A&D to Absorption Rate
A&D
See the Acquisition & Development Financing entry.
AAA Tenant
When it comes to for-lease commercial real estate, the preferred type of tenants are “Triple A” tenants. It’s not just that they have a good track record of paying their bills on time. AAA-rated commercial tenants are usually established and profitable businesses, as well.
Because they’re so desirable, however, AAA tenants usually receive the most favorable lease terms and (lowest) rents. Commercial property owners and developers rely on AAA tenants to anchor their projects and maximize their financing.
Abandonment
A property has been abandoned when the rightful lessee (tenant) or property owner surrenders ownership or possession of the subject property without a formal successor. With leasehold properties, a tenant abandons the property when they move out without informing the property owner or manager.
Similarly, property owners commit abandonment when they walk away from the property without transferring or conveying the property’s title or possession to another party. This becomes a typical occurrence with mortgage defaults and foreclosure, when property owners decide not to fight the foreclosure.
When a tenant abandons a leasehold (rental) property AND stops paying the rent, the landlord must follow applicable local laws when trying to reclaim rental units abandoned by the tenant. The landlord may be required to go through a formal lease termination process and even hang on to any of the personal properties left behind for a period of time.
When a property owner abandons a fee simple property — such as during a foreclosure — the mortgagee (lender) or other property claimant must follow the terms of the mortgage and applicable state laws to formally claim the property.
For example, if the borrower abandons a property during a foreclosure without formally handing over the property to the lender, the lender must still complete the foreclosure process in order to take full ownership and control of the subject property.
Abatement
An abatement is technically a decrease or reduction. In real estate, rents and property taxes are common expenses many people try to abate.
With regard to legal nuisances, abatement refers the reduction or removal of that nuisance. An abatement of nuisance is a court suit and order to terminate a nuisance. However, such abatement orders are only issued for illegal or improper nuisances.
Above Building Standard
Additional work, upgrades and redesign that a property owner or developer provides to incoming tenants—in excess of the standard space or shell—are considered above building standard.
Such upgrades are usually to serve the special needs of the tenant. With newly constructed properties, this may be part of or in excess of the allowance over the building shell.
For example, a dentist’s office may need additional plumbing and electricity for the necessary equipment. Similarly, a high-tech or web commerce company may require high-end Internet connections.
Absentee Owner
Absentee owners don’t reside in or actively manage the real property they own.
This can be a problem because absentee ownership often contributes to rapid disrepair — unless the owner arranges for a property manager to maintain the property.
Absolute Auction
Absolute auctions require the seller to accept any high bid, even if it falls below the seller’s intended minimum.
Some absolute auction agreements do come with a buy-out option, which allows the seller to reject the current high bid (usually after paying a fee to the bidder and the auctioneer). Compare with the Auction With Reserve entry.
Absorption Cooling System
One of the two primary HVAC methods is through an absorption cooling system; the other is a compressor cooling system. Both use a refrigerant that boils at a very low temperature. As it boils and evaporates, the refrigerant removes heat from water, which is then used to chill the building space.
They differ in the refrigerant they use and the way the refrigerant is converted back to liquid (from gas). Traditional absorption systems typically use ammonia, while commercial HVAC units use a lithium bromide solution.
The absorption system uses either a direct heat source (such as a gas burner) or an indirect source (such as recaptured waste heat from a water heater or gas turbine). By contrast, the compression system relies on an electric-powered compressor, which can be louder and costlier. As such, absorption systems are often preferred when electricity is unreliable or expensive.
Absorption Rate
The absorption rate is an effective barometer of the current real estate market. It lets smart investors and developers know whether the market is about to go up or go down.
Specifically, the absorption rate refers to how long it takes for developers, investors and property owners to lease or market a newly developed, built or produced property. Such new spaces add to the supply; the absorption rate refers to how strong the demand is for that new supply of real estate.
Many investors look to the absorption rate trendline to get an idea of where the market is headed. When the absorption rate is trending downwards, that usually means that the supply is decreasing and the price is increasing. When the absorption rate is trending higher, that usually means that the local market has too much supply, which can have a downward effect on prices.
