Common Area Maintenance (CAM) – Charges paid by the tenant for the upkeep of areas designated for use and benefit of all tenants. CAM charges are common in shopping centers. Tenants are charged for parking lot maintenance, snow removal, and utilities.
CAM cap – The maximum amount for which the tenant pays its share of common area maintenance costs. The owner pays for any CAM expenses exceeding that amount.
Capitalization rate (CAP Rate) – A percentage that relates the value of an income-producing property to its future income, expressed as net operating income divided by purchase price. Also referred to as cap rate.
Capital expenditures – Property improvements that cannot be expensed as a current operating expense for tax purposes. Examples include a new roof, tenant improvements, or a parking lot such items are added to the basis of the property and then can be depreciated over the holding period. Distinguished from cash outflows for expense items such as new paint or plumbing repairs (operating expenses) that can be expensed in the year they occur. Also see operating expenses.
Capital gain – Taxable income derived from the sale of a capital asset. It is equal to the sales price less the cost of sale, adjusted basis, suspended losses, excess cost recovery, and recapture of straight-line cost recovery.
Capital Markets – The supply and demand for resources to invest in real estate and other investments.
Capital tax – Any tax on a change in capital value (including capital gains tax, estate tax, or inheritance tax); as distinguished from a tax on income.
Cash flow after taxes (CFAT) – For properties, it is the result of first calculating the net operating income, less mortgage and construction loan interest, less cost recovery for improvements and personal property, less amortization of loan points and leasing commissions to arrive at real estate taxable income. Next, real estate taxable income is multiplied by the applicable marginal tax rate to result in the tax liability (savings). Then, from the net operating income, annual debt service is subtracted to equal the cash flow before taxes (CFBT). Finally, the cash flow after taxes (CFAT) is calculated from the CFBT, less the tax liability (savings), plus investment tax credit. The Cash Flow Analysis Worksheet can be used to calculate a property’s gross operating income, net operating income, real estate taxable income and tax liability or (savings), CFBT, and CFAT.
Cash flow before taxes (CFBT – For properties, it is the result of calculating the effective rental income, plus other income not affected by vacancy, less total operating expenses, less annual debt service, funded reserves, leasing commissions, and capital additions. The Annual Property Operating Data form can be used to calculate a property’s effective rental income, gross operating income, total operating expenses, net operating income, and cash flow before taxes.
Cash-on-cash rate – A return measure that is calculated as cash flow before taxes divided by the initial equity investment.
Cash proceeds from sale – The sales price less sales costs, mortgage balance, and tax liability on sale. Also known as sales proceeds after tax.
Close – Third stage of four-stage transaction management process pertaining to bringing the parties together and consummating an agreement. The acronym CLOSE represents the contingencies, legal instruments, obstacles, signatures, and execution involved in the close stage.
Commercial real estate – Any multifamily residential, office, industrial, or retail property that can be bought or sold in a real estate market.
Common area – For lease purposes, the areas of a building (and its site) that are available for the nonexclusive use of all its tenants, such as lobbies, corridors, and parking lots. (Real Estate Information Standards)
Comparative advantage– The principle that cities or regions tend to produce those items or support those activities for which they have the greatest advantage over other areas as defined by the factors of production, demand, supporting industries, and quality of life considerations, as defined in relation to human, financial, and physical resources, and opportunity costs costs expressed in terms of opportunities foregone.
Compound interest – Interest computed on the original principal and accumulated interest.
Compounding – A type of calculation in which interest earned is reinvested and earns additional interest.
Contract rent – The total rental obligation, expressed in dollars, as specified in a lease. Also known as base rent.(Real Estate Information Standards)
Cost – The actual dollar amount paid for a property or the amount needed to build or improve it at a specified time in the future.
Cost approach – A method of determining the market value of a property by evaluating the costs of creating a property exactly like the subject.
Cost approach improvement value – The current cost to construct a reproduction of, or replacement for, the existing structure less an estimate for accrued depreciation from all causes.
Cost of capita – The average cost of capital (whether equity or debt), taking into account the relative proportions of each source of capital.
Cost of occupancy – Expenditures that are required to assume and maintain occupancy of a space. Such expenditures include rent and/or mortgage payments, and recurring costs, such as real estate taxes, repairs, operating expenses, and other outgoings directly resulting from the use of the property
Cost recovery An annual deduction based on the class life of an asset.
Cost recovery recapture – According to the Taxpayer Relief Act of 1997, for properties sold after May 6, 1997, a noncorporate taxpayer will have to recapture, or pay taxes on, any straight-line cost recovery taken during the holding period, to the extent there is any gain.