CAM
See common area maintenance.
CAM cap
The maximum amount for which the tenant pays its share of common area maintenance costs. The owner pays for any CAM expenses exceeding that amount.
CFAT
See cash flow after tax.
CFBT
See cash flow before tax.
Cap rate
See capitalization rate.
Capital expenditures
Property improvements that cannot be expensed as a current operating expense for tax purposes. Examples include a new roof, tenant improvements, or a parking lot—such items are added to the basis of the property and then can be depreciated over the holding period.
Distinguished from cash outflows for expense items such as new paint or plumbing repairs (operating expenses) that can be expensed in the year they occur. Also see operating expenses.
Capital gain
Taxable income derived from the sale of a capital asset. It is equal to the sales price less the cost of sale, adjusted basis, suspended losses, excess cost recovery, and recapture of straight-line cost recovery.
Capital market
The supply and demand for resources to invest in real estate and other investments.
Capital tax
Any tax on a change in capital value (including capital gains tax, estate tax, or inheritance tax); as distinguished from a tax on income.
Capitalization rate
A percentage that relates the value of an income-producing property to its future income, expressed as net operating income divided by purchase price. Also referred to as cap rate.
Cash flow
The net cash received in any period, taking into account net operating income, debt service, capital expenses, loan proceeds, sale revenues, and any other sources and uses of cash.
Cash flow after taxes (CFAT)
For properties, it is the result of first calculating the net operating income, less mortgage and construction loan interest, less cost recovery for improvements and personal property, less amortization of loan points and leasing commissions to arrive at real estate taxable income. Next, real estate taxable income is multiplied by the applicable marginal tax rate
to result in the tax liability (savings). Then, from the net operating income, annual debt service is subtracted to equal the cash flow before taxes (CFBT). Finally, the cash flow after taxes (CFAT) is calculated from the CFBT, less the tax liability (savings), plus investment tax credit. The Cash Flow Analysis Worksheet can be used to calculate a property’s gross operating income, net operating income, real estate taxable income and tax liability or (savings), CFBT, and CFAT.
Net operating income
– Interest
– Cost recovery
– Amortization of loan points
Real Estate taxable income
× Investor’s marginal tax rate
Tax liability (savings)
Then
Net operating income
– Annual debt service
Cash flow before taxes
– Tax liability (savings)
Cash flow after taxes
Cash flow before tax/es (CFBT)
For properties, it is the result of calculating the effective rental income, plus other income not affected by vacancy, less total operating expenses, less annual debt service, funded reserves, leasing commissions, and capital additions. The Annual Property Operating Data form can be used to calculate a property’s effective rental income, gross operating income,
total operating expenses, net operating income, and cash flow before taxes.
Cash flow model
The framework used to determine the cash flow from operations and the cash proceeds from sale.
Cash proceeds from sale
The sales price less sales costs, mortgage balance, and tax liability on sale. Also known as sales proceeds after tax.
Cash-on-cash rate
A return measure that is calculated as cash flow before taxes divided by the initial equity investment.
Central place theory
A location theory that accounts for the size, distribution, and organization of settlements, places, market areas, and establishments in a competitive and interdependent urban system, to explain differences in the locational tendencies and preferences of businesses as they seek to maximize market accessibility, sales, and profits.
City
An urban settlement or system containing various functions, agents, institutions, and components which interact and work together to satisfy the wants and needs of its inhabitants (as well as a portion of the population in surrounding rural areas).
Class life
The useful economic life of an asset set by the Internal Revenue Service.
Close
Third stage of four-stage transaction management process pertaining to bringing the parties together and consummating an agreement. The acronym CLOSE represents the contingencies, legal instruments, obstacles, signatures, and execution involved in the close stage.
Commercial real estate
Any multifamily residential, office, industrial, or retail property that can be bought or sold in a real estate market.
Common area
For lease purposes, the areas of a building (and its site) that are available for the nonexclusive use of all its tenants, such as lobbies, corridors, and parking lots. (Real Estate Information Standards)
Common area maintenance (CAM)
Charges paid by the tenant for the upkeep of areas designated for use and benefit of all tenants. CAM charges are common in shopping centers. Tenants are charged for parking lot maintenance, snow removal, and utilities.
Community center
A community center is a retail property type that typically offers a wider range of apparel and other soft goods than the neighborhood center does. Among the more common anchors are supermarkets, super drugstores, and discount department stores. Community center tenants sometimes contain off-price retailers selling such items as apparel, home improvement/ furnishings, toys, electronics, or sporting goods. The center is usually
configured as a strip, in a straight line, “L”, or “U” shaped. Of the eight center types, community centers encompass the widest range of formats. For example, certain centers that are anchored by a large discount department store refer to themselves as discount centers. Others with a high percentage of square footage allocated to off-price retailers can
be termed off-price centers.
Comparative advantage
The principle that cities or regions tend to produce those items or support those activities for which they have the greatest advantage over other areas as defined by the factors of production, demand, supporting industries, and quality of life considerations, as defined in relation to human, financial, and physical resources, and opportunity costs—costs expressed in terms of opportunities foregone.
Competition (retail)
A market condition or setting in which numerous firms compete for a share of the retail market in a given geographic area; a term which is also used to denote rivals or competitors.
Compound interest
Interest computed on the original principal and accumulated interest.
Compounding
A type of calculation in which interest earned is reinvested and earns additional interest.
Confidence range method (95%)
A statistical method of estimating a range of vacancy rates with a 95% confidence such that the expected vacancy rate for the next time period falls within that range (using the sample mean vacancy rate and corresponding standard deviation as input).
Contract rent
The total rental obligation, expressed in dollars, as specified in a lease. Also known as base rent. (Real Estate Information Standards)
Cost
The actual dollar amount paid for a property or the amount needed to build or improve it at a specified time in the future.
Cost approach
A method of determining the market value of a property by evaluating the costs of creating a property exactly like the subject.
Cost approach improvement value
The current cost to construct a reproduction of, or replacement for, the existing structure less an estimate for accrued depreciation from all causes. [Appraisal Institute]
Cost of capital
See weighted average cost of capital.
Cost of occupancy
Expenditures that are required to assume and maintain occupancy of a space. Such expenditures include rent and/or mortgage payments, and recurring costs, such as real estate taxes, repairs, operating expenses, and other outgoings directly resulting from the use of the property. (Encyclopedia of Real Estate Terms 2nd Edition, Damien Abbott)
Cost recovery
An annual deduction based on the class life of an asset.
Cost recovery recapture
According to the Taxpayer Relief Act of 1997, for properties sold after May 6, 1997, a Non-corporate taxpayer will have to recapture, or pay taxes on, any straight-line cost recovery taken during the holding period, to the extent there is any gain.
Cross-over (office use) demand
Industrial space that is used as office space in order to lower the rental rate of a property. Also known as flex space.
Cross-over chart
A visual representation of the relationship between the costs of leasing and owning at varying discount rates.
Customer-spotting approach
An approach to estimating the retail trade area (and sales/revenue potential) for a given establishment or center based on the location of existing customers via point-of-sale information (by obtaining customer address or zip code data) or customer surveys (by interviewing customers as they enter the store); data which can later be mapped to determine the extent of the trade area.