built home. The community owner typically owns the
land and improvements (e.g., amenities and utility hookups), while the resident owns the home and pays
monthly rent for the pad on which it sits.
Margin Call
Occurs when a broker demands that the holder of a margin loan put up extra cash or securities as collateral for
that loan, usually because the value of the securities purchased with the loan has declined significantly. See also
Margin Loan
Market Beta
Green Street's perceived risk associated with a particular market under coverage. Market Betas are calculated
using a combination of M-RevPAF and asset value volatility.
Market Cap Rate
A cap rate primarily used in the hotel and apartment sectors. Similar to Economic Cap Rate in that a deduction to
NOI is made to reflect cap-ex incurred by owners to maintain their properties. A key difference is that the
standardized cap-ex reserves commonly used by market participants are far smaller than the cap-ex historically
incurred by public and private owners in both property types.
Market Cap Rate =
Forward Nominal NOI - Standardized CapEx Reserve
Property Value / Transaction Price
Market Grade
Green Street calculates proprietary long-term growth rates expressed as letter grades for the 50 U.S. and 30 PanEuropean markets in our coverage universe. Each grade is calculated by assessing ten key metrics relevant to
each sector. Grades can range from A++ to D. and are meant to represent relative long-term rent growth
potential vs. local inflation.
Market Liquidity Adjustment
A Green Street proprietary estimate for the liquidity risk (the ease to which an asset can be transacted) present in
a particular market. Markets with higher transaction volumes score better because it is easier for an investor to
buy and sell within that market.
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Green Street's Glossary of Finance and Commercial Real Estate Terms
Market Revenue per Available Foot (M-RevPAF) Growth
A measure of the health of a market (or sector) that combines two key operating metrics (effective market rents
and occupancy) into a single value.
Market Revenue per Available Metre (M-RevPAM) Growth
In Europe, a measure of the health of a market (or sector) that combines two key operating metrics (effective
market rents and occupancy) into a single value.
Market Risk-Adjusted IRR
The expected unleveraged buy and hold return after considering market liquidity and risk. Green Street's IRR is a
useful metric for comparing prospective returns on real estate with yields on alternative investments, such as
investment-grade and high-yield bonds. See also Unlevered IRR
Market Risk-Adjusted IRR = Unlevered IRR + Market Liquidity Adjustment + Market Risk Adjustment
Markets in Financial Instruments Directive (MiFID I & II)
A regulatory framework designed to increase transparency in the EU’s financial markets by focusing on reporting
and disclosure standards in financial and equity trading.The parties most impacted by these regulations are
investment, wealth, and asset managers operating in the fixed income, derivative, and commodity markets. The
directive, which took effect Nov. 1, 2007, created a heavy compliance burden on banks, fund managers, brokers
and others financial firms. MiFID includes investor-protection measures, provisions requiring pre- and posttrade disclosures, and definitions of trading venues. MiFID II took effect in January 2018 to strengthen investor
protection particularly for OTC trading, dark pools, and high-frequency trading. MiFID II introduces significant
rules and requirements for product governance, transaction reporting, and the unbundling of research from
execution services.
Mark-to-Market Debt
The difference between the outstanding principal and the current value of a fixed-rate bond based on prevailing
interest rates. The mark-to-market value can be thought of as interest savings (when the coupon is lower than
market interest rates) or added interest expense (when the coupon exceeds market interest rates).
Master-feeder Fund
A common hedge-fund structure used to create a single investment vehicle for both U.S. and non-U.S investors.
A manager sets up two separate vehicles – one based in the U.S. and one outside the U.S. – which serve as the
only investors for a third non-U.S. fund. The two smaller entities are known as feeder funds, while the large
offshore vehicle acts as the master fund. The purpose of such an arrangement is to create a single investment
vehicle for both U.S. and non-U.S. investors.
Minimum Investment
The smallest amount an investor is permitted to contribute as an initial investment to an investment fund.
Mortgage REIT
A specialized niche of REITs that don’t own real estate, but instead provide financing by originating mortgage
loans and mortage-backed securities to generate interest income.
NAREIT
An association representing publicly traded real estate owners in the U.S. See also EPRA
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Green Street's Glossary of Finance and Commercial Real Estate Terms
Net Asset Value
The mark-to-market value of a company's assets and liabilities calculated by applying an estimate of private
market valuation to the real estate portfolio and all other assets, deducting all marked-to-market liabilities and
preferred equity. NAV is often represented on a per-share basis.
Net Asset Value = Value of Operating RE + Development/CIP + Other tangible assets - Marked-tomarket Debt - Preferred Equity
Net Effective Rent
A metric designed to measure the economics of a lease after taking into consideration applicable operating costs,
leasing commissions and tenant improvements.
Net Effective Rent = Annual Base Rent - OpEx - Leasing Commissions - Tenant Improvements
Net Equivalent Yield
The time-weighted average of Net Initial Yield and Reversionary Yield. The yield an investor would receive based
on leases in place today, through to their next review or break, time-weighted with the yield based on Estimated
Rental Value. Includes an assumption for downtime after lease expiry and the denominator includes Purchaser’s
Costs.
Net External Growth
A measure that captures the external growth (or contraction) of a company’s asset base through allocating capital
(or shrinking the business) for a given period of time and typically represented in percentage terms relative to
asset size.
Net External Growth (as % of assets) = Growth Activites - Dispositions
Beginning Period Assets
Net Initial Yield (NIY)
The benchmark real estate yield and valuation measure throughout Europe. Green Street's Net Initial Yields are
calculated as Net Rental Income divided by the market value or price of a property plus Purchaser’s Costs. See
also EPRA Net Initial Yield
Net Rental Income
Property Value + Purchaser's Cost
Net Intital Yield =
Net Leasable Area (NLA)
A measure of property’s leasable area that typically excludes common areas and mechanical space.
Net Operating Income (NOI)
Property or portfolio revenue less operating expenses, presented on a cash basis. Revenue is predominantly rents
and tenant reimbursements; expenses include property taxes, utilities, maintenance costs and property-level
personnel. Revenues
Net Rent
(-) Expenses
(-) Non-cash rent
(+) 1-yr Forward Growth
= Net Operating Income
Typically calculated as Rent Receivable less Ground Rent (if applicable). Net rent is based on a cash concept, so
would equal 0 if a tenant was in a free rent period.
Net Rental Income
Gross Rental Income minus Property Outgoings. This is the closest comparable to Net Operating Income (NOI)
in the U.S, but is accrual-based and includes the amortized cost of free rent and leasing commissions.
Headline Rent
(-) Tenant Incentives / Leasing Commissions
(-) Non-recoverable operating expenses
= Net Rental Income
Network Dense Data Center
Data centers that act as key hubs for the Internet and connectivity. Network-dense data centers are rare, hard-toreplicate, and exhibit strong pricing power.
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Green Street's Glossary of Finance and Commercial Real Estate Terms
Nomenclature of Territorial Units (NUTS)
A hierarchical system for dividing up the economic territory of the EU and the UK. Regions range from NUTS 1
to NUTS 3 and are a geocode standard for referencing the subdivisions of countries for statistical purposes.
Nominal Cap Rate
Represents the expected unleveraged first year yield a property buyer expects to realize on their investment. Like
bond yields, nominal cap rates move inversely with property values. A primary flaw to nominal cap rates is that
cap-ex – the substantial cost borne by commercial property owners over long holding periods – is ignored in its
calculation. As a result, “economic cap rates” are a better measure of investment yields.
Nominal Cap Rate =
Net Operating Income
Property Value
Normalized Free Cash Flow
A measure of cash flow that deducts cash taxes as well as a normalized cap-ex reserve from corporate-level
EBITDA (i.e., after G&A). Intended to be used as an “apples-to-apples” cash flow metric for comparing Hotel C
Corp and Hotel REIT valuations.
Observed Premium/Discount to Assets
See Observed Premium (Discount) to GAV
Observed Premium/Discount to GAV
The premium or discount ascribed to a company’s asset base that is implied by the current share price compared
to Green Street’s assessment of asset value. Observed premiums/discounts in the public market have historically
been reliable predictors of future changes in private-market prices. Also referred to as Observed
Premium/Discount to Assets
Observed Prem/Disc. to GAV= Total Market Value of Assets
Green St. NAV Total Assets
= __Implied Market Value__
Green St. NAV Total Assets
-1
Occupancy Cost Ratio
A ratio which expresses a retailer's total cost of occupancy (sum of minimum rents, percentage rents, common
area maintenance, and real estate tax recovery) as a percentage of tenant sales. Stabilized occupancy cost ratios
range from 12-16% for most mall tenants. In general, higher productivity tenants can support higher occupancy
cost ratios.
OCR = Total Cost of Occupancy
Total Tenant Sales
Occupancy Costs
The total costs incurred by a tenant to occupy space at a property, which includes a sum of minimum rents,
percentage rents, common area maintenance, and real estate tax recovery.
Occupancy Rate
The ratio or percentage of rented or physically occupied space to the total amount of available space.
Occupancy Rate = Physically occupied or rented space
Total available space
Operating Partnership (OP) Units
Represent an equity interest in the UP-REIT that is almost always exchangeable for common shares on a 1:1
basis. These ownership units allow for investors to contribute to a REIT and get diversification benefits of
owning a much a larger portfolio without having to pay taxes unless those shares are sold. When OP units are
converted to common shares, capital gains are triggered, so such exchanges are typically made only when the
shares are going to be sold immediately. See also UP-REIT
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Green Street's Glossary of Finance and Commercial Real Estate Terms
Option
A type of financial derivative that gives parties the right to buy, or sell, a specific asset or security at a specified
price by a pre-set date. See also Derivative
Origination Vintage
A loan's origination year.
Passing Rent
The cash rent that is currently in-place and a landlord receives for a property today. See Headline Rent .
Pooled Investment Vehicle
Any limited partnership, trust or company that operates as an investment fund and is exempt from SEC
registration under the Investment Company Act of 1940.
Portfolio Manager
A company or individual that manages capital or a portfolio on behalf of an investment fund.
Power Center
A strip center comprised primarily of big-box retail tenants (Best Buy, Home Depot, Target, etc.) and typically
has a limited amount of space dedicated to smaller tenants.
Powered-Base / Powered-Shell Data Center
A data center in which the tenant, rather than the landlord, is responsible for building out the data center
infrastructure. From the landlord's perspective, powered-base building development costs run a few hundred
dollars per sq. ft., compared to $1,200+ per sq. ft. for a fully built-out data center. Powered-base space/buildings
are commonly leased on a triple-net basis.
Primary Cap Rate
Represents the cap rate ascribed to the core real estate segment in companies that operate in multiple real estate
segments.
Prime Yield
The hypothetical yield for a top-quality, freehold interest in a relatively new property located in a prime location,
and fully leased at current market rent (i.e. “rack rented”) to a good quality tenant under a long lease.
Principal-Protected Note
Structured securities that promise hedge-fund returns (minus a 1% to 2% fee) without risking an investor's
principal. Offer investors a safe haven from stock- or bond-market volatility, while providing a way for riskaverse investors to invest in assets that would otherwise be of concern to them.
Private Equity Fund
A business entity that buys illiquid stakes in privately held companies, sometimes by taking on large amounts of
debt through a leveraged buyout. Similar to hedge funds, these vehicles are structured as private investment
partnerships in which only qualified investors may participate.
Private Placement
Security issues that are exempt from public-registration provisions in section 4-2 of the Securities Act of 1933.
An example is shares of a hedge fund, where offerings are private placements and generally open to a few
investors rather than the general public.
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Green Street's Glossary of Finance and Commercial Real Estate Terms
Private REITs
Also known as “public, non-traded REITs", private REITs sell stock to investors and own/operate commercial
real estate portfolios. Private REIT shares are typically sold to retail investors through commission-based
financial planners as shares of these companies are not freely traded on stock exchanges.
Probability of Default (PD)
A measure which quantifies the likelihood of a loan defaulting, its value ranges from 0% (low risk loan) to 100%
(high risk loan).
Prop 13
An amendment in California enacted in 1978 that limits the tax rate on real estate. The proposition decreased
property taxes by assessing property values at their 1975 value and restricted annual increases of assessed value
to an inflation factor, not to exceed 2% per year. It also prohibited reassessment of a new base year except for: a)
a change in ownership, or b) the completion of new construction.
Property Outgoings
Cost to the landlord of operating a property or portfolio of properties. Includes Service Charge expense (generally
the largest component, often broken out separately), Ground Rent (where applicable), and amortization of Free
Rent, Tenant Improvements borne by the landlord, and Leasing Commissions (if not already reflected in Gross
Rental Income).
Purchaser's Costs
The assumed or actual transaction cost to a buyer of an individual property. Purchaser's costs typically includes
transfer tax/stamp duty, agent's fees, legal and due dilligence, and VAT on fees.
Purpose-Built Student Accommodation (PBSA)
A form of off-campus student housing that is amenity-rich, similar to apartments but with more bedrooms.
Qualified Investor
Any individual whose investment portfolio is valued at $5 million or more, or any company that owns or
manages at least $25 million of investments.
Redemption
The liquidation of shares or interests in an investment fund.
Redemption Fee
A charge, intended to discourage withdrawals, that a fund manager levies against investors when they cash in
their shares before a specified date.
Redemption Notice Period
The amount of advance notice that an investor must give a fund manager before cashing in shares of the fund.
Notification is usually required in writing.
Regional Distribution / Light Industrial
The most common of the industrial property types. These properties are similar in function to larger distribution
centres, but are small and more easily divisible into spaces to accommodate tenants distributing locally.
Relative Pricing Model
A pricing model that compares security prices to gain a positive spread in total returns by buying the cheap
security and selling the expensive security. Green Street employs a relative valuation approach when ascribing
recommendations.
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Green Street's Glossary of Finance and Commercial Real Estate Terms
Releasing Spreads
The spread between lease rates on expiring leases and the rates on new leases, often measured on a cash and
GAAP basis. The metric measures rent growth from the time the lease was initially signed offset by rent bumps
that occurred during the course of the lease. Cash releasing spreads reflect the last cash payment of the expiring
lease versus the first cash payment after the renewal. GAAP releasing spreads refer to change in average lease
rate upon renewal and therefore as reported in U.S. GAAP financial statements.
Rent Review
A process in the United Kingdom by which rental payments are adjusted on a periodic basis. Most leases are
upwards only and set to the higher of the market rent or the current rent being paid by the tenant.
Rent Roll
A report that provides detailed information about a leased property, its tenant(s), and rents. Rent rolls can be
constructed for a single property or an entire property portfolio.
Replacement Costs
The estimated costs to construct, at current prices, a building with equal utility to the building being appraised.
Replacement cost can be calculated as Land Value + Building Costs inclusive of all hard and soft costs.
Retail Park
A grouping of retail warehouses, grocery stores, and/or small shops. Similar to U.S. strip centers.
Retail Warehouse
A single-tenant, large-format store generally located in an edge of town or suburban area. These are called “bulky
goods” retailers in the U.K and known as “big box” stores (e.g. Costco or Best Buy) in the U.S.
Revenue per Available Room (RevPAR)
A metric used for the hotel sector that combines occupancy and rental rates in a single value to measure
operating performance. Its calculation is closely tied to the M-RevPAF concept used across sectors.
Reversionary Potential
The potential increase in total rent, from marking leases to market and increasing occupancy to 100%, shown on
a percentage basis.
Reversionary Yield
Estimated Rental Value for a property divided by its cost or value. Known as the hypothetical yield for a property
fully leased at market rents.
Risk-Free Rate
The expected return on a theoretical risk-free investment, typically a government-issued bond.
Royal Institution of Chartered Surveyors (RICS)
A professional organization headquarted in London that enforces standards in the valuation, management and
development of land, real estate, construction and infrastructure. The body is in charge of setting guidelines. Its
approach results in unduly slow reported changes to asset values and therefore properties valued following these
guidelines will not be marked to a rapidly changing market value.
Same-Store
Properties held for the full length of two accounting periods (e.g. one quarter as compared with the same quarter
of the previous year, or one year versus the prior year). Same-store metrics compare sales, financial results, etc.
in one period with those for the previous period, taking into account the same number of properties with no new
ones added. Known as Like-for-Like in Europe
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Green Street's Glossary of Finance and Commercial Real Estate Terms
Sector Allocation
A Green Street proprietary framework designed to rank property sector prospective returns based on
informational advantages by focusing on long-term expecatations particularly for cap-ex, NOI growth, and risk.
Service Charge
Expenses incurred by a landlord that are billed to the tenant in order to recover all, or a portion, of the landlord’s
Property Outgoings. These can include the cost of common area maintenance (CAM), insurance, property
management, and sometimes utilities.
Single Family Rental (SFR)
SFR properties are single-family homes (usually detached structures) that are rented out to tenants and are often
found in suburban neighborhoods.
Small Cell Tower
A small antenna typically installed on a public utility pole or right-of-way that helps reduce capacity needs in
hightrafficked mobile usage areas.
Smart Comps™
A Green Street proprietary algorithm developed to identify the most relevant comparable transactions by size,
date, age, location, etc.
Specialty Industrial
Specialty industrial properties include manufacturing ("Heavy Industrial"), refrigeration & cold-storage, telecom
("Data Centers"), and truck terminals.
Speculative Development
Development that has commenced prior to a lease agreement being signed in relation to that development.
Spread
The difference in price or yield between two securities. It also refers to the return from a given investment
product, such as a hedge fund, versus the return of a benchmark such as the S&P 500 index.
Standard Deviation
For an investment portfolio, it measures the variation of returns around the portfolio's mean-average return. In
other words, it expresses an investment's historical volatility. The further the variation from the average return,
the higher the standard deviation.
Strip Center
A generic term applied to retail properties that are not traditional malls or factory outlet centers. Strip center
properties generally fall into two broad categories – 1) grocery anchored shopping centers and 2) power centers.
Structural Cap-ex Reserve
A Green Street proprietary assumption for non-frequent capital expenditure (as a % of NOI) used as a key input
in developing IRR estimates. Also referred to as maintenance capex.
Student Housing
A type of residential property primarily used for housing university and college students.
Sun Belt Markets
Markets scattered across the southern U.S. and characterized by a growing tech presence, higher than average
job growth, and a business-friendly environment. Notable Sun Belt markets include Atlanta, Austin, Charlotte,
Nashville, and Raleigh.
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Green Street's Glossary of Finance and Commercial Real Estate Terms
Survivorship Bias
A type of bias that occurs when an individual mistakes a successful group as a representative sample of the entire
group without regard to those that have gone bust. Survivorship bias can result in the overestimation of
historical performance.
Take-Up
Gross leasing activity for a given period of time; known as gross absorption in the U.S.
Tenant / Lease Incentives
Incentives offered by a landlord to a prospective tenant to sign a lease. These incentives can include periods of
free rent, tenant improvements, tenant reimbursements, etc.
Tenant Improvements
Costs to improve space to be occupied by a tenant. Investors are most concerned with the portion of these costs
that are borne by the landlord as part of the inducements to complete a lease deal.
Top-Down
A valuation approach intially based on a macro thesis. The impacts of that thesis are subsequently analyzed at the
universe level, the sector level, and, finally, the company level.
Total Shareholder Return (TSR)
The growth in value of equity over a specified period, assuming dividends are reinvested.
Total Shareholder Return =
Ending Value - Purchase Value + Dividends
Purchase Value
Trade Area Power (TAP Scores)
Green Street proprietary scores that measure the strength of demand in the trade area surrounding a mall or
strip center property by combining various demographic factors, including income, population density,
education, and cost of living. The trade area for Power Centers, Neighborhood Centers and Street Retail is a threemiles radius. TAP Scores range from 1 to 100 and are available for every property owned by mall and strip center
REITs in Green Street’s U.S. coverage universe.
Trading Properties
Properties owned with the intent to sell in a relatively short period of time.
Triple Net Rent (NNN)
A type of lease structure where the the tenant agrees to pay all expenses associated with the property (e.g., real
estate taxes, insurance, repairs and maintenance). In most cases net rent should be roughly equal to NOI.
Turnover Rent (Sales-based Rent)
A form of rent that is calculated as a portion of the revenue or sales generated from the leased property (usually
on an agreed percentage of turnover basis). Also referred to as percentage rent.
UK Net Initial Yield
A U.K. yield quoted as Gross Rental Income / (Property Value + Purchaser's Costs)
UK Net Intital Yield = ______Gross Rental Income_____
Property Value + Purchaser's Cost
Important Green Street Term
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24
Green Street's Glossary of Finance and Commercial Real Estate Terms
Unlevered IRR
The discount rate that sets estimated discounted cash flows equal to the initial investment. By combining current
cap rates, a cap-ex reserve, intermediate cash flow growth, and long-term growth expectations, it is possible to
estimate the unlevered returns that real estate investors can expect to achieve. Green Street's unlevered IRR does
not include adjustments for liquidity or market risk. See also Market Risk-Adjusted IRR
Unlevered IRR = Nominal Cap Rate - CapEx Reserve + Intermediate NOI Growth + Long-Term NOI Growth
UP-REIT
A REIT structure created to facilitate the conversion of private real estate companies to public vehicles on a taxefficient basis. In an UP-REIT, a partnership owns the real estate assets and the partnership is owned jointly by a
REIT and other investors (OP Unit holders) who usually contributed properties.
Value Creation
The expected profit of a development project after adjusting for risk. Value creation is one of two key components
(CIP is the other) in valuing development in an NAV model.
Value Extrapolation
A tool that looks at the last known sales price of a property and increases or decreases it by Green Street's marketlevel Commercial Property Price Indices to determine a starting point of estimated current value. This is not an
appraisal or formal opinion of value.
Value per Unit
An industry metric used to compare real estate values across different portfolios. Green Street uses value per
square foot/metre for four of the major sectors (office, industrial, malls and strip centers) and value per unit for
apartments. We also use value per key in the lodging industry and value per bed in student housing.
Venture Capital
Investment funds given to corporate start-ups and other high-risk enterprises by investors who seek aboveaverage returns while willing to take illiquid positions.
Void
A term akin to vacant space.
Volatility
The likelihood that an instrument's value will change over a given period of time, usually measured as beta or
standard deviation.
Warranted Premium / (Discount) to Assets/Value
The premium or discount (%) that should be ascribed to a company due to factors not captured in an NAV
analysis and a function of four key inputs: franchise value, balance sheet risk, corporate governance, and
overhead. Corporate governance is no longer included in the US model, but is a component of the pricing model
for Europe in order to derive the 'going-concern' value. Green Street separately estimates odds of corporate
events and that further serves to determine a warranted share price.
Warranted Prem/Disc. = Sector Average Premium/Disc. + Franchise Value + Balance sheet risk +
Overhead + Corporate Governance (EU Only)
Warranted Premium / (Discount) to NAV
See Warranted Premium/(Discount) to Assets/Value.
Important Green Street Term
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U.S.
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25
Green Street's Glossary of Finance and Commercial Real Estate Terms
Warranted Share Price
Green Street’s estimate of fair value for a company’s stock relative to its peers.
Warranted Share Price = Total Assets * (1 + Warranted Prem./Disc. to Assets) - Liabilities
Shares Outstanding
Weighted Allowance for Credit/Loan Losses (Weighted ACL)
The cash allowance banks set aside to cover impaired loans. CECL requires banks to forecast losses on the life of
a loan as soon as they originate and record it on their balance sheet. The new accounting standard is expected to
increase the allowance for credit/loan losses.
Weighted Average Cost of Capital (WACC)
The estimated cost for a company to raise capital that includes all sources of capital including common equity,
preferred equity, and debt. Unlike the WACC calculations for companies in most industries, REITs do not benefit
from an interest tax shield, which should encourage companies to use less debt than companies in other
industries. Fortunately, NAV premiums/discounts provide clear cost-of-capital signals for REITs.
Weighted Average Maturity (WAM)
The average remaining months until the loan maturity date for a portfolio, weighted by loan balance.
Weighted Average Maturity =
𝑤 𝑚 + 𝑤 𝑚 + 𝑤 𝑚 ....+ 𝑤 𝑚
where
𝑤 = 𝑛 𝑤𝑒𝑖𝑔ℎ𝑡
𝑚 = 𝑛 𝑚𝑎𝑡𝑢𝑟𝑖𝑡𝑦
Wholesale Data Center
A type of Enterprise Data Center specifically catering to larger tenants. Leases tend to be longer (5-10 years), and
are usually greater than half a megawatt. Tenants lease entire suites or buildings as opposed to racks or cabinets
in a multi-tenant suite.
Zone-A Rent
Rent paid by a retail tenant in the Zone A portion of its space. This is the first 20 feet of store depth from the
entrance (i.e. the most valuable selling space).
Important Green Street Term
30 Panton Street, 6th Floor, London, SW1Y 4AJ, United Kingdom
T +44 (20) 7290 6555 / my.greenstreet.com
U.S.
Pan-European
© 2022, Green Street