Gross leases: Gross leases are also known as full-service leases, in which the landlord pays all operating expenses including electricity, gas, cleaning, security, landscaping, and elevator, as well as waste removal and recycling. You might find this type of lease in multi-unit and single-unit office and industrial properties although in the Canadian market gross commercial leases are extreme ...

Understanding the difference between private and public markets is a useful tool in evaluating real estate transactions. Public markets are those in which small homogeneous units of ownership trade over a public exchange (such as the stock market). They are highly liquid and transaction prices are transparent to the public. In contrast, private markets are those in which assets are sold bet ...

Replacement Cost Rent (RCR) is a tool that calculates replacement cost rent based on development cost inputs and capitalization rate inputs. A prospective developer could use this to evaluate the feasibility of a development site. The developer could also use this to calculate the highest and best use of a property. The developer would compare the replacement cost rent output with the actual ...

The Annual Urban Land Institute’s Emerging Trends in Real Estate publication is a superior information source that provides invaluable market data for industry professionals. The sector-specific ULI annual report covers U.S. and Canadian real estate markets, providing in-depth market reports, tables and graphs that show interest rates, vacancy rates, cap rates, building starts and absorption ...

Net operating income (NOI) is what remains after one subtracts all the operating expenses on the pro forma. As simple as it sounds, NOI is perhaps the most important line item on a pro forma because it is used to calculate the cap rate, which determines the value of the property and DSCR. NOI does have its failings; specifically, it does not reflect account reserves for essential capital expe ...

The cash on cash yield is a return measure that expresses the cash flows paid to the investor of an income-producing property as a percentage of the asset’s value at the beginning of a certain period. This performance metric is used to measure periodic returns because it involves the cash flows paid back within a certain period of time. For example, the distributions of a real estate asset mi ...

The capitalization rate or overall rate (OAR) is a fundamental metric used by investors, brokers, and lenders to determine transaction pricing (the price at which the deal gets done).  The cap rate is determined by dividing the NOI by the transaction price or projected value (cap rate =NOI/value).  Moreover, a property value can be determined by dividing the NOI by the cap rate (val ...

The Real Estate System is a tool that creates a general framework in which to understand the connections between the space market, the asset market and the development industry and how these connections affect the demand for commercial real estate. The space market is the driving force in forming the asset market and development industry since it is from the space market that the cash flow to ...

Positive and negative leverage.  “Real estate is nothing more than a positive spread investing game” (Sam Zell, Bergsman) Positive and negative leverage are two sides of the same coin, with positive leverage occurring when the investment property’s yield is higher than the mortgage which increases the investor return.  Conversely, negative lavage is exactly the opposite, where the loan amou ...