In commercial real estate, a common lease structure is the triple net lease, often abbreviated as “NNN Lease”. Despite its popularity, the triple net lease structure is still commonly misunderstood. In this article, we’ll take a deep dive into the triple net lease and cover: What is a Triple Net Lease (NNN)? What is a …
The operating expense ratio provides a lot of useful insight into a commercial property analysis, but it’s not as widely used as it ought to be. The operating expense ratio is a simple ratio that’s easy to calculate and in this article we’ll take a closer look at how to calculate the operating expense ratio, …
In commercial real estate the tenant estoppel often comes up during the due diligence phase of an acquisition or during the underwriting of a loan. What exactly is a tenant estoppel and how does it work? Let’s dive in and take a closer look at the tenant estoppel. What is a Tenant Estoppel? What exactly is …
Typically an interest rate is given as a nominal, or stated, annual rate of interest. But when compounding occurs more than once per year, the rate of interest actually realized will be higher than the nominal rate of interest. This actual, realized rate is known as the Effective Annual Rate (EAR). In this article we’ll …
NPV in Excel is widely used but commonly misunderstood. Even top MBA grads commonly misuse NPV in Excel. In this short article, we’ll look at the problem with NPV in Excel, show you where most people go wrong, and we’ll also walk through the correct way to use the NPV function in Excel, step-by-step. The Problem With NPV in …
Ground leases are an important component of many commercial real estate deal structures. Yet for a lot commercial real estate professionals ground leases are rarely encountered and are poorly understood. In this article we’ll shed some light on how ground leases work, explain what typical ground lease structures look like, and we’ll also clear up some …
The topic of replacement reserves is often confusing for commercial real estate professionals. How much should be set aside for replacement reserves? Should replacement reserves be included in net operating income? How do replacement reserves impact cap rates and value? In this article, we’re going to take a closer look at reserves for replacement, clear …
Being completely comfortable with the time value of money is critical when working in the field of finance and commercial real estate. The time value of money is impossible to ignore when dealing with loans, investment analysis, capital budgeting, and many other financial decisions. It’s a fundamental building block that the entire field of finance …
The internal rate of return (IRR) is a widely used investment performance measure in finance, private equity, and commercial real estate. Yet, it’s also widely misunderstood. In this article, you’ll learn: What is Internal Rate of Return (IRR)? The internal rate of return (IRR) is a financial metric used to measure an investment’s performance. The …
The breakeven occupancy ratio is one of the less frequently used ratios in commercial real estate, yet it’s also one of the most practical and useful ratios to know. It’s also especially important to lenders when underwriting investment commercial real estate loans. In this short article we discuss how the breakeven occupancy ratio works, why it’s …