Glossary

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This glossary contains definitions of a number of real estate terms to enhance your understanding of ING Real Estate’s business and results, but is by no means complete. If you can't find a certain definition, please feel free to contact us.

To look up a definition, use the alphabetical listing to find all words beginning with a specific letter.

[A] [B] [C] [D] [E] [F] [G] [H] [I] [J] K [L] [M] [N] [O] [P] Q [R] [S] [T] [U] [V] [W] X [Y] [Z]

Acquisition
- The act or process by which a person obtains ownership of or an interest in property.
- A corporate action in which a company buys most, if not all, of the target company's ownership stakes in order to assume control of the target firm. Acquisitions are often made as part of a company's growth strategy whereby it is more beneficial to take over an existing firm's operations and niche compared to expanding on its own.

Alpha
Most commonly used with mutual funds, alpha describes the difference between a fund’s actual return and its expected return, given the level of risk it takes, as measured by beta. A fund with a positive alpha has done better than expected, while a fund with a negative alpha had underperformed.

Amortisation
The process of paying off a loan by periodic payments of blended principal and interest.

Anchor tenant
The most reliable, and usually the largest, tenant in a shopping centre. The term may also be used to describe a tenant in an office building, industrial park, etc.

Appraisal
An opinion of value based upon a factual analysis. Legally, an estimation of value by two disinterested persons of suitable qualifications.

Appraised value
An expert option of the value of a property at a given time, based on facts regarding the location, improvements, etc., of the property and surroundings.

Appreciation
Increase in value or worth of property.

Area development
Generally, large-scale but also smaller-scale mixed-use development projects that entail the development or redevelopment of whole areas in cities and towns rather than specific sections thereof. Area development projects usually have a long duration and involve many different stakeholders, such as municipalities, local authorities, owners, tenants and investors. Area development is one of ING Real Estate’s key competencies.

Assessed value
Value at which the property was last assessed for property tax.

Asset
Any possession that has value in an exchange.

Asset allocation
An investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an investor's goals, risk tolerance and investment horizon. Investment managers may use various models to determine what portion of their assets are invested in stocks, corporate bonds, government bonds, real estate, and other asset classes, changing the mix of assets as market conditions change.

Asset class
A term used to describe categories of investments, such as stocks, bonds, real estate and foreign securities.

Asset management
The various disciplines involved in managing real property assets from the time of investment through the time of disposal. The process essentially is tactical in nature. Asset managers oversee and coordinate all of the following activities: property acquisition; property management; leasing; operational and financial reporting (including operating budgets); appraisals; audits; market review; accounting and reporting procedures, as well as refinancing and asset disposition plans.

Asset management fee
A charge paid to a fund’s manager for their services to manage the assets on behalf of a fund.

Asset-backed security
A security that is collateralised by loans, leases, receivables, or instalment contracts on personal property, not real estate.

Asset-based financing
Methods of financing in which lenders and equity investors look principally to the cash flow from a particular asset or set of assets for a return on, and the return of, their financing.

Assets under Management (AUM)
- In general: the term used by investment managers and advisors to define the size of their firms’ activities and commonly expressed as the total fair market value of all assets under the control of the manager, regardless of encumbering debt or other financing structure.
- Investing: Assets under management are the gross asset value of properties that the investment manager manages for itself and its clients.
- Development projects: the properties in the development portfolio that are being developed or under construction.

Average Rate of Return (ARR)
A tool for measuring performance that includes appreciation (or depreciation), realised capital gains (or losses), and income. Indices are computed and then forward-linked to calculate a rate of return for the period, for any type of weighting, i.e. time-weighted, currency-weighted, etc. In PSN, returns can be calculated for any time period with a quarterly multiple factor. Most recent quarter represents three fiscal months. The average rate of return is simply the arithmetic mean of a return series.

Average annualised return
The average return over a number of time periods, calculated as a geometric mean of the periodic returns.

Balanced
An investment style which invests in stocks, bonds and cash and very often uses an asset allocation model to determine how much is invested in each class.

Benchmark
The average against which a portfolio or group of properties is measured. When evaluating the performance of any investment, it's important to compare it against an appropriate benchmark.

Bridge loan
An interim solution designed to provide clients with financing while they investigate and establish other alternatives to meet their needs. Also known as loan financing or swing loans, this short-term (12-18 months) instrument enables clients to make the best use of market conditions and opportunities, while keeping options open for subsequent access to other favourable funding facilities.

Brownfield site
Previously developed land. A piece of industrial or commercial property that is abandoned or underused and often environmentally contaminated, especially one considered as a potential site for redevelopment.

Building code
The various laws set forth by the ruling municipality as to the end use of a certain piece of property. They dictate the criteria for design, materials and types of improvements allowed.

CSR
Stands for corporate social responsibility. ING defines corporate social responsibility or corporate responsibility as open and transparent business practices based on ethical values and respect for its stakeholders.

Capital employed
The average money value of capital employed in a property or group of properties over the measurement period, which may be expressed as the denominator of the total return equation.

Capital expenditures
Investment of cash or the creation of a liability to acquire or improve an asset, as distinguished from cash outflows for expense items that are considered part of normal operations.

Capital growth
The increase in the value of a property or group of properties net of capital expenditure, expressed as a percentage of the capital employed over the period.

Capital improvements
Expenditures that arrest deterioration of property or add new improvements and appreciably prolong its life.

Capitalisation rate
The discount rate or interest rate applied to property income to calculate its open market capital value.

Central business district
The heart of an urban area, usually located at the meeting point of the city's transport systems, which contains the highest percentage of shops and offices. Land values are high because of high accessibility, therefore land use is at its most intense in order to offset rent costs.

Chinese wall
The ethical barrier between different divisions of a financial (or other) institution to avoid conflict of interest. The ‘wall’ is thrown up to prevent leaks of corporate inside information, which could influence the advice given to clients making investments.

Class ‘A’
A real estate rating generally assigned to properties that will generate the highest rents per square metre/foot due to their high quality and/or superior location.

Class ‘B’
Good assets that most tenants would find desirable but lack attributes that would permit owners to charge a good price.

Class ‘C’
Buildings that offer few amenities but are otherwise in physically acceptable condition and provide cost-effective space to tenants who are not particularly image-conscious.

Closed-end fund
A commingled fund whereby entry and withdrawal are closed to investors. All participants are treated pro-rata and discretion usually resides with the sponsor or advisor. Such funds are finite with a typical life of five to ten years.
A fund is closed ended where:
- A formal limit is placed upon the maximum amount of capital which may be accepted into the fund without existing investors’ consent.
- It has a finite life.
- There is limited liquidity, save investors wishing to purchase a stake in the fund must buy units from existing investors (once the fund is closed).
- Redemption of units at the investors choice can otherwise only occur at end of the life of the fund, and/or at interim periods of over 12 months notice.

Closing
In real estate sales, the final procedure in which documents are executed and/or recorded, and the sale (or loan) is completed. See first closing of a fund and final closing of a fund.

Co-investment
A co-investment occurs when two or more pension funds or groups of funds share ownership of a real estate investment. A co-investment structure generally relates to a single large property investment or a series or related properties (common ownership).

Collateral
Property or goods used as security against a loan and forfeited to the lender if the borrower defaults.

Commercial Mortgage-backed Securities (CMBS)
Commercial mortgage-backed securities (CMBS) or securitisations are part of a financing process by which clients move assets to a lower-risk vehicle to reduce the interest rates on their loans. The advantage of mortgage-secured loans, either with fixed or with floating rates, is that they can be kept on a bank's balance sheet or securitised to give the optimum pricing benefit to clients.

Commercial real estate
Property that is solely used for business purposes. Examples are malls, industrial parks, gas stations, convenience stores and office towers.

Commingled account
An investment type in which several investors pool funds together for purposes of acquiring real estate investments.

Commingled fund
A fund consisting of assets from several accounts that are blended together. Investors in commingled fund investments benefit from economies of scale, which allow for lower trading costs per dollar/euro or other currency of investment, diversification and professional money management.

Commitment period
The commitment period of a fund is the period of time after the first closing during which an investor is obliged to contribute capital upon receiving a drawdown notice from the fund manager.

Commitment to a fund
A commitment to a fund is the total agreed capital a fund manager can drawdown from an investor, during the commitment period, with a specified notice as outlined in the constituent fund documentation.

Community shopping centre
A medium-size shopping centre. May contain a small department store and coordinated small shops. Larger than a neighbourhood shopping centre and smaller than a regional shopping centre.

Compliance
ING Real Estate operates in the global real estate marketplace as part of a major global financial institution and as such is subject to both national and international regulatory supervision. We are committed to complying with all laws, regulations and ethical standards applicable to our business.

Condo conversion loan
The process of transforming assets with sole ownership into a number of individual ‘for sale’ units. The conversion can take place both after construction or redevelopment.

Construction date
Year in which the construction of the oldest part of the existing building began.

Construction loan
Short-term financing for real estate construction. Generally followed by long-term financing called a 'take out' loan issued upon completion of construction.

Core fund
A fund is a core fund where:
- The fund assets provide stable income returns, which are a key element of the total return.
- Its overall target (post tax and fees) return is up to 11.5% per annum or its target (post tax and fees) return is less than 1% above a specified property or peer group, and
- Its permitted capital leverage ratio is below 60% of gross asset value.
Core funds are seen as low risk funds that invest in stabilised, income-producing properties which are held typically for 5-10 years and have little acquisition/disposal activity after the fund has been invested. Assets in such a fund are typified by stable income returns with less capital growth.

Core properties
The major property types, specifically office, retail, industrial and multi-family. Core assets tend to be built within the past five years or recently renovated.

Core-plus
A core-plus fund invests in similar style assets as a core fund but adopts a more aggressive management style. A core-plus fund is a core fund with a target return at the upper end of the core range.

Corporate governance
The way in which a company is governed and how it deals with the various interests of its customers, shareholders, employees and society at large.

Credit risk
The risk that borrowers will not be able to pay their debts.

Cross-border lending
Financing to clients who wish to acquire or develop a real estate portfolio in another region or country.

Delivery
A formal act of transferring ownership of property to another.

Depreciation
A decrease or loss in property value due to wear, age or other cause. In accounting, depreciation is a periodic allowance made for this real or implied loss.

Derivatives trading
Derivatives are contracts that enable investors to quickly stake a position in a market without acquiring a hard asset. The contract uses a benchmark, such as an index of real estate market performance, as the basis for payments between parties. Portfolio managers can use derivatives to swiftly achieve diversification goals without going through the process of finding and acquiring properties.

Developer
An entrepreneur who has an interest in a property, initiates its development and ensures that this is carried out (for occupation, investment or dealing) and from the outset accepts the ultimate responsibility for providing or procuring the funds needed to finance the whole project.

Development
A planned construction project, rather than simply the building of unrelated buildings.

Development expenditure
Capital expenditure relating to the acquisition and ongoing construction of properties under development.

Development portfolio
The projects or assets under management that ING Real Estate is currently developing are referred to as the development portfolio. See also total project value.

Disposal/disposition
The giving up or alienating of property.

Diversification
The process of investing funds in more than one project or industry in order to reduce the risk of incurring unexpected losses. The opposite of ‘putting all your eggs in one basket’.

Divestment
Sale of an asset.

Drawdown (of a fund)
Drawdown is when the fund manager serves notice as outlined in the subscription agreement, to investors requiring them to meet their capital obligations.

Due diligence
- A study that often precedes the purchase of property, which considers the physical, financial, legal and social characteristics of the property and expected investment performance; the underwriting of a loan or investment.
- In the case of an IPO registration statement, due diligence is a reasonable investigation by the parties involved to confirm that all the statements within the document are true and that no material facts are omitted.

Economic capital
Economic capital is an internally prescribed amount of capital. It is the amount of capital a bank or insurer should have to support the risks it faces.

Economic life
The ‘profitable’ life of an improvement. Generally shorter than the physical life (before it is worn out).

Economic rent
The market rental value of a property at a given point in time.

Equity funds
Capital invested to gain a residual ownership interest in property.

Exit strategy
Strategy available to investors when they desire to liquidate all or part of their investment.

Fair market value
The amount of money that would be paid for a property offered on the open market for a reasonable period of time with both buyer and seller knowing all the uses to which the property could be put and with neither party being under any pressure to buy or sell.

Fair value changes
Under IFRS – the International Financial Reporting Standards – changes in the value of property owned or those owned by real estate funds have to be reported in the profit and loss account. Increasing values of property lead to unrealised gains, while lower values have to be reported as an unrealised loss. Fair value changes are only realised on the sale of property.

Fiduciary
One acting in a relationship of trust, regarding financial transactions.

Final closing (of a fund)
The final closing occurs at the end of the equity raising period set by the fund manager and the fund is closed to new commitments.

First closing (of a fund)
The first closing is a dated specified by a fund manager whereby the fund is launched, the initial subscription is completed and the commitment period will commence.

Fit-out
The physical components included in a facility constructed to enable the occupier to utilise the space.

Fixed rate
A loan interest rate that remains constant over the term of the loan.

Flagship store
A large, signature store that showcases the best and widest variety of merchandise for a particular brand. It may serve as a mini-anchor in a shopping centre/mall or may take the form of an iconic stand alone building.

Floor area
The aggregate superficial area of a building, taking each floor into account.

Floor area ratio (FAR)
The ratio of the gross square metres/footage of a building to the square metres/footage of the land on which it is situated.

Floor plan
An architectural sketch of various rooms, balconies, bathrooms, etc.

Floor space
The total area covered by a building. It includes external walls, partitions, stairways and enclosed car parking areas.

Freehold
A tenure in perpetuity.

Full-time equivalent (FTE)
Full-time equivalent employment is the number of full-time equivalent jobs, defined as total hours worked divided by average annual hours worked in full-time jobs.

Fund
A fund is a term used to describe a structure where the capital of at least three investors is pooled together and managed as a single entity with a common investment aim.

Fund management fee
A charge paid to a fund’s manager for their fund management services to the fund.

Fund manager
The individual responsible for making decisions related to any portfolio of real estate investments in accordance with the stated goals of the fund.

Fund of funds
Funds that are invested in other funds. A pooled investment vehicle which gives investors a cost-effective investment opportunity with an element of liquidity and the added benefits of significantly reduced administration on the part of investors and economies of scale via pooled capital.

Fundamentals
Any factor that could be considered important to the understanding of a particular business. See real estate fundamentals.

Funds under management
Funds under management are the net asset value of the funds that the manager manages for itself and its clients as well as any undrawn commitments from its clients.

Greenfield site
Land on which no urban development has previously taken place; usually understood to be on the periphery, of an existing built-up area.

Gross asset value (GAV)
- The value of an asset or portfolio without taking into account any encumbering debt.
- The gross asset value of a fund is the gross property value plus the value of any further assets at market value as per the chosen valuation principles.

Gross capital value
The open market capital value of the property before purchasers’ costs have been deducted.

Gross purchase price
The total cost of acquiring the property, including all associated fees and taxes.

Gross return
Gross return is the absolute return of a fund over a stated period before any fund level fees and expenses are deducted.

Ground rent
Rent payable for the use of a site for a fixed period.

Hedge fund
Private mutual funds which often have a high degree of leverage.

High rise
In the Central Business District, this could mean a building higher than 25 storeys above ground level but in suburban sub-markets, it generally refers to buildings higher than seven to eight stories.

Historical cost
The original cost of an asset plus capital additions and less accumulated depreciation.

IAS
International Accounting Standards.

IFRS
International Financial Reporting Standards. As from 2005, all European listed companies must report in accordance with IFRS (previously known as IAS). This implies that a large number of assets and liabilities have to be valued and classified differently.

Income return
The net income receivable for the period expressed as a percentage of the capital employed.

Industrial building
A reasonably generic building used for manufacturing or distribution, usually with a minimum amount of office space. Specialised industrial facilities, such as refineries and heavy manufacturing plants, are not considered to be industrial buildings for investment purposes.

Industrial park
An area in which the land is developed specifically for use for industrial purposes. Usually located outside the main residential area of a city and normally offering adequate transportation access, such as roads and rail.

Industrial property
Any real property that is zoned and used for industrial use in conformity with zoning regulations, such as factories, manufacturing, distribution research and development, warehouse space and industrial park.

Inflation hedge
An investment that tends to increase in value at a rate greater than inflation and helps contribute to the preservation of the purchasing power of a portfolio.

Initial yield – net/gross
- Gross initial yield is the passing rent divided by the gross property value.
- Net initial yield is the passing rent or net operating income divided by the gross property value plus notional acquisition costs.

Inspection
Viewing of the property by the valuer to determine its physical condition and relation to the local market.

Institutional investor
A large investor who invests professionally. Examples include pension funds and insurance companies.

Interest
The price paid for the use of capital.

Interest rate risk
The risk of loss due to changes in the interest rate. Earnings or the value of a property that may be affected as a result of changes in prevailing interest rates in the money market. When interest rates go up capitalisation rates are generally lower rates and property values go down.

Internal rate of return (IRR)
Used as a historic measure of return, IRR is the discount rate that equates the initial value, final value and intervening cash flows of the asset or fund to give a net present value of zero. Calculations assume monthly cash flows (net income less net capital expenditure) timed to the mid-point of each month. The start value is the initial capital value, or gross purchase price for acquisitions during the period; the end value is the net sale receipt, or current capital value for held properties.

Investment management fee
Fees paid by the investor for the services of the investment manager or advisor.

Investment manager
An organisation or entity which, by a contractual agreement, has discretion for acquiring, managing, and selling individual real estate investments or commingled fund assets.

Investment period
The investment period is the period of time during the life of the fund that a fund can acquire assets and the proceeds of any asset disposals can be re-invested.

Investment portfolio
The ING Real Estate investment portfolio comprises real estate, which the company either owns directly through its investment management and development businesses or indirectly through its investment funds.

Investment property
Real estate, such as rental properties, which generate income.

Investment strategy
An investor's plan of distributing assets among various investments, taking into consideration such factors as individual goals, risk tolerance and horizon.

Joint venture
A business venture undertaken by two or more parties in a specific business enterprise, such as a real estate development or the acquisition of an investment.

Land
A general term which includes the ground and things of a permanent nature such as trees, crops, oil and minerals in the ground, unless specifically excluded.

Land construction loan
Land lending assists clients in the project stages prior to actual construction.

Land value
Open market value of land on which the property stands.

Lease
An agreement whereby the owner of real property (i.e., landlord/lessor) gives the right to possession to another (i.e., tenant/lessee) for a specified period of time (i.e., term) and for a specified consideration (i.e. rent).

Leasehold
The fact or condition of holding property by lease.

Leisure development
A property developed specifically for leisure and recreational use, such as a cinema, sports centre or other entertainment.

Lettable area
- Gross lettable area (GLA)
  GLA is the floor space contained within each tenancy at each floor by measuring from the dominant portion of the outside faces of walls, to the centre line of internal common area/inter-tenancy walls.
- Net lettable area (NLA)
  NLA (measured in square metres/feet) is the floor space between the internal finished surfaces of permanent internal walls and the internal finished surfaces of dominant portions of the permanent outer building walls. It excludes areas dedicated as public spaces or thoroughfares such as foyers, atria and building service areas.

Leverage
The use of credit to finance a portion of the costs of purchasing or developing a real estate investment.

Lien
A claim or charge on real or personal property for payment of some debt, lien obligation or duty.

Lifecycle
The various developmental stages of a property: pre-development, development, leasing, operating and redevelopment.

Listed real estate funds
See real estate securities and multi-manager.

Loan portfolio
The total number of loans extended to borrowers by our finance business.

Loan to equity
Loan to equity is the consolidated total leverage at the fund level as a percentage of the net asset value of the fund.

Loan-to-value ratio (LTV)
- Financing - The ratio of the value of the loan principal divided by the property's appraised value.
- Investing - Loan to value is the consolidated total external leverage at the fund level as a percentage of the gross asset value of the fund.

Location of industrial property
Location of industrial property relative to transport links such as motorways, airports and canals.

Location of office property
Location of office properties within major cities in terms of districts recognised by property advisors, experts or brokers.

Logistics property
A property designated for use as a logistics facility, such as a distribution centre or warehouse.

Long-term lease
In most markets, this refers to a lease whose term is at least three years from initial signing until the date of expiration or renewal option.

Lot
Generally, any portion or parcel of real property. Usually refers to a portion of a subdivision.

Low-rise
A building with fewer than four stories above ground level.

Mandate
A contract by which one party agrees to perform services for another without payment.

Market rental value growth
The increase in the open market rental value expressed as a percentage of the amount at the start of the period.

Market risk
The market risk corresponds to the general economic situation. It is a risk which affects all investments. Examples include: periods of economic growth and recession, as well as government tax reforms. Fluctuations in the equity market can also be included here (share price volatility).

Market segment
Classification of a national property market as used in benchmarking reports.

Mezzanine financing
A high loan-to-value, unsecured, subordinated, equity-related finance instrument. Mezzanine funding offers an alternative source of finance where regular financing options may not be appropriate or adequate.

Mixed-use development
Project which incorporates two or more property uses, for example, an office building with retail space, an apartment building with office space, a shopping centre with leisure facilities such as cinema or swimming pool.

Mortgage
A written instrument creating an interest in real estate and that provides security for the performance of a duty or the payment of a debt. The borrower (i.e., mortgagor) retains possession and use of the property.

Multi-manager
Multi-manager provides exposure to real estate through the acquisition of units in real estate funds. It is also known as indirect investment and is a popular way to access the real estate market. ING Real Estate Select is ING Real Estate’s dedicated and multi-manager business.

Net asset value (NAV)
- Current real estate value or equity, net of debt. In common practice, current real estate value is considered to be the most recent appraised value, or if prior to the initial appraisal following acquisition, the asset's acquisition cost adjusted for capital expenditures and additional contributions or distributions.
- The net asset value of a fund is its GAV (gross asset value) less all liabilities as per the chosen valuation principles.

Net investment
The sum of gross purchase costs, development expenditure and costs of all capital improvements, less net sale receipts and the total of all other capital receipts over the period.

Net purchase price
Price of the property agreed in the transfer contract, excluding any associated fees or costs incurred.

Net return
Net return is the amount an investor earns over the stated period after all fund level fees and expenses, including taxes and servicing of debt are deducted.

Number of parking spaces
Number of parking spaces on the property, either internal or external to the building.

Occupancy
The percentage of space or units rented.

Office
Property predominantly used for business services.

Open space
An area of land or water dedicated for public or private use or enjoyment.

Open-end fund
A commingled fund that does not have a finite life and that continually (usually at the end of each calendar quarter) accepts new investor capital and continually consummates new property investments. Individual properties typically are sold from time to time by managers of open-end funds.
A fund is open ended where:
- No formal limit is placed upon the maximum amount of capital which may be invested into the fund.
- Trading takes place either through the fund on an issue/redemption or through a matched bargain basis, and
- The issue/redemption of units is subject to, inter alia, conditions as to price, notice period, number of units and payment period.

Operating costs (% loss of income)
The percentage of gross income lost through non-recoverable operating costs.

Opportunistic fund
A fund is an opportunistic fund where:
- Returns are driven primarily through capital return.
- Its target (post tax and fees) return is in excess of 18.5% per annum or it target (post tax and fees) return is greater than 3% above a specified property peer group benchmark, and
- Its capital leverage ratio is in excess of 70% gross asset value.
Opportunistic funds are generally of a high-risk nature that can involve developments without pre-leases, acquisition of distressed assets, large portfolio acquisitions and re-packaging in similar lot sizes. Opportunistic funds generally have shorter holding periods for assets.

Organic growth
Growth excluding the impact of exchange-rate differences and acquisitions or divestments.

Outperform
An analyst recommendation meaning an investment is expected to do slightly better than the market return.

Owner
An entity possessing ownership rights to a property.

Parcel
Any area of land contained within a single description.

Performance
The quarterly changes in fund or account values attributable to investment income, realised or unrealised appreciation, and the total gross return to the investors both before and after investment management fees.

Perpetuity
The condition of being never ending. In legal terms it refers to an interest under which property is less than completely alienable for longer than the law allows.

Pooled funds
Funds from many individual investors that are aggregated for the purposes of investment as in the case of a mutual or pension fund. Investors in pooled fund investments benefit from economies of scale, which allow for lower trading costs per dollar of investment, diversification and professional money management.

Portfolio
A group of properties managed as an entity on behalf of an investor or investors.

Portfolio management
The art and science of making decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against performance.

Power centre
A form of specialist store which merchandises the widest range of merchandise of a particular kind. For example, Home Depot in the US is a power centre for Do-It-Yourself (DIY) home improvement merchandise.

Prime
Refers to property which is the best in terms of rentals, location, etc.

Prime tenant
The major tenant in a building, or the major or anchor tenant in a shopping centre.

Private equity
A broad term which refers to investments in companies which are not quoted on the equity market. The difference is primarily the way in which the money for an investment is collected, that is privately as opposed to publicly.

Private investor
A natural person (and not a corporation, partnership, proprietorship or any other entity whatsoever) who does not perform and is not in any other way engaged in giving investment services.

Private property
Property owned by a private individual, company, corporation or a non-government body.

Property management
The day-to-day management, often on-site, of the operations of a property including rent collection, tenant services, care of the physical plant, security and adherence to regulatory requirements. Some property management arrangements also include lease renewal negotiations and even the leasing and marketing of the property to outside prospects.

Property tax
Costs incurred by the owner for periodic national, regional or local property taxes.

Property type
Type of building constituting the property, such as a shopping centre, office or industrial building.

REIT (Real Estate Investment Trust)
A method in investing real estate in a group, with certain tax advantages.

Real estate
Of, or relating to land and property.

Real estate fundamentals
The factors driving the value of real property (i.e. the supply, demand and pricing for land and/or developed space in a given geographic or economic region or market).

Real estate leasing
In real estate leasing an owner of a property conveys the right to its use and possession to another party in exchange for rental payments.

Real estate securities
ING Real Estate Securities is our global business that seeks to maximise total return (income plus capital appreciation) by investing in a widely diversified portfolio of listed real estate companies located throughout the world. This is known as indirect investment. Visit: www.ingclarionres.com.

Real estate spectrum
The broad range of activities related to real estate, including real estate investing, financing and development, all of which are offered by ING Real Estate worldwide.

Real return
The inflation adjusted ‘real’ return is calculated in the same way as relative return by the ratio of the portfolio return to the inflation rate.

Realised gains and losses
See unrealised gains and losses.

Redevelopment
Generally, the improvement of land in accordance with an urban renewal project.
See area development.

Refinancing
- The renewing of an existing loan with the same borrower and lender.
- A loan on the same property by either the same lender or borrower.
- The selling of loans by the original lender.

Relative return [IPD]
The ratio of the return achieved by a portfolio, segment or individual asset to that of a benchmark, expressed as a percentage.

Rental growth rate
The expected trend in market rental rates over the period of analysis, expressed as an annual percentage increase.

Residential property
A building designed for people to live in.

Residual
The part of capital growth which cannot be explained by changes in market rental value or valuation yield.

Retail property
Properties used exclusively to market and sell consumer goods and services.

Return
Total income or revenues over a certain period of time, in relation to the invested capital.

Revaluation
Re-estimating the value of all property in a given area for tax assessment purposes.

Reversionary yield
The estimated rental value as a percentage of gross property value.

Risk averse
A description of an investor who, when faced with two investments with a similar expected return (but different risks), will prefer the one with the lower risk.

Risk management
- A systematic approach to identifying and separating insurable risks from non-insurable risks, evaluating the availability and costs of purchasing third-party insurance, the art of developing preventative measures to reduce the probability of occurrence and contingency plans to minimise the negative consequences of specific events that otherwise could severely damage investment performance.
- The process of identification, analysis and either acceptance or mitigation of uncertainty in investment decision-making. Essentially, risk management occurs anytime an investor or fund manager analyses and attempts to quantify the potential for losses in an investment and then takes the appropriate action (or inaction) given their investment objectives and risk tolerance.

Risk-adjusted return
The ratio of the arithmetic average return over the period to the volatility of returns measured by the standard deviation.

Risk-return relationship
The relationship between the expected risk in respect of the expected return.

SEC (Securities and Exchange Commission)
The federal agency which regulates the stock market. It gets involved in real estate when the real estate development is one which sells shares.

Sale and lease back transaction
The sale of an asset, usually buildings, to a third party that then leases it back to the owner. It is used by a company as a way of raising finance.

Secured loan
A loan offering the lender more than just the borrower's promise to repay. In real estate terms, a mortgage loan.

Securitisation
See CMBS.

Seed capital
A general term describing any initial funds used to begin a project. Usually not the major source or amount of the funds necessary to complete the project.

Senior housing
Purpose-built accommodation providing amenities for senior citizens.

Separate account
A non-commingled account under the control of an investment manager for the purpose of acquiring, owning, managing and disposing of assets for the benefit of a single client.

Service charge
Charges payable by the property occupier to cover the costs of services provided by the building owner.

Shopping centre/mall
A general term, covering a number of types of clustered retail stores with common parking and ownership or management.

Short-term trading
Lending (less than 12 months), backed by portfolios that will be sold on, consolidated or disposed of within the period of the loan.

Site
A general term signifying a plot of land suitable or set aside for any specific use.

Site area
The area of land on which a property stands.

Sovereign wealth fund (SWF)
A state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments.

Space plan
A graphic representation of a tenant's space requirements, showing wall and door locations, room sizes and sometimes furniture layouts.

Straight line depreciation
A method of replacing the capital investment of income property, by reducing the value of the property by a set amount annually from the income, over the economic life of the property.

Strip centre
Any shopping area, generally with common parking, comprised of a row of stores. Usually does not contain major department stores or grocery chain stores.

Structured finance
A service offered by many large financial institutions for companies with unique financing needs. These financing needs usually don't match conventional financial products such as a loan. Structured finance generally involves highly complex financial transactions. Syndicated loans are examples of structured finance – see description below.

Suburban
The area around a city. Usually residential with small businesses, although nowadays an attraction for large industrial and commercial complexes.

Swaps
Interest rate and currency swaps are used to hedge and reduce the risk of changes in medium or long-term interest rates or currency exchange rates.

Syndicated loan
A large loan in which a group of banks provide funds for a borrower, usually several but without joint liability. There is usually a lead bank or group of banks (the arranger / arrangers or agent / agents) that take a percentage of the loan and syndicate or sell the rest to other banks.

Tenancy
A holding, as of land, by any kind of title, occupancy of land, a house or the like under a lease or on payment of rent or tenure.

Tenant (lessee)
One who rents real estate from another and holds an estate by virtue of a lease.

Tenant mix
A phrase used to describe the quality of a property's income stream. In multi-tenanted properties, institutional investors typically prefer a mixture of national credit tenants, regional credit tenants and local non-credit tenants.

Tenure
The act or right of holding, as property, especially real estate.

Time-weighted average annual rate of return
The constant annual return over a series of years that would compound to the same return as compounding the actual annual returns for each year in the series.

Title
The means whereby the owner has the just and full possession of real property.

Total gross income
Total of all income receivable from property by owner.

Total net income
Total income receivable from property by owner, less total irrecoverable property operating costs.

Total portfolio
The total number of assets managed by ING Real Estate’s investing and development businesses and the number of loans extended by the company’s finance business.

Total project value
The total project value represents the expected commercial results of projects in the construction and development phases that have already been committed as well as the value of assets held for sale and investment.

Total return
The sum of capital growth and net income expressed as a percentage of capital employed over the period.

Turnkey project
The construction of a project in which a third party, usually a developer or general contractor, is responsible for the total completion of a building (including construction and interior design) or, the construction of tenant improvements to the customised requirements and specifications of a future owner or tenant.

Type of income
The definition of income used to calculate the core of the capital value, such as gross rent passing, net rent passing and open market rental value.

Type of interest
Form of legal interest in the property, such as freehold or leasehold.

Type of investor
Type of investor holding the property interest, such as insurance, pension or investment fund.

Type of ownership
Form of vehicle through which property is held, such as single ownership, joint ownership and joined venture company.

Under construction
When construction has started but the Certificate of Occupancy has not yet been issued.

Unrealised gains and losses
A change in the value of an asset that is still being held. It is distinguished from a realised gain or loss on the sale of the asset. The term commonly refers to the write-down or write-up of an investment portfolio of trading or available-for-sale securities resulting from applying the market value method on an aggregate basis.

Unsecured loan
A loan which is not backed by collateral. It is also known as a signature loan.

Urban
Relating to a city or a town.

Urban regeneration
The process of reinvigorating a run-down urban area, such as the inner city.

Urban renewal / renaissance
The process of redeveloping deteriorated sections of a city, often through demolition and new construction. Although urban renewal may be privately funded, it is most often associated with government renewal programs. Often urban renewal areas become sites for new public buildings, such as civic centres, sports arenas, and universities.

Usable square metres/footage
The area contained within the demising walls of the tenant space that equals the net square metres / footage multiplied by the circulation factor.

Use
The specific purpose for which a parcel or a building is intended to be used or for which it has been designed or arranged.

Vacancy
A place which is empty (vacant). The term is generally used to describe a property available for rent.

Vacancy rate
The proportion of the property vacant at the date of valuation, in terms of potential rent, market rent or floor area.

Valuation
The estimating of value.
See appraisal.

Value added fund
A fund is a value added fund where:
- Returns are driven by a combination of income and capital return.
- Its target (post tax and fees) return is between 11.5% and 18.5% per annum or its target return (post tax and fees) is 1-3% above a specified property or peer group benchmark, and
- Its permitted capital leverage ratio is between 30% and 70% of gross asset value.
Value added funds contain higher risk. The higher risk is borne from assets that often require some refurbishment, active asset management and in some cases development.

Valuer
The organisation that has performed the property valuation – a professional firm or internal to the investor.

Warehouse
Property used mainly for storage/distribution.

Weighted contribution to relative portfolio return
Measure of the contribution of an individual asset or group of assets to the relative return of the portfolio over a year (or other defined period). The weighted contribution of all the assets in a portfolio sum to its relative return, and the weighted contribution of a group of assets is the sum of the contributions of the individual assets in the group.

Weighted-average equity
The denominator of the fraction used to calculate investment-level income, appreciation and total returns on a quarterly basis, consisting of net assets at the beginning of the period adjusted for weighted contributions and distributions.

Weighted-average rental rates
The average proportion of unequal rental rates in two or more buildings within a market.

Write-down
The accounting procedure used when the book value of an asset is adjusted downward to better reflect current market value.

Write-off
The accounting procedure used when an asset has been determined to be uncollectible and is therefore charged as a loss.

Yield
Ratio of income from an investment to the total cost of the investment over a given period of time.

Yield impact
The impact of a change in yield on capital value, expressed as a percentage.

Yield shift
The yield at the end of a period less the yield at the start of that period.

Zoning
Government (usually municipal) laws that control the use of land within a jurisdiction. Zoning areas may be classified as residential, commercial, farming, and so forth.

Zoning ordinance
The set of laws and regulations controlling the use of land and construction of improvements in a given area or zone.

REAL ESTATE

Glossary