CRE & M&A Glossary

AcquiOS's proprietary deal quality ranking system (1-100 scale) that analyzes all available deal information and predicts likelihood of success and return potential. AcquiScore considers financial metrics, market trends, comparable transaction performance, broker reputation, sponsor track record, and alignment with your fund's historical sweet spot. High-AcquiScore deals have historically performed better for investors like you. AcquiScore helps eliminate low-quality deals early and prioritize deep analysis on deals with highest probability of success.

The final round of bidding in a competitive deal auction, where serious bidders submit their best and highest offer. In a BAF process, the seller typically sets a deadline (24-48 hours) and asks remaining bidders to submit their final bids: higher purchase price, better terms, or both. There are no further rounds after BAF. Smart bidders reserve some flexibility for BAF rather than maximizing their initial bid, since BAF is where the best offers win.

A market-based valuation of a property prepared by a commercial real estate broker, typically as part of loan origination or refinancing. A BOV uses comparable sales analysis and income capitalization to estimate property value. BOVs are cheaper and faster than formal appraisals but carry more broker bias: the broker is incentivized to support the lending deal or sale price. Always verify BOV conclusions against your own analysis and actual comparable sales data.

NOI divided by property value (or purchase price), expressed as a percentage. A $10M property generating $500K in NOI has a 5% cap rate. Cap rate reflects the unlevered return on real estate and is used to compare properties on an apples-to-apples basis: a 5% cap rate deal carries more risk or lower quality than an 8% cap rate deal in the same market. Going-in cap rate applies at purchase; exit cap rate applies at sale.

Annual cash distributions to equity divided by initial cash invested, expressed as a percentage. Different from IRR because it only looks at actual cash returned in a single year, not total return over the hold period. A deal returning 10% cash-on-cash in year 1 provides quick capital recovery and lower risk. Cash-on-cash return is critical for sponsors who need near-term distributions to capital providers.

Income-producing real estate used for business purposes, excluding residential and agricultural properties. CRE includes office, retail, industrial, hotels, medical, and mixed-use properties. CRE is evaluated differently from residential because tenant credit, lease terms, and business viability matter. CRE markets are more cyclical than residential, driven by business profitability, employment, and capital access. A diversified CRE portfolio includes multiple asset classes to reduce concentration risk.

A situation where a party has competing interests or loyalties that could compromise objectivity or create unfair advantage. In real estate context: your firm appearing on both sides of a transaction (buyer and seller), advisors representing multiple parties with opposing interests, or team members having personal stakes in different deals. Conflicts must be disclosed and properly managed through disclosure to all parties, recusal from decision-making, or using separate advisors. Institutional investors have sophisticated conflict policies; smaller firms often underestimate conflict risk until problems arise.

Core is a conservative real estate investment strategy focused on stabilized, fully-leased properties in prime locations with strong tenants. Core properties generate steady yield with minimal capital reinvestment and principal repayment focus. Core-plus adds modest value creation (rent growth, minor renovations, management improvements) while maintaining stability. Core targets 8-12% IRRs; core-plus targets 12-15%. Appropriate for stable capital, insurance companies, pension funds, and capital preservation mandates. Core deals have lower risk but also lower return potential.

A structured list of all deals in various stages of evaluation and negotiation, from initial marketing received through due diligence and closing. A typical pipeline might have 100 deals in "sourcing," 20 in "underwriting," 5 in "due diligence," and 1 in "closing." Pipeline health is measured by depth (how many deals at each stage) and velocity (how fast deals progress through stages). A healthy pipeline requires consistent sourcing to backfill deals that fall out or close. Most professional investors track pipeline not just by deal count but by total dollar volume and expected closing timeline.

The initial filtration process where incoming deals are quickly assessed against your investment criteria. Screening happens within hours of receiving a marketing package and asks: Is this the right asset class? The right geography? In our price range? Meeting our return target? Efficient screening eliminates obvious mismatches early, freeing your team to focus on deals that fit your strategy. Screening is about saying "no" quickly to bad fits, not about thorough underwriting.

The process of identifying and acquiring deal flow: the stream of investment opportunities for your team to evaluate. Deal sourcing channels include commercial brokers, investment banks, off-market relationships, direct owner outreach, and networks. Professional investors maintain multiple sourcing channels because heavy reliance on a single broker is risky. Sourcing is a core competitive advantage; better sourcing means access to better deals with less competition.

NOI divided by annual debt service (principal + interest payments). A DSCR of 1.25x means NOI is 25% higher than annual debt payments, a healthy cushion. Lenders typically require minimum DSCRs of 1.25x for stabilized property loans. DSCR measures how easily a property's cash flow can cover its debt obligations; below 1.0x means the property does not generate enough cash to cover debt, a major red flag.

NOI divided by total loan amount, expressed as a percentage. A $100M loan on a $200M property generating $10M in NOI has a 10% debt yield. Lenders use this metric to ensure the property generates sufficient income relative to loan size. A lower debt yield (e.g., 6%) signals higher leverage and higher lender risk. This is a lender's version of cap rate: it shows what yield the lender's capital is earning.

A valuation method that projects a property's future cash flows and discounts them back to present value using a discount rate (typically WACC or required return). DCF analysis is the gold standard for evaluating real estate investments because it captures the full economic lifecycle of a deal: rental growth, expense inflation, refinancing options, and eventual disposition. The model shows what a property is worth today based on cash you expect to receive tomorrow.

The comprehensive investigation and verification phase of a real estate deal, occurring after LOI execution but before closing. Due diligence includes legal review (title, deed, easements), financial review (audited statements, rent roll verification), physical inspection (property condition assessment, environmental), operational review (leases, management contracts), and market verification. Large institutional deals can have due diligence periods of 60-120 days. The goal is to confirm nothing material was misrepresented and to surface any issues requiring negotiation.

Total cash distributed to equity divided by initial equity invested. Also called "money multiple" or "MOIC" (Multiple on Invested Capital). A 2.0x equity multiple means you get $2 back for every $1 invested. This is simpler than IRR in that it ignores timing, but it provides a quick comparison of how much wealth a deal creates. A deal returning 2.5x over 5 years is more attractive than one returning 2.0x over 7 years, though IRR would show that more precisely.

Going-in cap rate is your entry yield (NOI divided by purchase price at acquisition). Exit cap rate is your exit yield (projected stabilized NOI divided by projected sale price at disposition). Cap rate expansion or compression is a major driver of returns: if you buy at 5% and sell at 6%, cap rate expansion works against you. If you buy at 6% and sell at 5%, cap rate compression enhances your returns. Most value-add deals assume modest cap rate compression as the market strengthens.

The annualized percentage return on a real estate investment, accounting for timing of cash flows, leverage, and disposition proceeds. If you invest $1M today and receive $1.5M back in 5 years, your IRR is higher than a deal that delivers the same total return over 10 years. Institutional investors typically target IRRs of 15-20% on value-add deals and 8-12% on core/core-plus. IRR is the most critical return metric for investment decisions.

A structured document presented to the investment committee to support approval of a deal. The IC memo typically includes executive summary, deal highlights, investment rationale, financial analysis, risk assessment, sponsor background, and recommendations. It is the output of thorough due diligence and underwriting: the document that proves you have done the work and explains why this deal deserves capital. Quality IC memos are persuasive but realistic; they do not oversell, they substantiate.

A non-binding agreement (in most cases) outlining the basic terms of a proposed transaction: purchase price, closing date, deposit amount, contingencies, and seller representations. An LOI is not a binding contract; it establishes agreed-upon business terms and signals intent to proceed to due diligence and final documentation. LOIs are negotiated quickly (often in days) and serve as the roadmap for legal, financial, and operational due diligence. Some LOIs include binding provisions on price and key terms.

The difference between market rent and actual tenant rent, when actual rent is below market. If market rent is $50/sf but you have tenants at $40/sf, you have $10/sf of loss to lease. Loss to lease represents upside that will materialize when leases renew at market rates. It is critical in value-add underwriting: you are often paying for stabilized yield but buying at below-market occupancy and rents, creating upside for the new owner.

Residential real estate with multiple rental units: apartments, garden complexes, or high-rise buildings. Multifamily is the largest CRE asset class by volume, driven by consistent rental demand, relatively straightforward management, and institutional capital access. Multifamily returns depend on rent growth, occupancy, and cap rates. The sector is sensitive to job growth, population migration, and interest rates. Multifamily is generally lower-risk than commercial because residential tenants are less likely to fail than businesses.

Total property revenue minus operating expenses, excluding debt service and taxes. NOI is the cash generated by the property before financing costs and is the most fundamental metric in commercial real estate. A property generating $1M in NOI is fundamentally different from one generating $500K; the difference reflects the actual earning power. NOI can be trailing (based on actual historical performance) or pro forma (projected future performance after value-add improvements).

A comprehensive marketing document for a property or portfolio sale, typically 50-100 pages, prepared by the seller's broker. The OM contains property overview, financial history, tenant detail, operating expense breakdown, comparable sales, market analysis, and offering terms. An OM is your primary source document for underwriting. Quality varies widely; some are meticulous and some obscure information. Smart investors always underwrite from primary sources (rent rolls, leases, audited financials) rather than relying solely on broker OMs.

Forward-looking financial projections for a property, showing expected revenues and expenses after the investor's improvements or operations. A pro forma NOI might be significantly higher than trailing NOI if you are executing a value-add strategy: you are projecting stabilized income after repositioning. The term can also refer to pro forma balance sheet or cash flow statement. Always challenge assumptions in pro formas; they can reflect sponsors' optimism more than market reality.

A detailed spreadsheet of all active leases, showing tenant name, unit/space, square footage, lease rate, lease expiration date, renewal options, and any free rent or concessions. The rent roll is your source of truth for property income: it shows exactly who pays what and when leases expire. A healthy rent roll has staggered expirations (leases maturing across multiple years) rather than a cliff (many leases expiring in the same year). Commercial rent rolls are unit-by-unit; multifamily properties sometimes show unit-level detail or aggregated by type.

A security framework where individual users are assigned roles (analyst, manager, partner) and each role has specific permissions to access data, modify information, and approve actions. RBAC ensures sensitive deal information is seen only by authorized users. It also creates an audit trail showing who accessed what and when. Institutional-grade RBAC allows senior leadership to control information flow and ensure confidentiality of sensitive transactions. Often required for SEC compliance and fund governance.

A real estate asset class where customers rent individual storage units by the month or year for personal or business use. Self-storage has attractive characteristics: minimal tenant credit risk (short leases, no long-term commitments), simple operations (mostly unmanned), high margins, and strong pricing power. The sector has grown substantially as housing costs rise and urban space decreases. Cap rates are typically lower (4-6%) due to stability and consistency. Self-storage is recession-resistant; people do not give up stored possessions during downturns.

SOC 2 (System and Organization Controls 2) is a security standard for service organizations that handle client data. SOC 2 Type II certification requires independent audit of controls related to security, availability, processing integrity, confidentiality, and privacy. For SaaS companies handling sensitive client deal information, SOC 2 certification is essential proof of security maturity. Institutional investors, especially family offices and PE firms, often require SOC 2 certification before trusting platforms with proprietary deal data.

Actual financial performance for the 12-month period immediately preceding the valuation date. T12 revenue, T12 NOI, T12 expenses: these are real, historical numbers, not projections. When evaluating a property, lenders and investors always look at T12 to establish a baseline of actual performance. T12 is sometimes called TTM (Trailing Twelve Months). For a property with seasonal revenue swings, T12 is more meaningful than a single quarter.

A real estate investment strategy where you acquire a stabilized or partially-occupied property below market value and create value through operational improvements, rent growth, expense reduction, or tenant upgrades. Value-add sits between core (minimal improvements) and opportunistic (distressed, major repositioning). A typical value-add deal might involve renovating units, implementing technology, refining pricing, or upgrading amenities to justify rent increases. Value-add deals typically target 15-20% IRRs and 2.0-2.5x equity multiples over 5-year holds.