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Chapter 17: Sources of Commercial Debt 7 Equity Capital

Terms in this set (13)

General partnership
an ownership form characterized by multiple owners, unlimited liability for each equity holder, and flow through taxation of both taxable income and cash distributions
Limited partnership
a partnership in which one party assumes unlimited liability in exchange for control of all material decision making; all parties involved benefit from flow-through income and taxation; that is, partnership is not taxed
C corporation
corporate ownership structure that provides limited liability, but suffers from double taxation and does not enable losses to flow through to investors for current use
S corporation
corporate ownership structure that is a federal tax election made with the unanimous consent of the shareholders; possess the same limited liability benefits for its shareholders as do C-crops but it's not a separate taxable entity
Limited liability company
a hybrid form of ownership that combines the corporate characteristics of limited liability with the tax characteristics of a partnership
Intermediaries
third party specialists who use their expertise and knowledge to invest and manage funds on behalf of clients
Pension funds
retirement savings accounts that now represent a major source of equity capital in commercial real estate markets.
Commingled real estate funds
a collection of investment capital from various pension funds that are pooled by an investment advisor/fund manager to purchase commercial real estate properties
Real estate private equity funds
have a finite life, typically 7-10 years, with an option for the fund manager or sponsor to extend the life by an additional year or two; the fund manager is forced to eventually dispose of the assets and return the investors' capital; typically have meaningful side-by-side investment by the fund sponsor/manager, aligning the manager's economic outcomes with those of the investors; fee structures are usually richer and more complex, allowing more features that further align interests
Real estate investment trusts
a corporation or trust that uses the pooled capital of many investors to purchase and manage income property and/or mortgage loans
Umbrella partnership REIT
an organized structure in which a publicly traded REIT owns a fractional interest in an operating partnership, which in turn, owns all or part of individual property partnerships
Funds from operations
net income, plus tax depreciation, plus amortization of leasing commissions and tenant improvements; considered a better measure of a REIT's cash flow than accounting income
Net asset value
equal to total market value of a REIT's, less mortgages and other debt
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