Global Definitions Database

Dark Space

Any space or suite which is physically vacant or “dark”, but for which the tenant is still contractually obligated to pay rent; typically results from a tenant ceasing operations at an unprofitable location, in hopes of saving cash on employee wages and other operating expenses.

Dead deal costs

Costs usually charged by third parties concerning work undertaken for acquisition/disposition projects which do not ultimately close. Such costs cannot be capitalised, and thus must be expensed. Services undertaken by the advisor/manager are passed through as an expense.

Deadlock Provision

A contractual clause or series of clauses in a shareholders' agreement or other form of joint venture agreement which determines how disagreements on key issues are to be resolved in relation to the management of the enterprise.

Deal-by-Deal Carry (Waterfall)

A distribution of Carried Interest in which the GP receives distribution of profits as investments are monetized through refinance or sale.  Gains from investments are not offset by losses or write-downs from unprofitable investments until last in the fund life.  A Clawback provision is generally used to require the GP to return profits if LPs do not receive their Preferred Return and return of capital during the fund life.  Also known as Interim Carry or American-style Carry or Waterfall.  See also Full Pool Carry.  

Debenture

A debenture is a type of instrument which usually contains charges and assignments over all assets and rights of the chargor.

Debt arrangement costs

Debt arrangement costs paid to a lender, broker, or other third party, in connection with obtaining debt financing for asset purchase or financing at the vehicle or other special purpose entity level of the holding structure. 

Debt arrangement fee

Also known as financing fee, this represents a fee charged by the investment manager for services rendered in arranging debt financing for asset purchases or financing at the vehicle or other special purpose entity level of the holding structure. This fee is separate from any arrangement costs paid to the debt provider or external party such as a broker.

Debt Fund

See definition Debt Vehicle

Debt Interest

The ownership of a mortgage note or other note receivable secured by real estate assets owned by another party

Debt Service Coverage Ratio - DSCR (INREV)

Projected NOI over the following four quarters as a ratio of projected interest and scheduled amortization payments on bank (not shareholder) loans over the same period. This is a portfolio metric which may not reflect precisely the varying stipulations of each loan facility of the vehicle but which aims to give an indication of the vehicle’s general ability to service its debt; for the avoidance of doubt, the DSCR calculation does not take into account cash in bank. Calculation: DSCR = projected annual NOI for next four quarters / projected annual interest expense and amortization payments over next four quarters.

Debt Service Coverage Ratio - DSCR (RS)

Used to measure the amount of cash flow from the property/ investment's operations that is available to meet annual interest and principal payments on debt. A DSCR of greater than 1 would mean there is a positive cash flow and conversely less than 1 would imply a negative cash flow.

Debt Vehicle

A fundor similar entity that has been set up for the purposes of issuing or investing in loans.

Debt Yield

Property’s operating income as a percentage of the total principal loan amount

Default Covenant

A Financial Covenant, the breach of which is an Event of Default.

Defaulting Investor

An investor in a fund that has breached the fund’s constituent documents, namely by failing to make a capital contribution when required pursuant to a capital call notice.

Deferred Maintenance

Repairs and similar improvements that normally would have been made to a property but were not made to the property in question, thus increasing the amount of its depreciation.

Deferred taxes

Tax on taxable/deductible temporary differences between the tax value and the book value of assets/liabilities of the vehicle. The main source of deferred taxes are the tax on capital gains payable at the time a property is sold. 

Defined Benefit Pension Plan

A company pension plan in which an employee's pension payments are calculated according to length of service and the salary they earned at the time of retirement with a specified monthly benefit paid at retirement.

Defined Contribution Pension Plan

A retirement plan in which the employee and/or the employer contribute to the employee’s individual account under the plan; the amount in the account at distribution includes the contributions and investment gains or losses, minus any investment and administrative fees; the value of the account will change based on contributions and the value and performance of the investments; examples 401(k) plans, 403(b) plans, employee stock ownership plans and profit-sharing plans.

Delinquency Rate

The percentage of loans within a financial institution's loan portfolio whose payments are delinquent.

Delivered

The total square footage or number of properties in a particular asset class that have been completed (status changing from under construction to inventory) and received a certificate of occupancy during a given period of time.

Demand Driver

An element or force that influences the demand for goods and services in a given market area.

Denominator

The number below the line in a common fraction; a divisor.

Dependent Variable

A variable that measures the effect of (a) independent variable(s) on a data point within a statistical model.

Deposit Account

This is one of the accounts the borrowers may be required to maintain. If relevant, it is principally used for holding amounts to be applied in prepayment.

Derivative Security

A security that is created artificially (derived from another financial instrument).

Design/Amenity Attributes

The natural and/or physical qualities and characteristics of a property that contribute to people's appreciation of its pleasantness, aesthetic coherence, and cultural and recreational attributes.

Developer Profit

The value created by the developer; the difference between value upon stabilization and construction costs, including land purchase.

Development

The process encompasses activities that range from preparation of an area of vacant land and installation of infrastructure to the construction of a property. Sometimes referred to as "ground up" development period.  Development includes the predevelopment phase and generally involves risks such as leasing risk, permissions/entitlement risk, construction risk, financing risk and zoning risk.

Development Facility

A loan provided to finance the development of a real estate asset

Development fee

A fee charged to the vehicle by the investment manager for the construction processes of a development project. These costs may be expensed or capitalised at the property level.

Development Margin

Margin applied to a development loan for the period before practical completion.

Dilution

The reduction in the ownership percentage of shareholders caused by the issuance of new securities or the conversion of convertible securities of the issuer, typically with the connotation that the new securities are issued at a lower price than that paid in a previous round of financing.

Direct Alpha

A public market equivalent (PME) methodology where all private equity cash flows are compounded by the returns of the reference benchmark to the same single point in time, which when combined with the final net asset value (NAV), forms a series of future values of net cash flows; the impact of any changes in the reference benchmark on the actual private equity cash flows is effectively neutralized and the resulting net cash flows are not affected by any changes in the reference index but reflect only the sole private equity returns relative to the index returns.

Direct Investment

An investment that involves the outright purchase of a property or properties or mortgage financing not done through other investment vehicles and may include any co-investments.

Discount margin

Rate above your floating benchmark rate.

Discount Rate

With reference to finance:  a yield rate used to convert future payments or receipts into present value; reflects both the safe rate earned from a completely riskless investment (which rate may reflect anticipated loss of purchasing power due to inflation) and compensation for risk, lack of liquidity, and investment management expenses; most often estimated by band-of-investment analysis or sales comparison analysis that estimates typical internal rates of return; With reference to monetary policy:  the rate that the Federal Reserve Bank charges member banks to borrow.

Discounted Cash Flow (DCF)

A valuation method used to estimate the feasibility and attractiveness of an investment opportunity; utilizes future free cash flow and discount rate estimates to determine a net present value (NPV) of the investment; if the present value of the cash flows is higher than the initial cost of the investment, the DCF analysis will show a favorable investment, or positive net present value (NPV); if the initial cost is higher, however, the NPV will be negative, showing an unfavorable investment.

Discretion

Within the GIPS standards, discretion is the management company's ability to execute transactions and to make decisions regarding the vehicle's investments on behalf of the investors without their prior approval. There are degrees of discretion. However not all investor imposed restrictions or investor approval rights will necessarily cause a portfolio to be non-discretionary. GIPS describes a discretionary portfolio as one for which the investors have not imposed restrictions or requirements that impede the manager from fully executing the defined and approved strategy. 

Discretion or Discretionary Account

The level of authority granted to an adviser or investment manager over the investment and management of client capital; With reference to a discretionary account:  typically defined as one in which the adviser or investment manager has full authority to invest and manage client's capital subject only to specific investment guidelines.

Disposals Account

The Disposals Account is used to hold the proceeds of disposal of a Property pending prepayment of Loans.

Disposition

Sale of an interest in an asset in exchange for consideration received.

Disposition Fee

A fee charged by an investment manager or operating partner to sell an investment.  The fee compensates for the costs of marketing, negotiating and closing the sale.  

Distressed Asset

An asset, generally a security or real property that features a sharply reduced value as a result of actual or potential losses created by an excess of credit risk, market risk, or liquidity risk.

Distribution fee

Fees charged in conjunction with operating or return of capital cash distributions to investors.

Distribution Waterfall

See "waterfall"  

Distribution-dividend yield

The amount of income (or shareholder loan interest payments) the vehicle distributes to investors on a rolling 12 months basis as a percentage of the average NAV over the same period.

Distributions

Cash or other assets paid from the Vehicle to its investors as a share of income or gains from operations or a return of capital.

Distributions to paid-in capital (DPI) multiple

Measures what portion of the return actually been returned to the investors. The DPI will be zero until distributions are made. As the fund matures, typically the DPI will increase. When the DPI is the equivalent of one, the fund has broken even. Consequently, a DPI of greater than one suggests the fund has generated profit to the investors

District heating and cooling

District heating and cooling is a system for distributing hot or cold steam and water generated in a centralised location for residential and commercial heating requirements such as space heating and water heating. The heat is often obtained from a cogeneration plant burning fossil fuels but increasingly biomass. Heat-only boiler stations, geothermal heating and central solar heating are also used.

Diversifiable Risk

The risk inherent to a particular investment or portfolio of investments that can be mitigated or reduced through diversification; also known as “idiosyncratic risk,” “residual risk,” “specific risk,” or “unsystematic risk”.

Diversity, Equity and Inclusion (DEI)

Diversity is the presence of differences within an industry or an organisation. A diverse environment is likely to exist where individuals are able to think and act differently. Examples of diversity types may include race, gender, religion, sexual orientation, ethnicity, competency, nationality, socioeconomic status, language, physical or mental disability, age, or political perspective. Including populations that have been underrepresented in the broader society may also help create functional diversity. Equity and inclusion are not natural consequences of diversity and diverse representation does not automatically lead to diversity of thought. Equity requires acknowledgement that everyone has different needs, experiences, and opportunities. It promotes justice and impartiality within the procedures, processes, and resource distribution and requires treating diverse members of the team fairly. People are likely to feel included when an organisation invites them and are able to feel hear fully in the decision-making processes and development opportunities within an organization or group and consequently positively impact outcomes. (Reference: https://dei.extension.org/)

Dividend Equivalent Amount

The foreign corporation’s effectively connected earnings and profits for the taxable year adjusted for changes in US net equity.

Dividend Payment

A form of Distribution as defined in the Vehicle’s Documentation.

Dollar-Weighted Rate of Return

A measure of investment performance calculated by finding the rate of return that will set the present values of all cash flows equal to the value of the initial investment; also known as “internal rate of return” or “money-weighted rate of return”.

DOWNREIT

An organizational structure that makes it possible for REITs to buy properties using partnership units; the effect is the same as an umbrella partnership real estate investment trust (UPREIT); however, the DOWNREIT is subordinate to the REIT itself, hence the name.

Drag-Along Rights

The right that enables a majority shareholder to force a minority shareholder to join in the sale of a company or investment; the majority owner doing the dragging must give the minority shareholder the same price, terms and conditions as any other seller.

Drawdown

The actual act of transferring capital in the fund’s portfolio companies; the drawdown may be in the form of a notice issued by a fund (or its general partner) instructing investors to make a capital contribution to the fund to permit the fund to make an investment or pay for fund expenses or liabilities; also known as a “capital call notice”.

Drive Time-Based Trade Area

A geographic area containing the customers of a particular firm or group of firms for specific goods or services based on consumer travel time and distance to the interest point(s); normally reflects barriers to travel not considered in other methods, including water bodies or stretches of freeways without exits.

Dry Powder

The amount of capital committed to a fund minus the amount of capital that has been called by the sponsor or general partner of the fund.

Due Diligence Questionnaire (DDQ)

A questionnaire given to a company to retrieve a standard set of documents and information that exemplify the strategy, investment and operating capabilities of the company.  It is generally given to a GP by an LP or investment consultant, but may be prepared by the GP to provide LPs with an overview of the firm.  It frequently covers factors such as the firm history, investment strategy, compliance and operating capabilities.

Due-on-Sale Clause

A provision in a mortgage contract that requires the mortgage to be repaid in full upon a sale or conveyance of partial or full interest in the property that secures the mortgage; protects the lender, or the ultimate mortgage holder, from the risk that the mortgage may be transferred to the new owner of a property when the rate on the mortgage is below current market interest rates; also known as “due-on-transfer clause”.

Due-on-Transfer Clause

A provision in a mortgage contract that requires the mortgage to be repaid in full upon a sale or conveyance of partial or full interest in the property that secures the mortgage; protects the lender, or the ultimate mortgage holder, from the risk that the mortgage may be transferred to the new owner of a property when the rate on the mortgage is below current market interest rates; also known as “due-on-sale clause”.

Duty of Care Agreement

An agreement entered into between the Secured Parties and an Asset Manager (AM) or Managing Agent (MA) in which the AM or the MA acknowledges the security over the relevant Properties and in which the parties agree the terms under which the services of the AM or MA, in the event of a default or breach of the owner of the relevant Properties under any agreement, may be continued and under which they may be cancelled.