Glossary of commercial 
real estate terms

A loan in which the borrower is only required to pay back the interest, not the principal, during some or all of the loan duration.

A period of time during which a borrower only pays interest on the loan. The borrower does not repay any of the original loan balance (the principal), so the borrower owes the same amount of money at the end of an interest-only period as the borrower did at the beginning of the loan.

Loans used for short-term financing, such as acquisitions or property renovations. Bridge loans are a form of interim loans.

The internal rate of return (IRR) is the annual rate of growth that an investment is expected to generate (or has generated if realized).

An investment vehicle similar to a fund but typically with one investor partner. In a joint venture, WDIP is also investing its own capital.

A Freddie Mac product that features a range of investor options with stable cash flows and a structured credit enhancement. K-Deals include guaranteed senior and interest- only classes. The related underlying private label trust includes unguaranteed subordinate and interest-only bonds.

A dollar-for-dollar federal tax credit for affordable housing investments. Private investors receive a federal income tax credit as an incentive to make equity investments in affordable rental housing. The role of the investor is to partner with the developer of a project (the general partner) by providing equity to help finance its construction or rehabilitation. Many capital investors receive additional tax savings due to the depreciation deduction from the projects. Most current investors are banks and other institutions that want or need CRA (Community Redevelopment Act) credit.

A Land Use Restriction Agreement (LURA) is a binding, recorded contract between a property owner and a government entity or funding agency that sets specific limitations on property use, particularly in affordable housing programs such as LIHTC. It ensures compliance with requirements such as income targeting, rent levels, tenant eligibility, and duration of affordability.

A preliminary agreement negotiated between a tenant and landlord or buyer and seller. The Letter of Intent or LOI states the primary economics and deal points with proposed terms.

The use of borrowed funds to finance the purchase of a property or investment, aiming to increase potential returns. In commercial real estate, it is typically expressed as a loan-to-value (LTV) ratio.

A highly specialized property type designed for laboratory or research and development purposes.

The limited partner(s) (if applicable) are passive investors in investments or funds.

Also known as workforce housing, where households typically earn between 60 and 120 percent of AMI (Area Median Income), this housing is aimed at those who earn too much to qualify for subsidy programs such as LIHTC and Housing Choice Vouchers but are cost-burdened at market-rate rent levels. This also includes naturally occurring affordable properties that do not have Land Use Restriction Agreements (LURA).

A commercial real estate professional who provides options to borrowers on multiple capital source executions.

A loan closer is responsible for assisting clients in securing a mortgage loan. They often handle each aspect of the loan closing process, which includes completing the proper paperwork, informing clients of the loan’s contract requirements, and preparing loan reports. Their goal is to help their clients gain approval for a loan and disperse their funds efficiently. These professionals have an in-depth understanding of loan regulations and payment procedures.

A loan committee/designated loan committee is the managing committee of a lending institution which approves or rejects loans, particularly higher-risk loans that are outside of a loan officer’s authority.

The multi-step process involved in selling a commercial real estate loan to a borrower, including actions such as pre-qualification and underwriting.

The professional involved in the administrative aspects of a loan, including collecting and keeping records of monthly payments, collecting and paying taxes and insurance, and managing escrow funds.

A professional that understands commercial real estate and assesses an asset and a sponsor to determine acceptability of risk of a loan application. More specifically, loan underwriters evaluate the cash flows of the asset, quality of the asset, borrower and sponsor capabilities and experience, etc.

The process lenders use to evaluate the creditworthiness of a potential loan opportunity including the collateral (property) and borrower.

The LTC ratio is a metric used in commercial real estate to compare the total cost of construction or renovation on a project to the amount borrowed.

The amount of a loan divided by the appraised value of the property, used by lenders in determining loan approvals and down payments. The higher the down payment, the lower the LTV ratio. Mortgage lenders may use the LTV in deciding whether to lend to a borrower and to determine if they will require private mortgage insurance. As a rule of thumb, a good loan-to-value ratio should be no greater than 80%. Anything above 80% is considered to be a high LTV, which means that borrowers may face higher borrowing costs, require private mortgage insurance, or be denied a loan.

The MAI designation is held by professionals who can provide a wide range of services relating to all types of real property, such as providing opinions of value, evaluations, reviews, consulting, and advice regarding investment decisions, among others.

Analysis of workforce stability based on nearby Fortune 500 corporate offices, hospitals, universities, and military bases.

Homes constructed off-site, then moved to the properties where residents will live. MHCs include the pads and utility and sewer hookups affixed to the land for manufactured homes.