Capital Expenditure - A major improvement that will have a life of more than one year. Capital expenditures are generally depreciated over their useful life, as distinguished from operational repairs, which are subtracted from income during the year in which they were expended.
Capital Improvement - Any major physical development or redevelopment to a property that extends the life of the property. Examples include upgrading the elevators, replacement of the roof, and renovations of the lobby.
Capital Markets - Public and private markets where businesses or individuals can raise or borrow capital.
Capitalization - The conversion of a future net income stream into present value by using a specified desired rate of earnings as a discount rate. This capitalization rate is divided into the expected periodic income to derive a capital value for the expected income.
Capitalization Rate - The rate of return on net operating income considered acceptable for an investor. A rate of return used to derive the capital value of an income stream. The formula is Value = annual income divided by the capitalization rate. Also known as "cap rate".
Carve-outs - Specific items that a Lender will require the Borrower to personally guarantee for the life of the loan. Typically include (but are not limited to) environmental, fraud, misappropriation of funds, and theft.
Cash flow - The revenue remaining after all cash expenses are paid.
Cash-on-cash yield - The relationship, expressed as a percentage, between the net cash flow of a property and the average amount of invested capital during an operating year.
Ceiling - The maximum allowable interest rate of an adjustable rate mortgage.
Certificate of occupancy - A document presented by a local government agency or building department certifying that a building and/or the leased area has been satisfactorily inspected and is in a condition suitable for occupancy
Chapter 7 - That portion of the federal bankruptcy code that deals with business liquidations.
Chapter 11 - That portion of the federal bankruptcy code that deals with business reorganizations.
Closing Costs - Various fees and expenses payable by the seller and buyer at the time of a real estate closing, (also termed transaction costs). Includes brokerage commissions, lender fees, title insurance, recording fees, prepayment penalty, inspection and appraisal fees, and attorneyˆ‚s fees.
Cloud on Title - An outstanding claim or encumbrance that, if valid, would affect or impair the owner's title.
Commercial Bank - A financial institution authorized to provide a variety of financial services, including consumer and business loans (generally short-term with full recourse to the Borrower). Commercial banks may be members of the Federal Reserve System.
Commitment Fee - A charge required by a lender to lock in specific terms on a loan at the time of Commitment.
Commitment Letter - An official notification from a Lender to a Borrower indicating that the Borrower's loan application has been approved. It will state in detail the terms and conditions of the prospective loan.
Common Area Maintenance (CAM) - An additional, annual charge often assessed to tenants for maintenance of the property's "common area", such as its entryways, hallways or bathrooms.
Conduit - An entity which issues mortgage- backed securities backed by mortgages which were originated by other lenders.
Constant - Percentage of the original loan paid in equal annual payments that provides principal reduction and interest payments over the life of the loan.
Construction Loan - A short-term, interim loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as work progresses. Typically a recourse loan to the borrower.
Consumer Price Index - The most widely known measures of price levels and inflation that are reported to the U.S. government. It measures and compares, on a monthly basis, the total cost of a statistically determined "typical market basket" of goods and services consumed by U.S. households.
Contract of Sale - The agreement between the buyer and seller on the purchase price, terms, and conditions of a sale.
Correspondent - A specialized type of mortgage banker whose function is limited to the origination of mortgage loans which are sold to other mortgage bankers or investment bankers under a specific commitment.
Cost Approach - A method of appraising property based on the depreciated reproduction or replacement cost (new) of improvements, plus the market value of the site.
Cost of Funds Index (COFI) - An index of the weighted-average interest rate paid by savings institutions for sources of funds, usually by members of the 11th Federal Home Loan Bank District.
CPI (Consumer Price Index) - A measure of inflation as determined by the US federal government by using a "basket of goods". Used in leases as an impartial benchmark for the calculation of escalations.
Credit Enhancement - The credit support needed in addition to the mortgage collateral to achieve a desired credit rating on mortgage-backed securities. The forms of credit enhancement most often employed are subordination, over-collateralization, reserve funds, corporate guarantees and letters of credit.
Credit Rating (Report) - An evaluation of a person's capacity (or history) of debt repayment. Generally available for individuals from a local retail credit association; for publicly held companies by such firms as Dunn