Glossary

A-C

D-F

G-K

L-P

Q-T

U-Z

A-C

Abandonment

The voluntary relinquishment of a property or an interest in a property, where there is no intention of resuming possession of the property or of keeping rights in it.

Adjusted EPS

Earnings per share on revenue profits and adjusted to exclude deferred tax associated with investment properties.

Accrued interest

Adjustment made to bond prices to allow for the fact that interest is paid at set intervals but earned on a daily basis.

Accumulation units

Units which do not pay income but roll the income into the value of the units.

Adjusted NAV per share

Net asset value per share adjusted to add back deferred tax associated with investment property, together with any accounting deficits in joint ventures that do not represent actual liabilities.

Adjusted figures

Reported amount adjusted to exclude the results of property sales and bid costs.

Alternative investments

Any investment other than equities and fixed income, such as property, private equity and hedge funds.

Anchor tenant(s)

One or more large shops or supermarkets introduced to a shopping centre in key positions to attract shoppers into the centre in order to encourage other retailers to lease units.

Annual charge

A fund's annual fee, calculated on a daily basis, which covers the cost of running the fund.

Annualised net rents

Gross rents plus, where rent reviews are outstanding, any increases to estimated rental value (as determined by external valuers), less any ground rents payable under head leases.

Annuity

A regular stream of payments made to an individual for a specified time period, such as a stream of payments made to a policyholder from an insurance company at retirement, or the payment of interest made to a bondholder.

Appraisal

The assessment of the likely future performance of an investment which can be used to determine value or to assess risk.

Appreciation

Increase in the value of an asset.

APUT

Authorised Property Unit Trust.

Ask price

Price at which a market maker will sell stock. Also known as the offer price.

Asset allocation

The proportion of investment or assets placed in various geographic regions, industry sectors or types of security.

Assets

Any possession that has a value. The investments within a fund are assets; they may include shares, bonds and/or cash.

Authorised Unit Trust

UK-based unit trust that has applied to FSA for this status, enabling the units to be marketed to all types of customers. FSA rules regulate the assets in which an authorised unit trust is permitted to invest.

Average maturity

A statistic relating to bond funds which provides the weighted-average maturity of all the bonds within a fund. The maturity of a bond is the time at which the principal of a bond is repayable and it ceases to exist.

Average unexpired lease term

Excludes short term lettings such as car parks and advertising hoardings, residential leases and long ground leases.

Basis point (bp)

One hundredth of a percentage point, eg 2bp = 0.02%.

Bears

City dealers who think investments are going to fall, so they sell their investments in the hope of buying them back at a lower price. A bear market is a period of falling stock prices, over a period of time.

Benchmark

A target against which investment fund performance can be measured. A benchmark, usually stipulated at the outset of an investment process, can be a stockmarket index or a peer group.

Bid/offer spread

The difference between the buying and selling price of shares and units, largely attributable to the initial charge.

Bid price

The price at which units or shares may be bought or sold.

Bonds

Loan agreements with a company or a government where there is an arranged repayment to the investor when the loan matures and the investor receives interest throughout the life of the loan. Such bonds can be bought and sold.

Bonus issue

Free shares issued to a company's existing shareholders. No money changes hands and the share price falls pro rata. Also known as a scrip issue.

Book value

The amount at which assets and liabilities are held in the accounting records.

Bottom-up approach

A method of portfolio construction determined primarily by stock selection. Fund managers will assess the quality and future prospects of a stock, analysing factors such as the strength of management, market share, pricing power, which will all determine future earnings growth.

Break clause

A clause in a lease that gives the landlord and/or the tenant a right, in specified circumstances, to terminate the lease before its normal expiry date.

Brownfield site

A site which has previously been developed and is available for redevelopment. Such sites may be contaminated.

Bulls

City dealers who believe prices will rise, so they buy securities in the hope of selling them at a higher price than they paid. A bull market is any market in which prices are in an upward trend.

Call option

Option providing its holder with the right to buy an investment at a future date at a price agreed now.

Capital allowance

One of several kinds of benefit available to an owner against income tax or corporation tax for capital expenditure on certain qualifying buildings.

Capitalisation

The value of an asset assessed in relation to the expected future income (rental) stream.

Capital gain

Arises when an investment is sold at a higher price than originally paid.

Capital Gains Tax

The tax that is payable on the profits made on the disposal of most investment products.

Capital growth

A fund seeking capital growth aims to maximise the value of the capital sum invested rather than producing any income.

Capital value

The value of an asset, freehold or leasehold, as distinct from its annual or periodic (rental) value.

Chartered surveyor

A surveyor who is a qualified member of the Royal Institution of Chartered Surveyors, either a fellow (FRICS) or a member (MRICS).

Clean price

Bond price excluding accrued interest.

Closed-ended funds

Investment funds that issue a fixed number of shares, so to buy the shares there usually must also be someone wishing to sell shares.

Collective investment scheme

An investment vehicle, such as a unit trust, that pools the investments of many investors in order to create a well diversified portfolio.

Contingent tax liability

In a property context, usually refer to the unprovided further taxation which would become payable if a company's properties were sold at their current market value (including the valuation surplus on trading and development properties, net of any tax losses which had not been recognised in the balance sheet).

Convertible bond

A bond issued by a company that can be exchanged for a set number of shares, usually of the issuing corporation, at a pre-stated conversion price.

Corporate bond

Debt obligations issued by corporations as an alternative to offering equity ownership by issuing stock. Like most municipal and Treasury bonds, most corporate bonds pay semi-annual interest and promise to return their principal when they mature. Maturities range from one to 30 years.

Coupon

The periodic interest payment made to the bond holders during the life of the bond.

Coupon rate

The percentage rate of interest payable on a bond/note or other fixed income security. The figure shown is always the pre-tax (gross) rate.

Creation price

A term used in the UK to refer to the cost of creating a unit, based on buying the underlying securities within a unit trust. The actual buying (offer) price is usually the creation price plus the initial charge.

Covenant

A subjective assessment of the character and quality of a tenant in terms of being able and willing to comply with the terms and conditions of the lease.

Currency hedging

The use of currency futures and options transactions to protect the value of investments and cash against fluctuations in exchange rates, relative to the currency in which the fund is denominated

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D-F

Depreciation

Decrease in the value of property caused by obsolescence, deterioration in its condition, or other factors.

Development

Making any material change in the use of any buildings or other land, not including internal alterations that do not materially affect its appearance.

Development construction cost

The total cost of construction of a project to completion, excluding site values and finance costs.

Development pipeline

Typically the combination of a development programme, together with proposed schemes that are not yet included in the development programme but are more likely to proceed than not.

Development programme

A schedule of major development schemes comprising projects that are completed but not yet fully let, also developments on site and committed developments.

Development surplus

Excess of latest valuation over the total development cost.

Dilution

Effect on earnings per share and book value per share if all convertible securities were converted or all warrants or stock options were exercised.

Discounted cash flow

An investment appraisal technique which takes account of the time value of money by assessing the present value of future income and expenditure. It is often used in valuing an investment or to show the viability of a project.

Distribution

The income or capital gain made by a mutual fund that is paid to the fund's investors.

Distribution units

Units of a UK unit trust which enable the unit holder to receive income distributions. Income distributions from these units are paid out to unit holders on set dates, usually monthly, quarterly, semi-annually or annually.

Distribution warehousing

Premises used by (mainly) retail companies for distributing goods, usually nearer in the chain of movement to the ultimate user of the goods (eg the shop).

Direct property fund

A fund that invests 100% in direct commercial property and holds no property shares, REITs, other equities or other indirect holdings. Authorised Property Unit Trusts can invest 100% in direct properties.

Dividend

The income received from a company by a shareholder; a share of the profits made by a company that it has chosen to distribute to its shareholders.

Dividend reinvestment

Dividends that are reinvested in the security that generated them.

Dividend yield

A ratio that represents the amount of income a company pays in dividends compared with its current share price, calculated by dividing the annual dividend per share of a company by its current share price. The ratio does not take into account capital gains or losses associated with the stock.

Dividend cover

Number of times dividend charge in the profit and loss account is covered by profit after tax.

Earnings per share (EPS)

Profit after taxation divided by the weighted average number of shares in issue during the year.

Estimated rental value (or rental value) (ERV)

The rent that a property might reasonably be able to command in the open market at a given time, subject to the terms of the relevant lease.

Equivalent yield

The internal rate of return from a property, making allowance for increases in rent to market levels, voids and expenditure, but making no allowance for any increase in the market rent.

Financial Services Authority (FSA)

The main financial services regulatory body in the United Kingdom. FSA is the designated agency under the Financial Services and Markets Act 2000 and the regulator of exchanges, clearing houses, recognised professional bodies, banks, wholesale money markets and certain investment businesses.

Fixed income securities

Debt securities or IOUs for borrowed money such as bonds. They obligate the borrower to pay the owner interest during the term of the loan and to return the principal, or face value, when the loan matures.

Flat yield

The most commonly used yield calculation, which divides the annual income paid by the market price.

Footfall

The number of pedestrians passing through a building or area, eg a shopping centre.

Freehold

The absolute ownership of land without burdens, encumbrances or which is overshadowed by a higher form of ownership. See feuhold below.

FTSE/EPRA NAREIT

An index created to track the performance of listed real estate companies and REITs worldwide which allows investors to take advantage of the increasing trend towards real estate investment trust (REIT) structures in Europe.

Feuhold

The Scottish equivalent of freehold.

Fund of funds

A fund that simultaneously invests in several funds, thereby reducing the performance risk inherent in any one fund. The manager of the fund selects which funds to invest in, but not the individual stocks.

Fund size

The total value of assets under management in a fund.

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G-K

Gearing

The use of debt financing. The debts of a company expressed as a percentage of its equity capital. If a fund is geared it means that it has the ability to borrow money and therefore take advantage of greater investment opportunities.

Gilt edged security

Gilts are bonds issued by the UK Government which pay a fixed rate of interest for a set period of time. At the time of purchasing the bonds the purchaser knows the income that will be received over the life of the bond.

Greenfield site

Land which is, or is potentially, available for development but which has not been developed before, eg agricultural land.

Gross fund

A fund which does not pay corporation tax or any other type of tax on income or capital gains, eg pension funds.

Ground lease

A long lease granted at a ground rent, ie a rent disregarding the value of any buildings or other improvements of the land but reflecting any right to develop the land.

Ground rent

Rent paid for vacant land which is suitable for development.

Growth fund

A fund whose main objective is capital appreciation. Contrasts with an income fund where the main aim is to provide higher than average income in the form of a dividend payment.

Head rent

The rent paid by a head lessee to the freeholder.

Hedging

A transaction that reduces the risk of an investment, or protects an existing position or commitment, by using one type of investment (eg a future or option) to cover adverse market movements.

Income shares

Some investment trusts, called split-capital investment trusts, issue more than one type of share. The simplest 'split' is divided between capital and income shares. Income shares receive all the income generated by the whole fund but do not benefit from any increase in the value of the shares.

Index

The indicator of the value of a sector of shares in a market. The most common index in the UK is the FTSE 100 which is an indication of the performance of the top 100 (by market capitalisation) UK companies' shares.

Index funds

Unit trusts which track the performance of an index. The value of the fund is linked to the chosen index so that if the index rises, so will the value of the fund. Conversely, if the index falls so will the value of the fund. They are also known as tracker funds.

Indirect property fund

A fund that invests in indirect property vehicles, such as property shares, property investment companies, REITs, limited partnerships or property unit trusts, as opposed to holding direct commercial property in its portfolio (direct property fund).

Industrial sector (property)

Sector of commercial property that is made up of distribution warehouses and industrial units or multi-tenanted estates.

Initial public offering (IPO)

A company's first sale of stock to the public.

Initial yield

The initial net rent at date of purchase divided by the gross purchase price, including costs of purchase.

Investment property

Any property purchased with the primary intention of retaining it and enjoying the total return (rental income and appreciation in capital value) over the life of the interest acquired.

Investment trust

A company whose sole function is to invest in the shares of other companies.

Issue

To create securities and exchange them for cash or other assets, or the securities created from a particular act of issuance.

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L-P

Landlord

The owner of an interest in land who, in consideration of rents, grants the right to exclusive possession of that land to another person for a specific period by way of a lease or tenancy.

Lease

The grant of a right to the exclusive possession of land for a definite period (which is less than that held by the grantor), or the document granting the right.

Limited partner

In a limited partnership, a partner who has limited liability and a passive role in its management.

Liquidity

In a property context, this refers to the ability to readily convert an asset or investment to cash by sale at a fair price. Also used to describe the amount of cash held in a portfolio.

Liquidity risk

The possibility that an investor may not be able to find a buyer within a reasonable time at a price that reasonably reflects the theoretical value of the asset.

Listed firm/company

A company whose stock trades on a stock exchange (also called a quoted company).

Listed building

A building of special architectural or historical interest which the owner may not alter, extend or demolish without listed building consent.

Market capitalisation

The total value of a company's stock; a measure of corporate size.

Market indicators

A variety of indices that give an indication of the overall direction and strength of the market.

Market maker

A market maker is someone appointed by a company to deal in its shares. The market maker must offer the shares, is obliged to quote two-way prices in them (ie buy and sell prices) and must deal in them at the quoted prices throughout the mandatory quote period.

Market value

The estimated amount for which a property should be exchanged on the date of valuation between a willing buyer and a willing seller in an arm's length transaction.

Marriage value

Latent value which is or would be released by the merger of two or more interests in land (eg two interests in the same property may have a greater value than the sum of their individual values).

Mid price of shares

The value mid way between the selling (bid) price and the buying (offer) price of shares.

Net absorption

The decrease in the amount of space available over a particular period of time, taking account of both the amount of space let and the amount of new space coming on to the market (eg through development completions and vacated space).

Net asset value (NAV)

The total assets of a company less all its liabilities including loan capital, and preference shares. NAV is usually expressed on a per share basis.

Net asset value (NAV) per share

Equity shareholders' funds divided by the number of shares in issue at the period end.

Net rent

The income from a property after deduction of all outgoings, including repairs, insurance and management costs, but excluding taxes payable by the recipient.

Obsolescence

The factors which affect the economic life of land and buildings. Types of obsolescence include economic, environmental, functional, configurative and strategic obsolescence.

Open ended

Collective investment schemes in which the number of units in the fund varies from day to day according to the number of people wishing to buy or sell their holding in the fund.

Open ended investment company (OEIC)

A UK open-ended collective investment scheme with variable capital, which is structured as a company rather than as a unit trust. They were launched in the UK in 1997.

Offer price

The price at which units may be bought.

Over-rented

A property that is let at a rent which is greater than the current open market value (see estimated rental value).

Passing rent

The rent which is currently payable under the terms of a lease or tenancy agreement.

Personal allowance

The amount of income that each person is allowed to earn which is not liable to income tax. The amount differs according to whether a person is married or single and according to their age.

Portfolio

The combination or spread of investments held by an investor or by a fund.

Pre-let

A legally enforceable agreement for letting to take effect at a future date, upon completion of a development that is proposed or under construction at the time of the agreement.

Price/earnings (P/E) ratio

The share price of a company divided by its earnings per share. The price earning ratio is usually used for comparing companies' investment potential.

Prime property

A property investment regarded as the best in its class and location.

Prime yield

The current yield used in the valuation of property let at full market value and which is of the best physical quality, in the best location and with the best tenants covenant and contemporary lease terms.

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Q-T

Quartile ranking

Fund rankings broken down into four sections, each of 25%. For example, in a sector of 12 funds, the top three performing funds would be classed as first quartile, the bottom three as fourth quartile, etc.

Rack rent

The rent that represents the full open market annual value of a holding.

Redemption yield

The total annualised return on owning a fixed interest security, made up of income plus any gain or minus any loss to redemption.

Redevelopment

Development of land which entails or follows the removal of all or most of the already existing buildings or structures.

Regulated unit trusts

Those trusts that can be marketed freely in the UK. Any trusts based in the UK that are authorised by the FSA; overseas trusts have to be recognised by the FSA.

REITs (real estate investment trusts)

A method of indirect property investment, where distributions are made tax free, and which are taxed according to the tax status of the shareholders. Due to be introduced to the UK in January 2007.

Rent review

A provision in a lease whereby the amount of the rent is reconsidered at stated intervals (often every five years). The method and procedure for reviewing the rent are outlined in the lease.

Rental growth

The rate of growth, over a specified period, of the estimated rental value (ERV) of a property.

Rental value

See estimated rental value.

Retail price index (RPI)

Main measure of inflation, used for calculating indexation for capital gains tax and on index-linked gilts and National Savings products.

Retail sector (property)

Sector of commercial property including high street shops, shopping centres and retail warehouses.

Retail warehouse

A retail store selling non-food goods occupying a warehouse. These are usually situated out of town, and are either solus (single) units or comprise several units in an open format, not under one roof.

Return

The amount by which an investment may change due to a combination of capital growth and/or interest dividend income. This is normally expressed as a percentage.

Revenue profit

Profit before tax, excluding the impact of exceptional costs or profits including bid costs, FRS3 profits, interest charges on termination of financial instruments and group reorganisation costs.

Reversion

The process by which a right in a property transferred by a deed of trust, mortgage or pledge, etc., is returned to the original owner after the interest held by others on the property is exhausted.

Reversionary yield

In a valuation for a term and reversion, the discount rate applied to the reversionary income.

Reversionary rent/income

A change in income that which will arise following a rent review or renewal of a lease or re-letting of a property.

Rights issues

Further issue of shares by an existing company to raise funds. Shares are offered to existing shareholders who can sell the right on to other people.

Risk

Degree of uncertainty of return on an asset.

Risk/return factor

The relationship between an investment's growth potential and its exposure to loss.

Secondary units (property)

Properties that are not deemed to be prime, either because of poor location, configuration or tenant.

Sector

The category in which funds or companies are grouped.

Securities

Another name for stocks and shares; also applies to any approved or registered financial instrument, such as unit trusts.

Securitisation

A financing technique where the income stream of an asset is used to service the interest and principal repayments on the relevant debt instruments.

Speculative development

The construction of a building or buildings where there is no known buyer or tenant at the outset; the scheme is offered for sale or to let, usually at or near completion.

Tenant

An individual or corporate body holding a tenancy.

Top-down approach

Investment management technique that bases portfolio construction on macroeconomic views rather than stock specific views. Top-down factors will apply to both country and sector allocation.

Total development cost

All capital expenditure on a project including the opening book value of the property on commencement of development, together with all finance costs.

Total investment property return

Valuation surplus, profit or loss on property sales and net rental income expressed as a percentage of opening book value of the investment property portfolio.

Total return

The growth in value of a share holding over a specified period, assuming that dividends are re-invested to buy additional units of the stock.

True equivalent yield

The internal rate of return from an investment property reflecting reversions to current market rent, allowing for items such as voids and expenditure but disregarding potential changes in market rent.

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U-Z

Umbrella funds

Unitised collective investment funds, usually domiciled offshore but increasingly adopted as a structure for UK OEICs. They offer investors a choice of sub funds and share classes within one vehicle, and often allow free switching between each sub fund.

Unauthorised unit trust

A unit trust that does not comply with FSA's criteria to make it authorised and that can only be marketed to sophisticated investors.

Underlying profit before tax

The profit on ordinary activities before taxation, after excluding trading profits, profits on disposal of fixed assets, one-off gains relating to other investments and exceptional items.

Unit trust

A system where money from a number of investors is pooled together and invested collectively in investments such as shares and bonds. Each investor owns a unit (or a number of them), the value of which relates to the value of those items owned by the fund.

Unoccupied rate (or empty rate)

The rate chargeable by an authority on empty non-domestic properties, presently limited to a maximum of 50% of the occupied rate and starting three months after the property becomes empty.

Upward only rent review

A rent review where the rent payable following a review date is the greater of the rent payable immediately before the review and the amount calculated upon review under the terms of the lease (ie the rent can not reduce).

Vacancy rate

The percentage of a portfolio which is vacant, calculated as the total of rental value of the vacant property/properties divided by the total rental value of the portfolio.

Venture capital trusts

Investment trusts, whose shares are often traded on the stock market, which are set up as a way to help new enterprising schemes and companies to get started, or established ones to expand (these are known as unquoted companies). Due to the uncertainty involved when investing in unquoted companies, the returns can be substantial but so can the losses.

Volatility

A measurement of how much variability there may be in the prices of an underlying security over a specified period of time.

Warrant

A type of security that gives the owner the right, but not the obligation, to buy new company shares at an agreed price at a future date. Warrants are traded on the Stock Exchange and tend to have a more volatile price than company shares. Until warrants are exercised into shares, they do not entitle the holder to receive dividends, or attend or vote at the company's general meetings.

Yield

The amount of income generated by a fund's investments in relation to the price. It is usually quoted gross (ie before tax and after charges).

Yield compression

Another term for yield hardening (see below).

Yield curve

The relationship between individual yields and maturities for a given issuer's securities, depicted graphically.

Yield hardening/softening

The movement of yields (usually, but not always, referring to equivalent yields) over a period of time. A hardening of yields refers to yields falling (ie capital values are rising) while a softening refers to yields rising (ie capital values are falling).

Yields moving out

Another name for yield softening.

Yield to maturity

The internal rate of return of a series of cash flows from a given time until maturity.

Zero dividend preference share

Share in a split capital trust that pre-determines the rate of growth and pays no dividend.

Zoning method/Zone A

A method of analysing the rental value of retail space by dividing into strips of equal depth parallel with the frontage. The most valuable area of a shop is at the front and each successive zone is ‘halved back' in value. Zone A is the unit of comparison for rental purposes attributed to the front zone.

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