Global Definitions Database

Idiosyncratic Risk

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

Impact Investing

Impact investments are investments made with the intention to generate positive, measurable social and/or environmental impact alongside a financial return. Additionality and intentionality are key factors of impact investing. For Real Estate, social impact for example, might occur through developing or providing affordable housing, social housing , healthcare or education units when there is a lack thereof or using one of the SDGs as an impact theme. Furthermore, environmental impact can for example, be achieved by improvement in energy efficiency as a result of sustainable building investments.  

Impact investing metrics

Impact strategies will have specific performance metrics related to the socialor environmental impact that they are addressing.  These metrics will be monitored alongside and in a similar fashion to financial performance metrics and help investors manage toward success. They are estimated, measured and monitored over time to give an indication of the performance of the investment in a given area of impact. Qualitative social impacts that cannot be easily measured can be measured through quantitative proxies. Investments will have to meet these social or environmental criteria as well as satisfying financial investment guidelines. For example, a Real Estate impact metric might be the percentage of units delivered that are available at an affordable rent. 

Impact Measurement & Management

Measuring and managing the process of creating social and environmental impact in order to maximize and optimize it. An impact measurement and management framework will be developed at the outset and will exist to test the achievement of the social and / or environmental impact goals associated with the strategy. An external independent party would ideally be appointed to assure or verify the annual statement of impact measurement and also to comment on the extent to which the impact strategy is meeting the initially identified social or environmental need. 

Implemented Consulting

In its broadest application, a form of discretionary investment consulting which comprises elements of policy formation, manager structure and selection, and performance monitoring through a fee relationship between an organization or pension plan or fund and a consultant or consultancy firm.

Incentive Fee

Applies to fee structures where the amount of the fee that is charged is determined by the performance of the real estate assets under management.

Inception date

The date on which the vehicle first undertook operating, financing, or investing activity as defined in the Vehicle Documentation.

Inception-Date Cohort

Similar investments with the same inception date over the same period of time as subject; also known as an “acquisition-date cohort”.

Income Approach (valuation technique)

Uses valuation techniques to convert future amounts (for example cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts.

Income distribution

The amount of operating cash flow or gains that are distributed to the investors in accordance with the vehicle documentation. Along with income distribution, there are other types of distributions that may be present. See the definition of distributions.

Income return

Net investment income divided by NAV plus the time weighted (daily) contributions for the measurement period (TwdC) minus the time weighted (daily) redemptions for the measurement period (TwdR) and minus the time weighted (daily) distributions for the measurement period (TwdD). See Performance Measurement Module of the INREV Guidelines.

Indemnity

Security or protection against a loss or other financial burden.

Independent Variable

A variable that is manipulated or changed in a statistical model (such as regression analysis) and whose effects on a data point are measured and compared; a variable whose value is not determined by other (dependent) variables.

Indexed Rent

A type of Contingent Rent as defined in the lease agreement that varies based on changing interest rates or a specified inflation index such as the Consumer Price Index (CPI), typically used to anticipate future effects of inflation.

Industrial Revenue Bonds

Also known as low floater tax exempt bonds or tax exempt real estate bonds. Originally used as a vehicle by which municipalities could encourage socially responsible investing in the apartment and industrial sectors. They are only available on new construction but are assumable. There are government reporting requirements associated with these low interest rate loans.

Inflation Hedge

An investment that is considered to protect the decreased purchasing power of a currency that results from the loss of its value due to rising prices (inflation).

Inflation Risk

The risk due to a decrease in purchasing power of assets or cash flow due to inflation; also known as “purchasing power risk”.

Information Covenants

Undertakings given by borrowers to lenders in a loan agreement to ensure lenders have the information they need, such as financial statements, compliance certificates and a duty to notify a default.

Information Ratio

A measurement of portfolio returns beyond the returns of a benchmark, usually an index, compared to the volatility of those returns; often used as a measure of a portfolio manager's level of skill and ability to generate excess returns relative to a benchmark; also attempts to identify the consistency of the performance by incorporating a tracking error, or standard deviation component into the calculation.

Informational Efficiency

The degree to which market prices quickly and correctly reflect information and, thus, the true value of an underlying investment.

Initial Closing

As defined in the vehicle documentation, it is the date on which the conditions for the operating agreement are met for the initial closing.  Generally, these conditions relate to subscription commitments.

Initial Leasing

Completed construction that is less than 60% occupied since the end of construction and has been available for occupancy for less than one year

Initial Yield

The amount of income that an investment produces at the time of acquisition.

INREV

INREV is the European Association for Investors in Non-Listed Real Estate Vehicles. The platform for sharing knowledge on the non-listed real estate industry to improve transparency, professionalism and best practices across the sector, making the asset class more accessible and attractive to investors. See www.inrev.org/.

INREV Guidelines

An integrated set of principles and recommendations including tools and examples for governance and information provision for investment managers and investors of non-listed real estate Vehicles. See www.inrev.org/.

Insurance Prepayment Proceeds

Amounts received under insurance policies which are to be used in mandatory prepayment.

Intangible Personal Property

Property that has no physical existence beyond merely representational, nor any extrinsic value; includes rights over tangible real and personal property, but not rights of use and possession; value lies chiefly in what it represents.

Intentionality

An investor’s intention to have a positive social or environmental impact through investments is essential to impact investing. These impacts are defined as part of the strategy and investments are assessed against social or environmental impact criteria as well as financial return thresholds.

Interaction (in Attribution)

With reference to attribution:  an effect that measures the combined impact of a portfolio manager's selection and allocation decisions within a segment; not a residual but rather a directly calculable effect resulting from the combination of (or “interaction” between) allocation and selection effects.

Intercreditor Agreement

An agreement between various financiers providing loans or credits to a borrower that reconciles their different (potentially competing) interests. It formalizes their relationship; in particular the ranking of their debt and security, particularly on insolvency, by subordinating junior lenders and regulating the rights of lenders.

Interest Payment Date (IPD)

Dates on which lenders receive interest payment on the debt instrument they hold. Interest payment dates are usually set at the outset and usually correlate closely to rental quarter dates.

Interest Period

The period over which the interest due to the lender under a debt instrument agreement is calculated.

Interest Rate

Annual cost of borrowing paid by the borrower to the lender on the outstanding loan balance. Typically expressed as a percentage.

Interest rate hedging ratio

Percentage of the nominal value of debt excluding shareholder loans of which the interest rate risk is hedged through derivatives.

Interest Rate Risk

The possibility of a reduction in the value of a security, especially a bond, resulting from a rise in interest rates.

Interest Rate Swaps

A type of hedging where two parties exchange a floating interest rate for a fixed interest rate or vice-versa

Interest reserve account

The account the borrowermay be required to maintain, principally used to establish a cash reserve which must be used for interest payment shortfalls under the loan. 

Interim Close

A periodic, non-final closing of a fund during the fund’s capital raising period, typically name in the sequence in which the close occurs, such as first close, second close and so forth; once an initial or first close occurs, a fund can initiate making investments.

Intermediary

An entity that acts as the middleman between two parties in a financial transaction.

Internal leasing commissions

Commissions charged by investment advisors, or managers, after a new lease or a renewal lease is signed. These include marketing of vacant space. Commission ranges vary and may depend on the market and/or the value of the transaction.

Internal Rate of Return - IRR (INREV)

The annual rate of return based on the present value of a capital investment over a holding period expressed as a percentage of the investment.

Internal Rate of Return - IRR (RS)

The annualized implied discount rate (effective compounded nominal rate) that equates the present value of all of the appropriate cash inflows associated with an investment with the sum of the present value of all the appropriate cash outflows accruing from it and the present value of the unrealized residual investment.

Internal Rate of Return (IRR) Breakpoint Analysis

The calculation of the internal rate of return (IRR) earned by the investor at the point where the manager is earning the stipulated share of profits; allows for comparison of alternative fee rates and terms (such as the impact of changing the preferred rate and catch-up rate).

Internal Rate of Return-gross

The absolute IRR of the property portfolio before any vehicle-level fees are deducted.

Internal Rate of Return-net

The absolute leveraged IRR of the property portfolio after all vehicle-level fees are deducted. Source: www.nationalcne.org/faq/re_glossary.htm

Internal Rate of Return-original and projected

Original and projected IRRs include actual fund performance to date and the projected performance through the anticipated liquidation date of the fund. In the early stage of the fund a projected IRR may be what was reported within the fund offering documents

Internal Rate of Return-realized (Gross) vehicle

IRR of portion of equity invested that has been achieved from actual divestments (regardless of whether the proceeds have been distributed or reinvested), before any vehicle-level fees, taxes and carried interest are deducted. Ignores any unrealized returns or distributions not derived from disposals and does not include NAV as an end value.

Internal Rate of Return-since inception gross of fees

The equity IRR at vehicle level before any vehicle-level fees, taxes and carried interest are deducted. This calculation is from inception through to the current quarter adopting NAV (adjusted to eliminate the effect of fees, taxes and carried interest if necessary) as the final end value

Internal Rate of Return-since inception net

The equity IRR at vehicle level after any vehicle-level fees, taxes and carried interest are deducted. This calculation is from inception through to the current quarter adopting NAV (adjusted to eliminate the effect of fees, taxes and carried interest if necessary) as the final end value

Internal Rate of Return-starting from inception to end-projected-gross

Current projected gross return performance from inception to end of vehicle term (gross of taxes, fees and carried interest) per the manager's estimate, or in the case of an open end vehicle over a period as agreed between the manager and investors.

Internal Rate of Return-starting from inception to end-projected-net

Current projected net return performance from inception to end of vehicle term (net of all taxes, fees and carried interest) per the manager's estimate, or in the case of an open end vehicle over a period as agreed between the manager and investors.

Internal Ratings-Based Approach (IRB)

A method of calculating regulatory capital requirements based on an institution's own internal assessment.

Internal valuation

Internal valuation is a valuation carried out by a valuer who is employed by either the entity that owns the assets or a related company or manager. An internal valuer is generally capable of meeting all the requirements of independence and professional objectivity, but for reasons of public presentation and regulation may not always be acceptable to fill the role of an external independent valuer.

International Council of Shopping Centers (ICSC)

An international trade organization that represents the shopping center and retail real estate industry.

International Financial Reporting Standards (IFRS)

A set of accounting standards, developed and maintained by the IASB with the intention of those standards being applied on a globally consistent basis thus providing investors and other users of financial statements to compare across their peers. See www.ifrs.org/.

International Valuation Standards Council (IVSC)

An independent, not-for-profit organisation that produces and implements universally accepted standards for the valuation of assets across the world in the public interest. See www.ivsc.org/.

Inventory

All space within a certain proscribed market without regard to its availability or condition.

Invested Capital

See also Committed Capital, Assets Under Management.  

Investee

A corporation, partnership or other legal entity or contractual arrangement in which an investor makes a direct investment.

Investment

A discrete asset or group of assets held for future income, appreciation, or both and tracked separately.

Investment Advisers Act of 1940 (Investment Advisers Act)

A US federal law that regulates investment advisers; requires that firms or sole practitioners compensated for advising others about securities investments must register with the Securities and Exchange Commission (SEC) (with certain exceptions) and conform to regulations designed to protect investors.

Investment Advisor

The role referring to activities related to the development and implementation of a strategic portfolio management function for a real estate investment Vehicle. This generally includes research and the development of a strategic plan, the identification and qualification of deal flow, financing and structuring advice and the monitoring of overall Vehicle performance. The Investment advisor can be a separate legal entity with a contractual relationship with an Investment Vehicle, or can be embedded within the activities of a Vehicle Manager. The role of the Investment Advisor is usually documented in an executed agreement between the client/investor and the Investment Advisor.

Investment Company

A type of investment vehicle which has legal form and framework adapted for specialised investment activities such as but not limited to managing pooled capital from multiple investors in order to buy, sell, or hold investments in various other investment products, funds, or businesses. The investors share in the profits/losses incurred by the investment vehicle.

Investment Company Act of 1940

A US federal law that regulates the organization of companies, including mutual funds, that engage primarily in investing, reinvesting, and trading in securities, and whose own securities are offered to the investing public; designed to minimize conflicts of interest that arise in these complex operations and requires these companies to disclose their financial condition and investment policies to investors when stock is initially sold and, subsequently, on a regular basis; it does not permit the Securities and Exchange Commission (SEC) to directly supervise the investment decisions or activities of these companies or judge the merits of their investments.

Investment Grade Security

A security rated AAA through BBB- that generally reflects a safer tranche of security with a higher level of subordination.

Investment Guidelines

A legally binding clause that specifies the types of investments in which an investment vehicle will or will not invest.  It often specifies limits on specific factors such as the percentage of the portfolio that can be invested in certain types of investments, e.g. by property type, geographic region, construction or risk exposure.   

Investment Guidelines or Limitations

Provisions in a fund’s governing documents that place restrictions on the types of investments the fund may undertake, which may include limitations on the size, geography, industry, concentration or return characteristics arising out of applicable regulations or law.

Investment level

Evident or applied only to the entire investment i.e.. e., "Investment-level debt" and "investment-level leverage". By contrast, "property-level" applies to characteristics of individual properties within an investment.

Investment Level Return

A return based upon the equity of the investor in the fund which consists of beginning net assets, contributions, net income, appreciation, and distributions.

Investment Management Agreement

Agreement between the sponsor’s management company and the Fund to manage the fund.  Specifies general terms under which the management company is authorized to perform its duties in exchange for the Management Fee.  

Investment Management Company

An entity which manages investment vehicles on behalf of investors. Depending on the scope of activities and legal domicile a management company may need to be authorized and supervised by a regulatory body.

Investment Manager

The organisation responsible for the overall governance and oversight of the real estate investment fund or other type of investment Vehicles and may incorporate the Investment Advisor. The Investment Manager is ultimately accountable to investors for the overall management of the fund or Vehicle. This can be a formal role as defined by applicable regulation (e.g. the AIFMD), or legally such as the role of the General Partner in a partnership arrangement. Also known as Fund Manager, Vehicle Manager or Investment Advisor.

Investment margin (Spread)

In relation to floating interest rates, the rate of interest charged by the lender over and above the relevant cost of funding, such as LIBOR or EURIBOR

Investment multiple

A ratio which measures the value of the investment relative to its cost basis, not taking into consideration the time invested.

Investment Period

The period of time, as defined in the Vehicle Documentation, during the life of the Vehicle when the Vehicle can make investments.

Investment Policy

A document that formalizes an institution's guidelines for investment and asset management; typically will contain goals and objectives, core and specialty investment criteria and methodology, and guidelines for asset management, investment advisory contracting, fees, and utilization of consultants and other outside professionals.

Investment Risk

The risk associated with investing; the potential of experiencing losses following a fluctuation in security prices; also known as “capital market risk”.

Investment Value

The worth of an investment property to a particular investor. Investment value may or may not coincide with market value depending on the requirements of the specific investor.

Investor Letter

An undertaking agreement or acknowledgement made by an investor in favor of a subscription-backed credit facility lender whereby the investor makes representations, acknowledgments and covenants in favor of the lender as a condition to the investor being included in the borrowing base; typically, includes an acknowledgement of the existence of the subscription-backed credit facility and the pledge of the right to receive and enforce the subscription-backed credit facility collateral, and the investor will agree to make capital contributions upon notice by the lender during an event of default.

Investor Opinion

A letter issued by legal counsel to an investor stating various legal conclusions with respect to the investor, delivery of which is often a condition to the Investor being included in the borrowing base of a subscription-backed credit facility; under certain circumstances, an authority certificate can be delivered in lieu of an investor opinion.