Glossary
Term | Definition |
|---|---|
Alienation | the rights of a leaseholder to transfer (i.e. assign) a lease or share or sublet property, as permitted by the terms and conditions of a lease. |
Asset management potential | an expression used to highlight the opportunity to generate revenues and profits by actively managing a property investment. It invariably means the investment is let on a multitude of short leases! |
EPC | Energy Performance Certificate, (also known as an Entirely Pointless Certificate), that provides an energy rating of a property. It is a legal requirement to make the EPC available to any intending buyer or potential tenant of a property. |
Estimated rental value (ERV) | is a valuer’s opinion as to the open market rent, which on the date of valuation, could reasonably be expected to be obtained on a new letting or rent review of a property. |
Equivalent yield | is the weighted average of the initial yield and reversionary yield. It represents the return a property will produce based upon the timing of the income received. In accordance with usual practice, the equivalent yield assumes the rent received annually is in arrears and on gross values including prospective purchasers’ costs. |
Gross development value (GDV) | is the total sale value of a completed development scheme. |
Headlease | a lease, (usually very long term) under which a property is held from a freeholder. |
Hereinbefore | a word never used by anyone except lawyers. |
Initial yield | is the net annual rent generated by a property investment expressed as a percentage of the purchase price. |
Interest rate swap | a financial instrument where two parties agree to exchange an interest rate obligation for a predetermined amount of time. These are used to convert floating rate debt to a fixed rate. |
Internal rate of return (IRR) | a single rate equivalent to the annual interest that would be received for an investment consisting of irregular payments and receipts that occur at regular periods. IRR is commonly used to measure the feasibility of capital projects. |
Loan to value (LTV) | is the ratio of net debt to the value of a property. |
Net Rental income | is the rental income receivable after payment of ground rents and property outgoings. |
Open Market value | is an opinion of the best price at which the sale of an interest in a property would complete unconditionally for cash consideration on the date of valuation. In accordance with usual practice, Open Market Value is stated net of a prospective purchaser’s costs, including stamp duty, agents and legal fees. |
Over-rented space | space that is let at a rent above its ERV. |
Passing rent | is the actual rent currently payable by a tenant. |
Priority return | a specified level of return which ranks for preferential distribution (typically to investors) prior to any distribution to other parties. |
Reversion | is the increase in rental income that will arise following rent reviews, letting of vacant space and expiry of rent free periods. It also refers to the right of a property owner to take back full ownership after a period of time during which an interest in the property has been granted to another party. |