Real Estate Tips
Glossary of Terms for Commercial Real Estate
TI's - Tenant Improvements with a minimum of 3-5 year term the Landlord is willing to contribute a certain amount of dollars.
NUA - Net Usable Area. The square footage you are actually occupying
NRA - Net Usable area plus an add-on factor (common area). City average is 15%.
Add-on Factor - The tenant pays for a pro-rata of the common areas of the building such as hallways, restrooms, elevators, etc.
Expense Stop - The owner of the building pays for all of the operating expenses for the building: utilities, landscaping, janitorial, maintenance, administrative costs, security, etc.
Base Year Expense Stop - The owner of the building pays all the operating expenses for the building to a certain amount. When expenses exceed the specified basis, the tenant is passed through the excess on a pro-rata basis.
Example: The operations expenses for year 1 are $6.00/sq ft annually. In year 2 the expenses are $6.25. you pay the difference of 25¢ x approx 3,000 sq ft = $750.00 for the year. This is a gray area so be careful!
Building Hours - Access to the building and the hours of operation for air conditioning and heating.
HVAC - Heating, Ventilating and Air Conditioning
After Hours - Most buildings cycle down their HVAC. Traditional hours are 7:00am - 6 or 7:00pm, M-F, Sat 7:00am - noon. No Sunday. The charges vary from $15-$25 hour.
CAM - Common Area Maintenance. This is a pass-thru of actual charges on a pro-rata basis. CAM is relevant to a Retail Lease
NNN - Triple Net. This is primarily for Retail, Industrial and Class A Office Buildings. The Tenant pays a base rental plus their pro-rata of the landlord's operating expenses for property taxes, fire and casualty insurance, common area maintenance.
Full Service - This term is namely used for office buildings. The Landlord pays for everything: utilities, taxes, secretarial, janitorial, maintenance, etc.
Rates - Brokers talk in per sq ft terms on an Annual Basis such as $16.00/sq ft or $1.33/month.
LOI - Letter of Intent proposed to lease or purchase.
First Right of Refusal - Request to lease additional space normally adjacent to existing space for potential expansion.
ADA - American Disabilities Act
Holdover - Once your lease has expired and you have not renegotiated with your landlord. The Landlord has the right to charge you 1.5 times your normal rent or higer (read your lease). Your lease is now on a month to month basis with a 30 day written notice to vacate by Landlord.
1031 - 1031 Tax Exchange - IRS Tax Code that allows you to defer your Capital Gains by reinvesting the proceeds from the sale of property into a like-kind-property. You must discuss with someone knowledgeable and familiar with a 1031 or else!
Commissions - In almost any transaction there is a commission paid that is built-in to the rate. Traditionally the Broker representing the Tenant receives 4% of the gross rental over the life of the lease and the Broker representing th Landlord receives 2%. If there is not a co-broker the Broker representing the Landlord will receive 4%.
CO - Certificate of Occupance from the City. You would be surprised how many businesses don't have a CO.