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Real Estate Financial Modeling Accelerator (Updated October 2024)

Prior to launching the Accelerator program, Michael and I fielded email after email requesting a more structured real estate financial modeling training program on the site. Over the years, we've covered hundreds of real estate modeling…

Preferred Return

A concept common to real estate partnership structures, preferred return refers to the preference given to a certain class of equity partners when distributing available cash flow. The preferred return is generally calculated as either a percentage…

Promote

A financial interest provided to the sponsor (investment manager) as an incentive to maximize performance. This is typically an outsized share of the profits, payable once the investors have received back their entire initial capital contributions…

Credit Tenant Lease (CTL)

A Credit Tenant Lease (CTL) is a specialized form of commercial real estate financing where a loan is provided for a property secured by a long-term lease (typically 10+ years) with a nationally recognized tenant boasting a high credit rating.…

Bid and Award Process

The period during which the owner and/or general contractor solicit bids from numerous subcontractors (subs) from the trades needed to build a project. Once the subs have responded to the bid requests, the general contractor may request additional…

Breakeven Occupancy

The occupancy at which the effective gross income is equal to the sum of the operating expenses plus debt service. Breakeven occupancy is an important metric for lenders, developers, and operators as it is the point at which the property shifts…

Average Daily Rate

The average revenue generated per paid occupied room per day, calculated by dividing total room revenue by the number of rooms sold. The ADR is commonly used in the hospitality industry together with the RevPAR metric to assess the property’s…

Base Year Stop

Upon lease commencement, the building owner will agree to pay the tenant's first year expenses (a.k.a. base year expenses) and will continue to pay the same amount in each of the subsequent years while the tenant will pay any additional costs…

Bargain and Sale Deed

A bargain and sale deed guarantees that the grantor has title to the property and the right to transfer ownership, but does not guarantee that it is free of encumbrances. It also doesn't guarantee that the title is free of any defects. It…

Architect of record

The architect of record is the architect or firm that creates the construction documents for a new project. The architect of record's name will also appear on the building permit issued for that specific building project. Putting 'Architect…

Average Life

Also referred to as Weighted Average Life, or WAL, the average life of a mortage loan refers to the number of periods (commonly denoted in years) in which half the time-weighted principal has been paid. Lenders use this metric in a variety…

Assignee

An entity that receives the rights to a property from an assignor. A mortgagee is an example of an assignee. Putting 'Assignee' in Context Scenario: Lone Star Real Estate Partners, a real estate investment firm, recently identified an…

Assignor

An entity that transfers the right they have to a property to a third party. A mortgagor is an example of an assignor. Putting 'Assignor' in Context Scenario: Lone Star Real Estate Partners, a real estate investment firm, recently identified…

Average Rate of Return

A measure of the profitability of a real estate investment or a type of return metric. The average rate of return is calculated as the total net profit of an investment (total cash inflows minus total cash outflows), divided by the length of…

Axonometric

An architectural drawing that depicts an object in three dimensions. Commonly created by architects to show others a more realistic depiction of a current project. Putting 'Axonometric' in Context In 2023, Innovative Urban Developers embarked…

APY

APY (Annual Percentage Yield) is the true rate of return earned taking in compounding interest. Also known as the Annual Effective Rate, the formula for APY is as follows: APY = ( 1 + APR / n ) ^ n – 1 Periodic Rate = ( 1 + APY ) ^ (…