Real Estate Finance Glossary

Amortisation

Scheduled repayment of loan principal during the term, reducing the outstanding balance over time.

Bridge Finance

Short- or medium-term financing used until a defined event such as sale, stabilisation, refinancing, planning or development completion.

Bullet Repayment

A structure where most or all principal is repaid at maturity rather than amortised throughout the term.

Cap Rate

Capitalisation Rate

The ratio between a property’s net operating income and its value or purchase price.

Cap rate = NOI ÷ property value × 100

Capex

Capital Expenditure

Capital expenditure for works that improve, reposition, refurbish or extend the useful life of a property.

Cash Sweep

A mechanism requiring agreed surplus cash to be applied to debt repayment or another specified purpose.

Contingency

A budget allowance for unforeseen costs, commonly included in development or refurbishment cost plans.

Cost to Complete

The remaining cost required to finish a development or business plan from the relevant measurement date.

Covenant

A contractual financial or operational requirement in finance documents, such as a maximum LTV or minimum ICR/DSCR.

Debt Service Coverage Ratio

DSCR

A measure of cash flow available to meet scheduled interest and principal payments. Exact lender definitions vary.

DSCR = cash flow available for debt service ÷ scheduled debt service

Debt Yield

A leverage-independent measure comparing property net operating income with the loan amount.

Debt yield = NOI ÷ loan amount × 100

Development Finance

Financing for land acquisition, construction, conversion and other eligible development costs, usually advanced in stages against progress.

Drawdown

An advance of loan proceeds under an agreed facility, often subject to conditions, evidence of costs or monitoring.

Exit Finance

Financing used to replace existing debt while a sponsor executes a defined sale, refinance, lease-up or stabilisation strategy.

Exit Strategy

The credible route by which a financing is expected to be repaid, for example through sale, refinance or stabilised investment debt.

First-Ranking Mortgage

A mortgage security with first priority over the property, subject to applicable law and any agreed permitted security.

Gross Development Value

GDV

The estimated aggregate market value of a completed development before deducting debt, sales costs or other project liabilities.

Intercreditor Agreement

An agreement regulating priority, enforcement rights, payment waterfalls and other rights between multiple capital providers.

Interest Cover Ratio

ICR

A measure comparing an agreed income metric with interest expense. The precise income definition varies by lender.

ICR = agreed income metric ÷ interest expense

Interest Reserve

Loan proceeds or sponsor funds set aside to pay interest during a period when project cash flow may be insufficient.

Joint Venture Equity

JV Equity

Equity capital invested by two or more parties under an agreed ownership, governance, return and exit framework.

Loan to Cost

LTC

The ratio of the loan amount to total eligible project or development cost.

LTC = loan amount ÷ total cost × 100

Loan to Value

LTV

The ratio of the loan amount to the relevant property value used by the lender.

LTV = loan amount ÷ property value × 100

Mezzanine Finance

Subordinated capital sitting behind senior debt and ahead of common equity, usually carrying higher risk and return than senior debt.

Net Operating Income

NOI

Property operating income after normal property operating expenses but before financing costs, depreciation and income taxes. Exact conventions can vary.

Pre-sales

Contracted sales agreed before completion of a development, sometimes used by lenders as evidence of demand and exit visibility.

Preferred Equity

Equity-like capital with contractual priority over common equity for distributions or return of capital, but generally ranking behind secured debt.

Refinancing

Replacing existing debt with a new financing, often to address maturity, pricing, leverage, stabilisation or a change in business plan.

Senior Debt

Debt with senior contractual and security priority in the capital structure, commonly secured by a first-ranking mortgage.

Sponsor Equity

Capital contributed by the property owner, developer or sponsor and economically at risk behind the debt structure.

Stretch Senior

Senior or senior-like debt providing more leverage than a conventional senior facility, often from specialist or alternative lenders.

WAULT

Weighted Average Unexpired Lease Term

The weighted average remaining lease term across a property or portfolio, commonly weighted by rent or income.

Whole Loan

A single facility providing a broader leverage range that may economically combine senior and junior risk within one loan.