Investment sales glossary.

Capitalisation rate

A property's net operating income divided by its price or value, expressed as a percentage. A building producing $500,000 of net operating income that sells for $10 million traded at a 5% cap rate.

Cap rates move inversely to value: a lower cap rate means a higher price for the same income. They are a shorthand for how much risk and growth buyers are pricing in, not a formula that determines value on its own.

Net operating income

Effective gross income less operating expenses, before debt service, capital expenditure, depreciation, and income tax. It is the number most commercial valuation is built on.

The figure that matters in a sale is normalised net operating income — your statements restated the way a buyer will underwrite them, with owner-specific expenses adjusted, a market management fee applied, and capital reserves deducted. The gap between reported and normalised NOI is frequently ten to twenty percent of value.

Effective gross income

Total potential rental income plus other income, less vacancy and collection loss. It is the top line a buyer underwrites, as distinct from the gross potential rent a fully leased building would produce.

Broker opinion of value

A written estimate of what a property would sell for in the current market, prepared by a licensed broker using comparable transactions, normalised income, and current buyer and lender behaviour.

Distinct from an appraisal, which is prepared by a licensed appraiser to a formal standard and is what lenders, courts, and tax authorities require. See our page on the difference.

Price per unit

Sale price divided by the number of apartment units. A quick comparison metric for multifamily that ignores unit sizes, condition, and income, so it is useful for orientation and misleading as a valuation method.

Gross rent multiplier

Sale price divided by annual gross rental income. A rough screening metric that ignores operating expenses entirely, which is precisely why it should not be used to price an asset where expense structures differ.

Going-in and exit cap rate

The going-in cap rate is what a buyer pays at acquisition. The exit cap rate is what they assume they will sell at.

Buyers typically underwrite an exit cap rate higher than the going-in rate, on the reasoning that the building will be older at sale. An offer built on an exit rate lower than the going-in rate is assuming market improvement, which is an aggressive position.

Basis

An owner's total cost in a property — purchase price plus capital improvements, less depreciation taken. Basis determines the taxable gain on a sale and is the reason two owners of identical buildings can have very different after-tax outcomes at the same price.

Investment sales

The sale of income-producing commercial property to buyers acquiring it as an investment. The work is underwriting, capital markets, and buyer targeting, as distinct from leasing or owner-user brokerage.

Due diligence

The period after contract execution during which a buyer verifies the asset — financial audit, physical inspection, environmental review, title, and survey. Typically 30 to 60 days on commercial investment sales.

This is where deals are lost. Most failures trace to something the seller's materials did not disclose that the buyer's team found.

Retrade

A buyer's attempt to renegotiate price after going under contract, usually citing something discovered in due diligence. Sometimes legitimate; frequently a negotiating tactic timed for when the seller has least leverage.

The defence is preparation. Issues disclosed up front and priced into the offer cannot be used as leverage later.

Off-market

A sale conducted without public marketing, shown only to a targeted set of buyers. Faster and more discreet, but usually produces a lower clearing price because competitive tension is the main mechanism of price discovery. See the trade-offs.

Exclusive right to sell

An agreement giving one brokerage the sole right to market a property and earn a fee on a sale during the term, regardless of who introduces the buyer. The standard structure for investment sales, because it justifies the up-front investment in underwriting and marketing.

Earnest money

Funds a buyer places in escrow on contract execution, demonstrating commitment. The size of the deposit, and when it becomes non-refundable, are among the clearest signals of how serious and how capable a buyer actually is.

Sale-leaseback

A transaction in which an owner-occupier sells its building and simultaneously leases it back, converting real estate equity into working capital while retaining occupancy. The lease terms agreed are effectively part of the product being sold.

1031 exchange

A tax provision allowing deferral of capital gains on investment property when proceeds are reinvested into like-kind property, subject to a 45-day identification deadline and a 180-day completion deadline from closing.

The structure must be in place before the sale closes, with a qualified intermediary holding proceeds. If funds reach the seller, the exchange fails.

Debt service coverage ratio

Net operating income divided by annual debt service. A lender requiring a 1.25x DSCR needs the property to produce 25% more income than the loan payment. It frequently constrains what a buyer can pay more than the cap rate does.

Loan-to-value

Loan amount as a percentage of property value. Together with DSCR it sets the ceiling on buyer leverage, and therefore on the price a leveraged buyer can bid.

Assumable debt

A loan a buyer can take over from the seller on its existing terms, subject to lender approval. In a higher-rate environment, a below-market assumable loan is a genuine selling advantage that can be worth real money in the price.

Defeasance and prepayment penalty

Costs of retiring a loan early. A prepayment penalty is a fee; defeasance, common on securitised loans, requires substituting government securities for the collateral and can be considerably more expensive.

Either can materially change net proceeds. Both should be quantified before going to market, not discovered at closing.

Bridge loan

Short-term financing on transitional or value-add property, typically 12 to 36 months, used to fund acquisition, lease-up, or capital work before permanent financing. The platform's affiliated bridge lending business originates these nationwide.

Workforce housing

Unsubsidised apartments affordable to middle-income households, generally older market-rate stock rather than income-restricted product. The core of the Upstate New York multifamily market.

Value-add

An asset where a buyer expects to increase income through renovation, better management, or bringing below-market rents to market. Where Good Cause Eviction applies, the rent component of that thesis is constrained, which affects what a buyer will pay.

Small-bay industrial

Industrial buildings divided into smaller units, typically serving local service businesses, light assembly, and distribution. Expensive to build relative to the rent it commands, so supply is structurally limited — which is why Tampa small-bay sits at 3.2% vacancy with the strongest rent growth in Florida.

Flex space

Buildings combining office and warehouse in one unit, adaptable across office, light manufacturing, showroom, and distribution uses.

Triple net

A lease under which the tenant pays property taxes, insurance, and maintenance in addition to rent. Shifts expense risk to the tenant, which makes income more predictable and usually supports a lower cap rate.

Weighted average lease term

The average remaining lease term across a building's tenants, weighted by rent. Measures how much of a buyer's hold period is contracted rather than speculative.

Good Cause Eviction

A New York law, effective April 2024, requiring landlords to establish good cause for eviction or non-renewal and creating a presumption that rent increases above the lower of 5% plus local CPI, or 10%, are unreasonable.

It applies automatically only in New York City. Every other municipality must pass a local law to opt in; roughly nineteen have. Among our markets, Rochester and Albany have opted in, Syracuse rejected it, and Buffalo has not adopted it. See the current map.

Fair market rent exemption threshold

Under Good Cause Eviction, a unit is exempt if its rent exceeds a set percentage of the applicable HUD fair market rent. Municipalities choose that percentage, and the choice runs opposite to intuition: a higher percentage means fewer units escape the law, so coverage is broader.

Rochester adopted the statutory default of 245%. Albany adopted 345%, so Albany's ordinance reaches further up the rent ladder than Rochester's.

Reassessment on sale

The resetting of a property's assessed value following a sale, using the sale price as evidence of market value. The most consequential and most frequently overlooked risk in Upstate New York, where the Rochester metro carries the highest effective property tax rate in the United States at 1.82%.

A buyer underwriting the seller's historical tax line may be underwriting a figure that does not survive closing. Modelling it in advance is what prevents a retrade.

Tax certiorari

The legal process of challenging a property's assessed valuation to reduce its tax burden. Relevant in Upstate New York both as an ongoing operating strategy and as a component of what a buyer may assume about future tax expense.