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Alternative
Services Provider Compendium. Usually applied to long term care
housing market. Refers to an analysis of third party services
providers that provide services that serve to increase (or decrease) the
demand for a certain type of housing services product within the proposed
Project's given Primary Marketing Area.
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ALZ/ALCF.
A care facility that offers Alzheimer's and/or dementia care for residents
at the assisted living licensure level. Typically these are special
care units that may also be referred to as memory care units,
memory-impaired care units, dementia units and the like that offer
programming and support services that are specifically suited to the unique
care and supervision requirements of the Alzheimer's resident.
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Assisted
Living Care Facility. See "ALCF", above.
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Amenities
Compendium. Usually applied to the multi-family housing market.
Refers to the on-site amenities and services available to an occupant at no
additional charge and those services or features provided for additional
charge. This is used to determine the Schedule of Amenities for the
proposed Project.
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Basic
Services. Usually applied to the senior housing and long term care
markets. Refers to the schedule of services that a particular facility
(or proposed facility) offers or proposes to offer as part of the
prospective resident's basic monthly residency fee.
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Black
Box Financing. Usually refers to a sale/lease-back financing
arrangement between a merchant builder and an owner/operator wherein the
owner/operator is seeking to avoid the liability of operating risks and
investment in a new facility development program.
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Capital
Contributions. Refers to the capital invested in a project or program
that is totally speculative in nature and may not be recoverable if the
business enterprise should fail.
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Cap
Rate. Refers to "capitalization rate" - a conversion factor
used to determine the underlying value of an income-producing property or
business using the income approach to valuation. Theoretically, the
capitalization rate applicable to a property is equal to its EBITDA income
divided by its market value. Capitalization rates are used as a quick
reference to determine the market value of a commercial real estate project
and are determined by three (3) factors:
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Market.
What investors are willing to pay for income-producing properties in an
arm's-length sale transaction. This means that properties are
grouped (creating a "basket") according to location (region)
and asset class (e.g.: apartments, senior housing, hotels, etc.) and
transaction sale prices are used as the divisor on the property's EBITDA
income stream to determine relative capitalization rates based upon the
basket of properties.
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Band
of Investment Method. This method (less often used) derives the
capitalization rate based upon the sum of the costs of capital (i.e.:
the percentage and cost of debt capital plus the percentage and cost of
equity capital used to finance a transaction) used in the transaction
with an assumed equity return rate being used for the equity side
"band" and current market interest rates being used for the
debt side "band".
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Elwood
Method. This method (almost never used, but probably more
accurate) uses a combination of factors and calculations to derive the
capitalization rate takes the reversion factors and internal rate of
return issues more closely into account.
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CBSA.
See Core-Based Statistical Area
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CDBG.
Refers to the "Community Development Block Grants" program
administered by HUD. This program provides communities and states with
additional funding resources for the development of affordable housing,
infrastructure, and economic development (business).
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CMSA.
Consolidated Metropolitan Statistical Areas (replaced by CBSAs to some
extent or another). These are the largest
municipalities recognized by the Census Bureau and include the following
examples:
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Houston/Galveston
CMSA.
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Los
Angeles/Riverside CMSA.
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San
Francisco CMSA.
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Chicago/Gary
CMSA.
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New
York/New Jersey CMSA.
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New
England CMSA.
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Baltimore/Washington
CMSA.
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Atlanta
CMSA.
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Tampa/Clearwater/St.
Petersburg CMSA.
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Miami/Ft.
Lauderdale/West Palm Beach CMSA.
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Dallas/Ft.
Worth CMSA.
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Jacksonville
CMSA
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Norfolk/Suffolk/Portsmouth
CMSA.
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Philadelphia/Camden
CMSA.
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Competitive
Facilities Compendium. A term that refers to the number and type of
facilities and services that are operating within a given Primary Marketing
Area that may impact the viability of a proposed new senior housing (or
other facility) program proposal.
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CON.
Certificate Of Need. Refers to a finding by the state licensing
skilled nursing care that sufficient demand exists to require the
construction of additional skilled nursing beds that are eligible for
Medicare and/or Medicaid reimbursement.
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Continuing
Care Retirement Community (CCRC). A senior housing community that
offers multiple levels of housing and care. Typically, this means the
community will offer ILF, ALCF and/or
ALZ/ALCF and/or SNF care.
If a continuing care community offers a life care contract for services that
requires an entry fee, then it is a Life Care Facility and not a CCRC.
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Core-Based
Statistical Area (CBSA). Term assigned by the United States Bureau of
the Census to metropolitan areas having populations greater than 50,000
persons (replaces MSA).
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Cost
Segregation Analysis. The delineation of all real and personal
property into their proper depreciation categories via a physical survey of
a subject property in order to maximize distributable cash flow from the
commercial real estate property and defer taxable income into a future
reporting period. Click
here to view this service selection.
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Cross-Collateralization.
A common practice in real estate development finance, wherein the lender for
one given property requires the borrower to grant the lender a mortgage
interest in all other properties of the lender.
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Cross-Default.
A common practice in real estate development finance wherein the lender for
one given property forces the borrower to covenant with the lender that a
default on any provision of any other credit instrument of the borrower
shall constitute a default on the mortgage or credit instrument provided by
the lender.
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Demand
Analysis. The process by which the analyst determines the theoretical
demand for a given type of housing program for a given period of time.
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Demand.
Refers to the number of units or beds or new construction a marketing area
will theoretically support over a given forecast period. There are
three (3) categories of demand: Net Buildable Demand; Net Demand; and, Gross
Demand.
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Demographics
Analysis. Refers to the process by which the demand for new
construction is quantified using estimates of population, sales, etc., for a
given area for a given period of time.
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Distribution
Plan. Usually refers to a legal document that is part of the
organizational documents of a royalty limited partnership. The
Distribution Plan of the limited partnership in a royalty
limited partnership governs the distribution of partnership income
between the General Partner (usually the sponsor or developer of a given
program or project) and the Limited Partners (the entities providing the
capital investment necessary to execute the Owner's
Program).
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Due
Diligence. The process by which an investment/loan underwriter
verifies the claims of a project's sponsor relative to a given project or
program. This process involves an independent investigation that can
take months to complete if the data requirements are not fully satisfied at
the initial submittal of the proposed Project. Items of particular
note will include a detailed analysis of the proposed Project's anticipated
market conditions, competitive environment, anticipated financial results of
development and operations, and the Business Plan.
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EBITDAR
- refers to Earnings Before Interest, Taxes, Depreciation, Amortization and
Rent. This is the operating income of a given program or company.
Taxes refer to federal income tax obligations of the company, not real
estate taxes or personal income taxes of employees. Rent refers to
ground rent upon which an income producing asset is located and not office
rent. When a transaction includes a leasing of usable facilities, Rent
refers to the lease payment.
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Facilities
Compendium. Refers to a comparison of facilities located within the
Primary Marketing Area of the proposed project that are substantially
competitive to the proposed Project in terms of services, amenities, unit
sizes, pricing and project size.
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Financial
Feasibility Analysis. The process of analyzing and determining the
prospective cash flows for a given project or program based upon historical
information relating to an entity, an industry, the market feasibility
analysis for the project or program and the goals and requirements of the
Owner's Program. With respect to real estate development and senior
housing, this usually includes the development of a stabilized operating
analysis to determine the overall operating cash flow potential of a given
project, that in turn, provides the framework for a capitalization analysis
of the project's development needs, which together with the operating
analysis, are then consolidated into a final integrated financial
presentation.
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Forecast
Period. The time period for which a demographics forecast or Demand
Analysis is provided (usually 5 years).
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GO
Zone. Refers to the "Gulf Opportunity Zone" - a defined area
in the Gulf Coast area that is targeted for special financial assistance to
help with the recovery efforts stemming from Hurricane Katrina, Hurricane
Rita, and Hurricane Wilma pursuant to HR 4440 (the "Gulf Opportunity
Zone Act of 2005"). Businesses located or developed in the GO
Zone qualify for special financing assistance. This assistance package
includes special tax incentives, tax-exempt financing, and/or availability
of CDBG financing assistance that cannot be accessed
anywhere else in the United States.
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Gross
Demand. Refers to the pool of cohorts who are income qualified and
market qualified for a given housing program type, within a given marketing
area for a given forecast period.
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IADL
(IADL's). Refers to Instrumental Activities of Daily Living.
This is a functional measure of one's ability to support your existence in
the community as opposed to having to live in a structured environment.
IADL's include light housework, heavy housework, shopping, meal preparation,
telephone usage, personal financial management and walking one (1) mile.
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ILF
(ILF's). Independent Living Facilities. Refers to senior rental
apartment communities. Sometimes these facilities are offered in
conjunction with other levels of care (such as assisted living or
Alzheimer's care, etc.), making them a continuing care community.
ILF's typically provide room, some form of meal service (with options) and
assistance with IADL's.
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Income
Qualified. Refers to households that theoretically meet the minimum
income requirements for inclusion in a housing demand pool based upon
certain income and cost assumptions.
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Internal
Rate of Return (IRR). The internal rate of return is the interest rate
received for an investment consisting of payments (negative values) and
income (positive values) that occur at regular periods. This is the
most common used function in weighing the potential financial rewards of an
investment.
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Life
Care. The provision of care for a flat monthly fee in exchange for an
entry fee paid upon entry into the community that is guaranteed for the
remaining life of the resident and the cost of residency remains fixed
regardless of the level of care required by the resident in the future.
Life care communities typically require the resident to enter into the ILF
program as a condition for occupancy. There are life care communities
that offer services at the rental level (no entry fee required) but these
have service rates which are based upon market rates for assisted living and
higher levels of care and are not fixed.
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Lease-Up
Forecast. Refers to the forecast of demand that is theoretically
achievable based upon estimated and forecasted changes in market conditions
for a given type of housing program, for a given period (usually monthly or
annually).
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Market
Feasibility Study. The process by which the demand for a given type of
Project proposal is quantified in terms of underlying support within its
projected trade area. This is usually performed by an independent
party (a consultant) to the developer for presentation to lenders and
investors for the Due Diligence analysis by same.
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Market
Qualified. Refers to the factors that make-up the theoretical profile
of a population grouping for a specific type of housing program.
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Merchant
Building. A business wherein the core function is to develop and
construct new facilities of some type (housing, office space, etc.), with
the express intent of disposing of the asset upon completion of construction
to a third party via a sale or lease.
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Metropolitan
Statistical Area. Generally, these are cities with 75,000 persons or
more within the United States, but less than 2,000,000 persons.
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Minimum
Sales Requirement. Refers to the minimum amount of sales each new
syndicate listing must achieve. By definition, this sales level is the
greater of:
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MSA's.
Metropolitan Statistical Areas. See above.
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Net
Buildable Demand. Refers to the Net Demand that is penetrable over a
given time for a given program type within a given area after all other
theoretical reductions have been accounted for in an analysis.
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Net
Demand. Different people describe this term in different ways (really
confusing I think). However, this generally refers to the demand for a
particular type of housing, within a given marketing area based upon income
qualified, market qualified, cohorts statistically likely to be available
for consideration for the housing program type, after the reduction of the
cohort pool is made to reflect the anticipated gains made by competing
facilities (current, planned and proposed).
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Non-Recourse.
A term referring to credit instruments or mortgages that do not require the
borrower to personally guarantee repayment and performance of all of the
obligations of the borrower's company pursuant to the origination of the
credit instrument or mortgage.
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NRSF.
Net Rentable Square Foot (or Feet or Footage). the net amount of
living space in a dwelling or space for the tenants use.
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Outline
Market Plan. One of the end-products of a Market Feasibility Analysis.
The Outline Market Plan provides the project developer and/or owner/operator
with critical marketing data as to the types of marketing mediums, basis of
competition (marketing medium content), rate schedules and other related
data that is used to determine the overall financial feasibility of a given
Project proposal.
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Owner's
Program. Refers to the conceptual document and/or concept that
quantifies the goals and requirements of a given company or sponsorship
entity with respect to the operations, marketing, financial, architectural,
client/customer, regulatory, construction, development and related
activities associated with a new program or project initiative or
diversification of a given company. The process of developing this
document becomes the "blueprint" by which sophisticated companies
create a corporate culture and communications program that allows the
company to properly address all employees, consultants, service providers,
vendors and interested third parties, while providing a basis for growth and
profitability for the company.
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Penetration
Rate. Refers to the theoretical number (or percentage) of cohorts that
can be successfully attracted to the proposed program. The higher the
penetration rate required to fill a given program, the riskier the project
becomes.
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Primary
Marketing Area. Refers to the geographical area from which a given
project or program is anticipated to capture the highest degree of
penetration based upon a given set of assumptions (program type, market
qualifications, etc.). In practicality (i.e.: in terms of commercial
real estate development based projects) the PMA works out to be the area
from which 75% of the expected routine revenues from ongoing operations
would be realistically captured.
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PMA.
See above.
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Rate
Analysis Compendium. Refers to the analysis of the occupancy and
related services charges currently in place within a given marketing area
being offered by competing facilities.
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QIB.
Acronym for Qualified Institutional Buyer. (see below)
-
Qualified
Institutional Buyer. An institutional investor having at least $100
million in liquid capital investment funds available and holdings of at
least $500 million. (think Fortune 500 and you have it)
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Royalty
Financing Program. Refers to a funding strategy (or scheme) wherein
the investors own the assets of the company or project, but the
distributable cash flows (the economic gains) are distributed with the
sponsor in accordance with a distribution plan
that allows the sponsorship entity to realize the vast majority of the
long-term financial gains realized from the operation of the project or
company, should all events work out successfully.
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Royalty
Limited Partnership. Refers to a Limited Partnership, properly
organized within the confines of state and federal law for the purpose of
financing a project or program pursuant to a royalty revenue sharing
agreement. This is commonly used to avoid corporate taxation and
eliminate market, business and capital risk elements a project or company
would otherwise face in a stock-oriented transaction.
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Sale/Lease-Back
Financing. A financing program typically provided by REIT's wherein
the project developer builds the project using a loan from the REIT (interim
loan) and sell the project to the REIT upon completion of construction.
Inter alia with the sale, the developer then enters into an operating lease
with the REIT (REIT is Lessor/Landlord, developer is Lessee/Tenant).
This type of arrangement typically results in an increase of financial
leverage for the developer.
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Schedule
of Amenities. Usually applied to multi-family housing market.
Refers to the list of services to be provided to residents of the proposed
Project and is predicated upon an analysis of the Amenities Compendium.
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Sensitivity
Analysis. The process by which a proposed Project is analyzed to
determine the Project's viability in the face of changing circumstances
beyond the reasonable control of the Projects developer.
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Services
Compendium. Usually applied to the senior housing market. Refers
to the schedule of Basic Services and Additional Services provided by a
given facility or group of facilities within the Facilities Compendium and
used to determine the optimal mix of Basic and Additional Services for the
proposed project.
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Skilled
Nursing Facilities. A Skilled Nursing Facility is a facility licensed
to provide the highest level of nursing care available outside the hospital
setting and is typically licensed for Medicare and/or Medicaid residents.
SNF's are subject to CON regulations in all states and
make up a majority of the care plan options available to seniors. They
are typically referred to as nursing homes.
-
SNF.
See above.
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Staffing
Patterns Analysis. An analysis of a faiclity in terms of how its
physical characteristics (layout) lends itself to optimized resident
services staffing, the analysis of staffing requirements in terms of patient
acuity needs and the development of new staffing programs to effectively
manage resident care requirements.
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Structured
Finance. A term used to describe an organized commercial financing
program that provides a set group of due diligence requirements, application
steps, and preset acceptance standards. The term is also used to
describe the practice group within large investment banking firms that deals
with larger-scale commercial funding transactions (usually $100 million and
over).
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Total
Development Cost (TDC). The sum of hard costs of construction, soft
costs of construction, land acquisition, interest charges, points and uses
of working capital required to develop, construct and operate a give project
to the point where the project is stabilized and requires no further
contributions to offset operating and non-operating expenses.
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Traffic
Count Analysis. The process by which a proposed site is compared and
ranked to existing competitive sites based upon roadway traffic flow
comparisons to leasing gains made. This process provides a Sensitivity
Analysis that is useful in determining a project's Lease-Up Rate.
