Leasing & Property Operations Flashcards
6 cards from real REA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Leasing & Property Operations flashcards as text
What is a 'lease renewal option' and how does it affect property valuation?
Answer: A contractual right allowing the tenant to extend the lease at pre-agreed terms, which can stabilize income but cap rental upside
Renewal options give tenants the right to extend at stated rent, providing income security for the landlord but potentially limiting rent growth if rates are set below future market levels.
What is 'net operating income' (NOI) and what expenses are excluded from its calculation?
Answer: Effective gross income minus operating expenses, excluding debt service, depreciation, and capital expenditures
NOI equals effective gross income minus operating expenses, specifically excluding debt service, depreciation, income taxes, and capital expenditures — all below-the-line items.
What is a 'sublease' and how does it differ from a lease assignment?
Answer: In a sublease the original tenant retains liability and leases to a subtenant; in an assignment the original tenant transfers all rights and obligations to the assignee
In a sublease the original tenant remains liable to the landlord while subleasing space to a third party; in an assignment, the original tenant's obligations are transferred to the assignee.
What does 'leasing velocity' measure in commercial real estate operations?
Answer: The pace at which vacant space is being signed to new leases over a given period
Leasing velocity measures how quickly vacant space is being absorbed through new tenant signings, indicating market demand and effectiveness of the leasing program.
What is a 'gross-up' provision in a commercial office lease?
Answer: A clause that adjusts variable operating expenses to a 100% occupancy basis for expense calculation purposes
A gross-up provision normalizes variable operating expenses to what they would be at full occupancy, preventing tenants from paying a disproportionate share when the building is partially vacant.
In property operations, what is the purpose of a 'preventive maintenance program'?
Answer: Scheduling regular inspections and maintenance to extend asset life and reduce costly emergency repairs
A preventive maintenance program reduces capital expenditure by identifying and correcting minor issues before they become costly failures, extending the useful life of building systems.