Development Jargon: Pro Forma
You will find that any real estate investment, either development or acquisition, will involve a “pro forma” financial analysis.
A series about demystifying common jargon in the development process.
You will find that any real estate investment, either development or acquisition, will involve a “pro forma” financial analysis.
If you have ever had a conversation with a leasing agent or commercial broker, you may have noticed that there are seemingly multiple different types of space being talked about when talking about renting space for a use. In this article I will talk about those different types of space and how they are all related through a concept called a Core Factor.
Once a lease is signed for a space, you will design and construct the interior finishes and systems of the tenant suite. These finishes and systems are all part of tenant specific improvements called “Tenant Improvements” or “TI” for short. The money contributed by the developer for these improvements is the “Tenant Improvement Allowance” or “TIA”. The TIA is negotiated as part of the lease negotiations.
The LOI or Letter of Intent lays the groundwork for many real estate deals. While a LOI isn’t required it’s very helpful.
Highest and Best Use is a term that you will often hear in relation to whether or not a real estate investment should be made. Highest and Best Use is a tricky concept because the term is subjective and relative
What is a sublease? If you read a recent news article on sublease inventory and were left scratching your head, read on for my latest installment of Development Jargon on …
Have you ever heard the saying that “a bird in the hand is worth two in the bush?”
Said in a different way, something guaranteed is more valuable than the unknown, and something you have today is worth more than something you will get in the future. This principle also applies directly to the world of real estate development and investing.
Have you ever been in an investment committee meeting and heard your VP of Acquisitions talking about things you didn’t understand? In the “Development Jargon” series I hope to demystify the language of development. If you have suggestions for future demystifications, let me know on twitter!
Have you ever spoken with a broker and heard some terminology flying around that didn’t make a whole lot of sense? The different words around the topic of rent can be confusing and can have very real impacts on the cost of doing business. Better pay attention!
Have you ever browsed r/raleigh or the DTRaleigh Community when the topic of density came up and not felt fully confident in your understanding of the terminology?