JDA

Tenant Insurance (TI)

Renters insurance for a self-storage unit, typically $10/month.

Square Feet Per Acre

1 Acre = 43,560 square feet

Mortgage-Backed Security (MBS)

A mortgage-backed security (MBS) is a type of asset-backed security that is secured by a mortgage or collection of mortgages. This security must also be grouped in one of the top two ratings as determined by an accredited credit ratings agency, and usually pays periodic payments that are similar to coupon payments. Furthermore, the mortgage must have originated from a regulated and authorized financial institution.

Equity Multiple (CFx)

A ratio dividing the total net profit plus the maximum amount of equity invested by the maximum amount of equity invested. The Equity multiple of an investment does not take into account when the return is made and does not reflect the risk profile of the offering or any other variables potentially affecting the project's return.

Escrow

A transaction in which an impartial third party acts upon instructions for both seller and buyer, or for both borrower and lender, in carrying out instructions, delivering papers and documents and, disbursing funds.

Trade Area

An area delineated about a central or dominant location, comprising a zone that is dependent upon production output from that location to meet internal demand, whose outermost boundaries are defined in terms of the presence or absence of interactions with that central or dominant location (for example, a localized area over which some specific activity or transaction takes place). Note that in central place theory context, the terms trade area and range are used interchangeably.

Impervious Surface Ratio

Artificial structures such as pavements that are covered by impenetrable materials such as asphalt, concrete, brick, stone, and rooftops as a percentage of the gross area of the lot.

Certificate of Occupancy (C/O)

At the completion of a building and after all building inspections, a municipality will issue a certificate of occupancy, which allows the property to operate as a business.

Levered IRR

Based on levered cash flow (NOI less debt service).

Fee Simple Absolute

Fee simple absolute is the most complete bundle of rights possible, and has the greatest value. Subject to the limitations imposed by government or by prior owners, all possible rights of exclusive possession, use and enjoyment, and disposition are possessed by the owner. This is the traditional concept of landownership. It is this interest that is intended when persons of the real estate world refer to owning or holding the "fee."

Physical Occupancy

GPI less any vacancies. In storage, this can be measured on a unit or square footage basis. JDA typically refers to this on a SF basis since we quote rates on a $/SF basis.

Letter of Intent (LOI)

Generally a written statement that two parties to a prospective transaction (buyer/seller or lessor/lessee) intend to proceed to a final agreement in good faith on stated principle business terms of the deal to be entered into. This meaning applies when executed by both parties. Alternatively such a document may be signed only by one party and is then an indication of a willingness to enter into agreement on the stated terms and conditions. To avoid legal issues regarding offer and acceptance and thus formation of a binding contract, care should be taken to include a clause stating that there is not a specific offer and no intent to be a legally binding obligation. However, an obligation to continue to negotiate in good faith to conclusion can be created.

LIBOR Rate

LIBOR is a benchmark rate that some of the world's leading banks charge each other for short-term loans. It stands for Intercontinental Exchange London Interbank Offered Rate and serves as the first step to calculating interest rates on various loans throughout the world. LIBOR is administered by the ICE Benchmark Administration (IBA), and is based on five currencies: U.S. dollar (USD), Euro (EUR), pound sterling (GBP), Japanese yen (JPY), and Swiss franc (CHF), and serves seven different maturities: overnight, one week, and 1,2,3,6 and 12 months. There are a total of 35 different LIBOR rates each business day. The most commonly quoted rate is the three-month U.S. dollar rate. It is the world's most widely-used benchmark for short-term interest rates. LIBOR's primary function is to serve as the benchmark reference rate for debt instruments, including government and corporate bonds, mortgages, student loans, credit cards, as well as derivatives such as currency and interest swaps, among many other financial products.

Investment-Grade Properties or Institutional-Grade Real Estate

Larger, more valuable commercial properties, generally well over $10 million, are often referred to as investment-grade properties or institutional-grade properties.

Untrended (in-place) Yield

NOI assuming the facility is stabilized but using today's rate and expense structure divided by the total project cost.

Trended (Stabilized) Yield

NOI at stabilization (assuming rates grow over time) divided by the total project cost.

Economic Occupancy

Net Rental Income divided by GPI with Net Rental Income defined as GPI less vacancy, discounts, and write-offs.

Net Operating Income (NOI)

Net operating income is a calculation used to analyze real estate investments that generate income. Net operating income equals all revenue from the property minus all reasonably necessary operating expenses. Aside from rent, a property might also generate revenue from parking and service fees, like vending and laundry machines. Operating expenses are those required to run and maintain the building and its grounds, such as insurance, property management fees, utilities, property taxes, repairs and janitorial fees. NOI is a before-tax figure; it also excludes principle and interest payments on loans, capital expenditures, depreciation and amortization.

Net Rentable Square Feet (NRSF)

Only the rentable square footage, which excludes hallways, office and wall structures.

Building Efficiency

Percentage of the GSF that is actually rentable (NRSF/GSF).

Value Engineering (VE)

Process by which costs can be decreased or benefits can be added to an undertaking or project through redesign, prioritization or other similar actions.

Earnest Money

Something given as a part of the purchase price to bind a bargain.

Loan-to-Value Ratio (LTV)

The amount of money borrowed in relation to the total market value of a property. Expressed as the loan amount divided by the property value.

Cap Rate

The capitalization rate is the rate of return on a real estate investment property based on the income that the property is expected to generate. The capitalization rate is used to estimate the investor's potential return on his or her investment. The capitalization rate of an investment may be calculated by dividing the investment's net operating income (NOI) by the current market value of the property, where NOI is the annual return on the property minus all operating costs.

Development Spread

The difference, denoted in basis points, between the market cap rate and the yield-on-cost. The Development Spread measures the "development pop", or value-added by taking on the construction and lease-up risk. The greater the development spread, the more likely a development project will be deemed financially feasible. Think of it in these terms. A real estate investor has the option to either a) acquire a fully-built and stabilized asset at some market cap rate or b) construct and lease-up a brand new property at some yield-on-cost. In order to make the latter worthwhile, a benefit commensurate with the risk must be gained, otherwise there is no incentive to take on the development risk. One way the developer and its capital partners measure the potential benefit is by looking at the difference in yield between the two options, or the Development Spread.

Floor Area Ratio (FAR)

The floor area ratio (FAR) is the relationship between the total amount of usable floor area that a building has, or has been permitted for the building, and the total area of the lot on which the building stands. This ratio is determined by dividing building's total floor area (gross floor area) to the size of the piece of land upon which it is built. The terms can also refer to limits imposed on such a ratio.

Gross Potential Income (GPI)

The maximum a facility could earn assuming 100% occupancy and no discounts or write-offs.

Interests

The owner of real property holds a bundle of rights that is complex. As noted above, this bundle is some combination of the right of exclusive possession, use (enjoyment), and disposition. But this bundle can be dismantled in many ways, creating lesser bundles, held by different individuals. These bundles of rights are referred to as interests.

Internal Rate of Return (IRR)

The percentage rate earned on each dollar that remains in an investment each year. The IRR of an investment is the discount rate at which the sum of the present value of future cash flows equals the initial capital investment. The IRR on an investment is the required return that results in a zero NPV when it is used as the discount rate.

Due Diligence Period (DD)

The process of examining a property, related documents, and procedures conducted by or for the potential lender or purchaser to reduce risk. Applying a consistent standard of inspection and investigation one can determine if the actual conditions do or do not reflect the information as represented.

Gross Square Feet (GSF)

The square footage of the entire building footprint.