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

GLOSSARY OF TERMS - P

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PARKING RATIO:

Ratio of number of parking space to square feet rented. The parking ratio allowance generally ranging from 3 spaces per every one thousand square feet rented, (3/1,000) up to 5.5 spaces (5.5/1,000). The average is an allowance of four (4) spaces for every 1,000 SF of rented space. Good indicator of how many people could/should occupy 1,000 SF.


PARTIAL EXCHANGE:

When a tax-deferred like-kind exchange entails receiving cash, excluded property and/or non-like-kind property and/or any net reduction in debt (mortgage relief) on the replacement property as well as an exchange of qualified, like-kind property. In the case of a partial exchange, income tax liability would be incurred on the non-qualifying portion and capital gain deferred on the qualifying portion under Section 1031 of the Internal Revenue Code and Section 1.1031 of the Treasury Regulations.


PARTICIPATION MORTGAGE:

A loan secured by real property, with a stated interest rate that also provides for a share to the lender in annual net cash flow, gain on sale, or proceeds from refinancing the property.


PERCENTAGE LEASE:

A lease in which the rent amount is based on a percentage of gross sales (monthly or annually) made by the tenant.


PERCENTAGE RENT:

The additional rent (over a base amount) that is paid by tenants to owners on tenant sales over a specified dollar amount. It is frequently found in retail leases. Also known as overage rent.


PERFECT MARKET:

A market in which the products are homogenous, there is complete information, and no buyers or sellers may influence the market.


POPULATION/EXPENDITURE APPROACH:

An approach to estimating the trade area (and sales/revenue potential) for a given retail establishment or center based on the minimum area (or threshold population) that would be required to sustain a business, by calculating the population necessary to support total square footage of both existing and proposed space for a specific-use


POPULATION GROWTH:

The rate at which a given population base in a given geographic area is growing (positive or negative) in relation to the forces of internal growth, in-migration, and out-migration; a factor that is widely acknowledged as having the greatest impact on the demand for housing.


POSITIVE LEVERAGE:

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


POTENTIAL RENTAL INCOME:

The total amount of rental income for a property if it were 100 percent occupied and rented at competitive market rates.


POWER CENTER:

This retail center is dominated by several large anchors, including discount department stores, off-price stores, warehouse clubs, or category killers-stores that offer tremendous selection in a particular merchandise category at low prices. The center typically consists of several freestanding (unconnected) anchors and only a minimum amount of small specialty tenants.


PRIMARY SOURCE DATA:

Information obtained directly from field observations and survey instruments (by observing or monitoring a phenomenon or site firsthand), typically involving quantitative measurement and/or qualitative assessment of that which is observed or monitored.


PRINCIPAL RESIDENCE EXEMPTION:

Exclusion from capital gain tax on the sale of principal residence of $250,000 for individual Investors and $500,000 for couples, filing jointly, under Internal Revenue Code Section 121. Property must have been the investor's principal residence for 24 of the last 60 months (two out of the last five years). In the case of a dual use property, such as ranch, retail store, duplex or triplex, the Investor can defer taxes on the portion of the property used for business or investment under Section 1031 of the Internal Revenue Code and exclude capital gain on the portion used as the primary residence under Section 121 of the Internal Revenue Code.


PROBABILITIES AND EXPECTED VALUE:

A quantifiable method of risk analysis. This method assigns probabilities to specific, possible investment outcomes, calculates an expected outcome for the investment based on these probabilities, and measures the likelihood that actual results will differ from the expected outcome.


PROFORMA:

Financial statement with one or more assumptions built into the data. Actual financial statements have no such assumptions.


PROPERTY-SPECIFIC FACTORS:

Factors influenced by the site-specific and technical characteristics of a property or parcel including its layout, limitations, orientation, physical features, and ability to comply with government imposed zoning and land-use restrictions.


PURCHASING POWER RISK:

The variability in the future purchasing power of income received from an investment.




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.