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Rating: Grade, assigned by a rating agency, designating the
credit quality or creditworthiness of the underlying assets
Rating agencies: Independent firms engaged to rate the
creditworthiness of securities for the benefit of investors. The major
rating agencies are Fitch Ratings, Standard & Poor's and Moody's Investors
Service.
Raw land: Unimproved land that remains in its natural state
Raw space: Unimproved shell space in a building
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 property: Land, and generally whatever is erected or affixed to
the land that would be personal property if not attached
Real rate of return: Yield to investors net of an inflationary
factor. The formula for calculating the real rate of return is [(1 + nominal
yield) / (1 + inflation rate)] - 1.
Recapture: When the IRS recovers the tax benefit of a deduction or a
credit previously taken by a taxpayer, which is often a factor in
foreclosure because there is a forgiveness of debt. As used in leases, it is
a clause giving the lessor a percentage of profits above a fixed amount of
rent; or in a percentage lease, a clause granting the landlord the right to
terminate the lease if the tenant fails to realize minimum sales.
Recourse: The right of a lender, in the event of default by the
borrower, to recover against the personal assets of a party who is
secondarily liable for the debt
Red herring: The preliminary prospectus for an initial public
offering. Before the registration statement becomes effective, underwriters
may use the preliminary prospectus to market the offering. The preliminary
prospectus, however, must bear a legend printed in red ink stating that the
offering has been filed but is not yet effective.
Regional diversification: Definitions for what constitute various
regions, for diversification purposes, vary among managers, consultants and
plan sponsors. Some boundaries are defined based purely on geography; others
have attempted to define boundaries along economic lines.
Registration statement: Forms filed with the Securities and Exchange
Commission (or the appropriate state regulatory agency) in connection with a
proposed offering of new securities or the listing of outstanding securities
on a national exchange
Rehab: Extensive renovation intended to cure obsolescence of a
building or project
REIT (Real estate investment trust): A business trust or corporation
that combines the capital of many investors to acquire or provide financing
for real estate. A corporation or trust that qualifies for REIT status
generally does not pay corporate income tax to the IRS. Instead, it pays out
at least 90 percent of its taxable income in the form of dividends.
See the complete Guide
to REITS on Rentlaw.com
REMIC (Real estate mortgage investment conduit): A product of the Tax
Reform Act of 1986, REMICs are designed to hold a pool of mortgages for the
exclusive purpose of issuing multiple classes of mortgage-backed securities
in a way that avoids a corporate double tax.
Renewal option: A clause giving a tenant the right to extend the term
of a lease
Renewal probability: Used to estimate leasing-related costs and
downtime, it is the average percentage of tenants in a building that are
expected to renew at market rental rates upon the expiration of their
leases.
Rent: Compensation or fee paid for the occupancy and use of any
rental property, land, buildings, equipment, etc.
Rent commencement date: The date on which a tenant begins paying rent
Rentable/usable ratio: A building's total rentable area divided by
its usable area. It represents the tenant's pro-rata share of the building's
common areas and can determine the square footage upon which the tenant will
pay rent. The inverse describes the proportion of space that an occupant can
expect to actually use.
Rental concession: What landlords offer tenants to secure their
tenancy. While rental abatement is one form of a concession, there are many
others such as increased tenant improvement allowance, signage, below-market
rental rates and moving allowances.
Rental growth rate: The expected trend in market rental rates over
the period of analysis, expressed as an annual percentage increase
Rent-up period: The period following construction of a new building
when tenants are actively being sought and the project is approaching its
stabilized occupancy
REO (Real estate owned): Real estate owned by a savings institution
as a result of default by borrowers and subsequent foreclosure by the
institution
Replacement cost: The estimated current cost to construct a building
with utility equivalent to the building being appraised, using modern
materials and current standards, design and layout
Replacement reserves: An allowance that provides for the periodic
replacement of building components that wear out more rapidly than the
building itself and must be replaced during the building's economic life
Request for proposal (RFP): A formal request, issued by a plan
sponsor or its consultant, inviting investment managers to submit
information on their firms' investment strategy, historical investment
performance, current investment opportunities, investment management fees,
other pension fund client relationships, etc. Firms that meet the
qualifications are requested to make a formal presentation to the board of
trustees and senior staff members. Finalists are chosen at the completion of
this process, and contract negotiation begins.
Reserve account: An account that a borrower has to fund to protect
the lender. Examples include capital expenditure accounts and deferred
maintenance accounts.
Resolution Trust Corp. (RTC): The RTC was established by Congress in
1989 to contain, manage and sell failed savings institutions and recover
taxpayer funds through the management and sale of the institutions' assets.
Retail investor: When used to describe an investor, retail refers to
the nature of the distribution channel and the market for the services -
selling interests directly to consumers.
Retention rate: The percent of trailing 12-month earnings that have
been ploughed back into the company. It is calculated as 100 minus the
trailing 12-month payout ratio.
Return on assets: The income after taxes for the trailing 12 months
divided by the average total assets, expressed as a percentage
Return on equity: The income available to common stockholders for the
trailing 12 months divided by the average common equity, expressed as a
percentage
Return on investments: The trailing 12-month income after taxes
divided by the average total long-term debt, other long-term liabilities and
shareholders equity, expressed as a percentage
Reversion capitalization rate: The capitalization rate used to
determine reversion value
Reversion value: A lump-sum benefit that an investor receives or
expects to receive at the termination of an investment
RevPAR (Revenue per available room): Total room revenue for the
period divided by the average number of available rooms in a hospitality
facility
Risk management: A systematic approach to identifying and separating
insurable risks from non-insurable risks, and evaluating the availability
and costs of purchasing third-party insurance
Risk-adjusted rate of return: Used to identify investment
alternatives that can be expected to deliver a positive premium, after
taking into consideration the expected volatility. The risk-adjusted rate of
return is defined as the expected rate of return of a given asset, less the
expected return for T-bills, divided by the expected standard deviation of
the returns for the assets.
Road show: A tour made by executives of a company that plans to go
public, where they travel to various cities to meet with underwriters and
analysts and make presentations regarding their company and IPO. The road
show takes place during the marketing period before the registration
statement becomes effective.
Roll-over risk: The risk that a tenant's lease will not be renewed
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