Charges - Under the provisions of many types of leases, a landlord typically passes
through to the tenants such expenses as overhead and administrative fees, and also building repair, maintenance, and operating
costs for “common areas” of the property, including driveways, parking lots, lobbies, thoroughfares, hallways
and public restrooms. These expenses are collectively called CAM charges.
Estoppel Certificates - An estoppel certificate is a document signed by a tenant that confirms
to the buyer the rent paid and other important details of the tenant’s lease agreement with the landlord. Estoppel certificates
commonly request from the tenant information about rental amount, lease terms and provisions, details about payment of utilities,
oral agreements and promises made by the landlord, and protected tenancy status.
NNN Lease - A triple net lease provides that a tenant agrees to pay a monthly lump sum base
rent, and also his proportionate (pro-rata) share of real property taxes, property and liability insurance, and maintenance
(repairs, common operating expenses and common area utilities).
Operating Income - The NOI is calculated as follows: NOI = GOI – Expenses, where GOI is the Gross Operating
Income of the commercial real estate asset. Expenses include property taxes, insurance, maintenance, utilities, capital reserves,
management fees and incidental expenses. NOI is analogous to a simple profit calculation for a business.
Rent Roll - The document commonly used in commercial real estate to
itemize the collection of rents is called the Rent Roll. This document is provided to the escrow officer by the seller or
property manager, and is approved by the buyer and seller prior to the close of escrow.
Gross Rent Multiplier – The GRM is calculated as follows: GRM = Price/SGI, where SGI
is the Scheduled Gross Income of the asset and Price is the price of the property. The GRM is a function of Price and Income.
To better understand the GRM, we can use algebra to change the calculation so that Price = GRM X SGI. This formula demonstrates
that the Price is expressed by the GRM in relative “multiples” or “orders of magnitude” of the annual