Real Estate Development Glossary

The rate at which available units or space are sold or leased in a market over a specific period.

Converting an existing building from its original purpose to a new use while retaining key structural elements.

The layered structure of debt and equity financing used to fund a development project, organized by repayment priority.

Net operating income divided by property value, used to estimate the market value of income-producing real estate.

A short-term loan that finances the building phase, disbursed in incremental draws as milestones are completed.

NOI divided by annual debt service, measuring a property's ability to cover its loan payments.

The investigation and analysis a buyer or developer conducts before acquiring a property, including title, environmental, physical, and financial reviews.

Governmental approvals and permits required before development can proceed, such as zoning, site plan approval, and building permits.

A distribution structure defining how cash flows and profits are allocated among partners based on preferred return thresholds and promote tiers.

An analysis evaluating the financial viability, market demand, physical suitability, and legal permissibility of a proposed development.

The firm responsible for managing day-to-day construction operations, hiring subcontractors, and delivering the project per plans and specifications.

A long-term lease of land on which the tenant constructs and operates improvements, with ownership of the land remaining with the landlord.

Direct physical construction expenses including labor, materials, equipment, and site work.

The legally permissible, physically possible, financially feasible, and maximally productive use of a property.

The annualized rate of return at which the net present value of all project cash flows equals zero.

A partnership between a developer and a capital partner to share the risks, responsibilities, and returns of a development project.

The ratio of a mortgage loan amount to the appraised value of the property, used by lenders to assess risk.

Subordinated financing that fills the gap between senior debt and equity, carrying higher interest rates and greater risk.

Gross property revenue minus operating expenses, excluding debt service, depreciation, and capital expenditures.

Long-term mortgage financing that replaces a construction loan after a project is completed and stabilized.

A financial model projecting all development costs, operating revenues, expenses, and investment returns over the project lifecycle.

Non-construction expenses including architectural fees, engineering, legal, permits, financing costs, and insurance.

The milestone at which a property reaches target occupancy and generates consistent, predictable net operating income.

A systematic review of project design and specifications to reduce costs while maintaining required function and quality.

Municipal regulations dividing land into districts with prescribed uses, densities, heights, and setback requirements.