Glossary of Real Estate Private Equity (REPE) Terms

Welcome to our comprehensive Glossary of Private Equity Real Estate (REPE) Terms. Whether you’re a seasoned investor or a curious analyst, this guide is your key to understanding the language of REPE investments. 

Key REPE Terms (Alphabetical Order)

• 1031 Exchange: Tax-deferred exchange of like-kind real property
• Acquisition: The process of identifying, negotiating, and closing on the purchase of an investment property.
• Cap Rate (Capitalization Rate): The ratio of a property’s net operating income to its market value. Used to assess investment performance.
• Cash Flow: Net cash income generated by a property after all cash expenses.
• Cash-on-Cash Return: The ratio of annual cash flow to the initial equity investment.
• Concessions: Incentives offered to tenants (e.g., rent discounts, free months).
• Core Strategy: Investing in stable, income-generating properties.
• Debt Yield: The ratio of net operating income to the loan amount.
• DSCR (Debt Service Coverage Ratio): Measures a property’s ability to cover debt payments from NOI.
• Due Diligence: Thorough research and analysis before investment in real property.
• Equity Multiple: A measure of total return on an investment.
• Equity Holder: Equity holders (as opposed to debt holders) bear the highest risk and enjoy the greatest potential return. They’re the residual owners after all other claims.
• General Partner (GP): Active manager responsible for investment decisions.
• Ground Lease: Leasing land for a long term, typically for development.
• Gross Potential Rent: The total rental income a property could generate if fully leased at market rates.
• Internal Rate of Return (IRR): A metric that calculates the annualized rate of return an investment generates over its holding period.
• Joint Venture (JV): Partnership between two or more parties for a specific project.
• Lease: A contract by which one party conveys land, improvements or other propertyfor use by another for a specified time, usually in return for a periodic rental payment.
• Loan to Value (LTV): The percentage of a property’s value financed by debt.
• Market Rent: The prevailing rental rate for a property.
• Mezzanine Debt: Junior debt secured by a property, subordinate to senior debt.
• Net Operating Income (NOI): The income generated by a property after subtracting operating expenses but before accounting for debt service or taxes.
• Opportunistic Strategy: Pursuing high-risk, high-reward investments.
• Other Operating Income: Additional revenue sources beyond rent (e.g., parking fees, laundry income).
• Qualified Opportunity Zone (QOZ): Designated areas where real property investments can receive tax benefits.
• Preferred Equity: A hybrid investment between debt and equity, often with a fixed return that is paid before other equity
• Repairs & Maintenance: Costs for keeping the property in good condition.
• REIT (Real Estate Investment Trust): A company that owns, operates, or finances income-producing real estate and is permitted to deduct distributions to investors.
• Sponsor: The entity or individual leading a real estate investment deal.
• Tax Cuts and Jobs Act (TCJA) of 2017: Introduced certain tax changes like bonus depreciation, increased interest expense limits, QOZ.
• UBTI (Unrelated Business Taxable Income): Tax imposed on certain tax-exempt entities investing in leveraged real estate.
• Vacancy Rate: The percentage of unoccupied rental units in a property.
• Waterfall Structure: The order in which profits are distributed among different classes of partners.
• Operating Agreement: A legal document governing the operation and management of limited liability companies (LLCs) and partnerships.

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