Commercial Real Estate
Commercial Real Estate
Commercial Real Estate
GLOSSARY OF TERMS  

GLOSSARY OF TERMS - N

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NATIONAL ASSOCIATION OF CORPORATE REAL ESATE EXECUTIVES (NACORE):

Trade association of real estate professionals who manage the real estate assets of corporations, retailers, and other commercial users.


NATIONAL ASSOCIATION OF INDUSTRIAL AND OFFICE PARKS (NAIOP):

Trade association of companies and individuals engaged in the development and management of planned suburban business parks.


NATIONAL ASSOCIATION OF REAL ESTATE INVESTMENT MANAGERS (NAREIM):

Trade association of organizations involved in the management of real estate for institutional investors.


NATIONAL ASSOCIATION OF REAL ESTATE INVESTMENT TRUSTS (NAREIT):

Trade association representing publicly traded and privately placed real estate investment trusts (REITs).


NATIONAL COUNCIL OF REAL ESTATE INVESTMENT FIDUCIARIES (NCREIF):

Association of real estate professionals who serve on working committees, sponsor research articles, seminars and symposiums, and produce the NCREIF Property Index. Property index reports quarterly and annual returns consisting of income and appreciation components. The index is based on data collected from the voting members of NCREIF. Specific property-type indices include apartment, office, retail, R&D/Office and Warehouse.


NEGATIVE CASH FLOW:

Cash income is insufficient to cover current operating expenses, debt service, and cash needs for critical capital replacements.


NEGATIVE LEVERAGE:

Borrowed funds are invested at a rate of return lower than the cost of funds to the borrower.


NEIGHBORHOOD CENTER:

Designed to provide convenience shopping for the day-to-day needs of consumers in the immediate neighborhood.


NET AFTER TAX CASH FLOW (NBTCF):

Net Before Tax Cash Flow (minus) taxable income (times) tax rate tax income (equals) Net Operating Income (minus) interest expense (minus) owner's deposit.


NET CASH FLOW:

Cash remaining from net operating income after deduction of all expenses and expenditures.


NET INCOME:

Total revenue minus total expense, what's left of the monies received after all debts have been paid, the bottom line. If Net Income is positive it is also called Net Profit. A negative Net Income is a Net Loss.


NET LEASE INVESTMENTS:

Net Lease Properties are the traditional real estate investment with no management obligation for the owner. In its purest form (called a triple net lease) the tenant manages the property, doing everything from paying the taxes and insurance to sweeping out the driveway and repairing the roof if needed.


NET OPERATING INCOME (NOI):

Effective gross income less all operating expenses and vacancy, but before debt service and capital expenditures.


NEUTRAL LEVERAGE:

An investment situation in which the cost of borrowed funds is exactly equal to the yield provided by the investment.


NNN LEASE INVESTMENTS:

In its purest form (called a triple net lease or NNN lease), the tenant is responsible for all property management and repairs - including everything from paying the taxes to sweeping out the driveway to repairing the roof if needed. The only responsibility of the owner is to pay the mortgage on the property.


NNN RENTAL RATES:

Rates quoted as NNN or "modified net" indicate that none or some of the services normally provided under a gross/full-service arrangement are included as part of the base rate. The tenant might be responsible for directly contracting with the applicable service providers for those desired services/utilities not provided through ownership. Property owners allow tenants to receive those services through the owner's base building equipment infrastructure. Under this arrangement, the tenant generally sends several checks out each month; i.e., one to the property owner for the base rent and other checks as required to the providing service/utility vendors. Generally Class "A, B & C" office rental expenses are quoted on a gross/full service basis while flex or industrial/manufacturing/warehouse space leases are quoted on a NNN or modified net basis.


NON RECOURSE LOAN (NON RECOURSE DEBT):

A loan in which the lender cannot claim more than the collateral or property as repayment in the event that payments on the loan are stopped. The unpaid balance on the loan will be absorbed by the lender except in the case of fraud. The IRS requires a non-recourse loan for all real estate purchases that use leverage with a self-directed IRA. Most commercial real estate in the United States is financed long term by non-recourse debt. Most real estate in other parts of the world is financed with full or partial recourse to the borrower.


NONCONFORMING USE:

A use of a property that is permitted to continue after a zoning ordinance prohibiting it has been established in the area.


NOVATION:

The substitution by agreement of a new obligation for an existing one or substituting new parties to an existing obligation.




This Glossary of Commercial Real Estate Terms is provided for general understanding purposes. Readers should consult with their legal and/or accounting professionals for specific situations and questions. TM 1031 Exchange Inc. and its employees provide neither legal nor accounting services or advice.