Ice cream, real estate and other twists
We love using special real estate terms, acronyms and words that have a different meaning in the real estate world.
Terms can be confusing, sometimes specific to certain regions as well as to specific property types.
To a baby, absorption and leakage is the difference between staying dry or not. In real estate there is a whole different meaning. Absorption happens to represent how much building space that was once vacant
is now leased and occupied. While leakage is the purchases of goods and services, which occurred outside of a trade area (think Napans shopping at Costco in Fairfield).
I’ve gone to my dentist more times than I like to know for a gap analysis of my gums. But in commercial real estate, gap analysis is the difference between supply and demand for a particular property type.
A gross lease is really not all that gross--it is actually quite appealing for a tenant because he would not have to reimburse the landlord for expenses like he would in a triple-net lease. Taking it one step further, an absolute net lease is absolutely a great lease for the landlord as the tenant is responsible for all expenses and maintenance of the property.
A power center could be a big room with buttons, lights, switches and computers somewhere at Pacific Gas & Electric. But, in real estate a power center is a 250,000 to 600,000 square foot shopping center with several big box anchor tenants, discount stores and wholesale clubs.
A big box anchor tenant? Those large category-dominant stores that are the “anchor” for the shopping center.
Most buyers “go hard” after their due diligence period expires. It has nothing to do with their arteries or level of difficulty to talk to, but when their time to perform research, inspections and review of the property expires according to the purchase agreement their deposit becomes nonrefundable.
A jumbo loan has nothing to do with elephants unless you figure you will have an elephant size mortgage for your house purchase. This is a loan amount that exceeds the conforming amounts as stated by Fannie Mae and Freddie Mac and are usually more difficult to qualify for.
Mezzanine financing is not a special type of loan for your second story, but rather is like a second mortgage for your commercial building where the borrower gives up equity to the lender.
Plain vanilla, warm shell and cold shell all sound delicious, but are actually the level of completeness of a commercial space to be leased. Plain vanilla is usually a mostly finished space ready to move into with the exception of final finishes. A cold shell is just the opposite--usually just the four exterior walls, roof and concrete floor with utilities stubbed to the space. A warm shell takes the cold shell one step further with the installation of HVAC (heating-ventilation-air conditioning) and the main electrical panel.
.Photo "Kids eating ice cream" used with permission from Tommy Lescher