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APPENDIX C Glossary A Abatement: Often and commonly referred to as free rent or early occupancy, may occur either outside or in addition to the primary term of the lease. Above Building Standard: Upgraded finishes and specialized design necessary to accommo- date a tenant's requirements. Absorption: The rate, expressed as a percentage, at which available space in the marketplace is leased during a predetermined period of time. Also referred to as market absorption. Accrued Interest: Interest that is earned but not paid, adding to the amount owed. Ad Valorem: Means "according to value." This is a tax imposed on the value of property (gen- eral property tax) and is typically based on the local government's valuation of the property. Add-on Factor: Often referred to as the Loss Factor or Rentable/Usable (R/U) Factor. Repre- sents the tenant's pro rata share of the building common areas, such as lobbies, public corridors, and restrooms. It is usually expressed as a percentage that can then be applied to the usable square footage to determine the rentable square footage upon which the tenant will pay rent. Air (or Aircraft) Operations Area (AOA): Restricted ground areas of the airport, inclusive of taxiways, runways, and aircraft parking areas contained within the airport's security fencing and/or boundary. Aircraft Parking Line Limit: A line established by the airport sponsor beyond which no part of a parked aircraft should protrude. Airport Environ: The area surrounding an airport that is considered to be directly affected by the presence, and operation, of that airport. Airport Layout Plan (ALP): A scale drawing of existing and proposed airport facilities, their location on an airport, and the pertinent clearance and dimensional information required to demonstrate conformance with applicable standards. Airport Master Plan: A long-range plan for development of an airport, including descriptions of the data and alternative analyses on which the plan is based. Airport Sponsor: A public agency or tax-supported organization, such as an airport authority, city, county, state or federal government, that is authorized to own and operate an airport, to obtain property interests, to obtain funds, and to be legally, financially, and otherwise able to meet all applicable requirements of the current laws and regulations. Allowance Over Building Shell: Most often used in a yet-to-be constructed property, the ten- ant has a blank canvas upon which to customize the interior finishes to its specifications. This 106

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Glossary 107 arrangement caps the landlord's expenditure at a fixed dollar amount over the negotiated price of the base building shell. This arrangement is most successful when both parties agree on a detailed definition of what construction will be included, and at what price. Amortization: The repayment of principal, through scheduled mortgage payments. The scheduled payment, less the interest, equals amortization. Appraisal: An estimate of opinion and value based upon a factual analysis of a property, by a qualified professional. Approach Protection Easement: A form of easement that conveys all of the rights of an avi- gation easement and limits the type of development and uses of the property. Apron: The portion of the AOA set aside for parking, loading, and unloading aircraft. "As-Is" Condition: The acceptance, by the tenant, of the existing condition of the premises at the time the lease is consummated. This would include any physical defects. Assessment: A fee imposed on property, usually to pay for public improvements such as water, sewers, and streets, made by a municipality or improvement district. Assignment: The transfer of ownership of an asset from one person to another. Attorn: To agree to be a tenant to a new owner or landlord of the same property. To agree to recognize a new owner of property and to pay the new landlord rent. In a lease, when the tenant agrees to attorn to the purchaser, the landlord is given the power to subordinate the tenant's interest to any first mortgage or deed of trust lien subsequently placed upon the leased premises. Avigation Easement: A type of easement that typically conveys the following rights: A right-of-way for free and unobstructed passage of aircraft through the airspace over the property, at any altitude above a surface specified in the easement (usually set in accordance with FAR Part 77 criteria). A right to subject the property to noise, vibrations, fumes, dust, and fuel particle emissions associated with normal airport activity. A right to prohibit the erection or growth of any structure, tree, or other object that would enter the acquired airspace. A right-of-entry onto the property, with proper advance notice, for the purpose of removing, marking, or lighting any structure or other object that enters the acquired airspace. A right to prohibit electrical interference, glare, misleading lights, visual impairments, and other hazards to aircraft flight from being created on the property. B Base Rent: A set amount, used as a minimum rent in a lease, with provisions for increasing the rent over the term of the lease. Base Year: Actual taxes and operating expenses are computed for a specified base year, most often the year in which the lease commences. Building Classifications: Building classifications in most markets refer to Class "A," "B," "C," and sometimes "D" properties. While the rating assigned to a particular building is very subjec- tive, Class "A" properties are typically newer buildings with superior construction and finish, in excellent locations with easy access, attractive to credit tenants, and that offer a multitude of amenities such as on-site management or covered parking. These buildings, of course, command the highest rental rates. As the "Class" of the building decreases (to Class "B," "C," or "D") one component or another (such as age, location, or construction of the building) changes.

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108 Guidebook for Developing and Leasing Airport Property Building Code: Sets forth the requirements for protection of public health, safety, and gen- eral welfare, as related to the construction and occupancy of buildings and structures. Building Code establishes minimum acceptable conditions for matters found to be in need of regulation. Example topics include exits, fire protection, structural design, sanitary facilities, lighting, and ventilation. Sound insulation may also be a topic of Building Code. Building Standard: A list of construction materials and finishes that represents what the ten- ant-improvement (finish) allowance/work letter is designed to cover, while also serving to estab- lish the landlord's minimum quality standards with respect to tenant finish improvements within the building. Examples of standard building items are type and style of doors, lineal feet of partitions, quantity of lights, and quality of floor covering. Building Standard Plus Allowance: The landlord lists, in detail, the building standard materi- als and costs necessary to make the premises suitable for occupancy. A negotiated allowance is then provided for the tenant to customize or upgrade materials. Building or "Core" Factor: Represents the percentage of net-rentable square feet devoted to the building's common areas (such as lobbies, restrooms, and corridors). This factor can be com- puted for an entire building or a single floor of a building. Also known as a loss factor or rentable/usable (R/U) factor, it is calculated by dividing the rentable square footage by the usable square footage. Building Restriction Line: A line established with respect to the runway centerline, to assure that structures will not project above the imaginary surfaces required by Federal Aviation Reg- ulations, Part 77 (FAR Part 77). Build-to-Suit: An approach taken to lease space by a property owner whereby a new building is designed and constructed per the tenant's specifications. C Capital Lease: A lease that is classified by a lessee as a purchase and by the lessor as a sale or financing. It must meet at least one of the following criteria: (a) the lessor transfers ownership to the lessee at the end of the lease term; (b) the lease contains an option to purchase the asset at a discounted price; (c) the lease term is equal to 75% or more of the estimated economic life of the property; or (d) the present value of minimum lease rental payments is equal to 90% or more of the fair market value of the leased asset, less related investment tax credits retained by the lessor. Capital Recovery Rate: The rate at which invested capital is regained over the life of an investment. Capitalization: A method of determining the value of real property, by considering net oper- ating income divided by a predetermined annual rate of return. Capitalization Rate: The rate that is considered a reasonable return on investment (on the basis of both the investor's alternative investment possibilities and the risk of the investment). Used to determine and value real property through the capitalization process. This terminology also refers to a "free and clear return." Capitalization Ratio: Ratio that expresses each component of a firm's capital (common stock or ordinary share, preferred stock or preference shares, other equities, and debt) as a percentage of its total capitalization. These ratios are used in analyzing the firm's capital structure.

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Glossary 109 Carrying Charges: Costs incidental to property ownership, other than interest, such as taxes, insurance costs, and maintenance expenses that must be absorbed by the landlord during the initial lease-up of a building and thereafter during periods of vacancy. Certificate of Occupancy: A document presented by a local government agency or building department certifying that a building and/or the leased premises (tenant's space), has been sat- isfactorily inspected and is suitable for occupancy. Common Area: There are two components of the term "common area." If referred to in asso- ciation with the Rentable/Usable or Load Factor calculation, the common areas are those areas within a building that are available for common use by all tenants and their invitees, such as lob- bies, corridors, and restrooms. The cost of maintaining parking facilities, sidewalks, landscaped areas, public toilets, truck, and service facilities is also included in the term "common area" when calculating the tenant's pro rata share of building operating expenses. Common Area Maintenance (CAM): The amount of Additional Rent charged to the tenant, in addition to the Base Rent, to maintain the common areas of the property shared by the tenants, and from which all tenants benefit. Examples include snow removal, outdoor lighting, parking lot sweeping, insurance, and property taxes. Most often, this does not include any capital improvements that are made to the property. Comparables: Lease rates and terms of properties similar in size, construction quality, age, and use, typically located within the same market, and used as comparison properties to determine the fair market lease rate for another property with similar characteristics. Compatibility Plan: A plan that sets forth policies for promoting compatibility between airports and the land uses that surround them. Compatibility Plans are often referred to as Comprehensive Land Use Plans. Condemnation: The process of the taking of private property, without the consent of the owner, by a governmental agency, for public use through the power of eminent domain. Conforming Use: Structures, trees, objects of natural growth, and/or use of land that complies with all applicable provisions of the applicable Zoning Ordinances, to include any amendment(s) to the ordinances. Consumer Price Index (CPI): Measures inflation by calculating the change in price of a "fixed market basket of goods and services," purchased by a specified population during a "base" period of time. CPI bears little direct relationship to actual costs of building operation or the value of real estate, but is commonly used to increase the base rental periodically, as a means of protect- ing the landlord's rental stream against inflation, in lieu of the landlord undertaking the record keeping necessary to determine the true change in operating expenses. Contiguous Space: (1) Multiple suites/spaces within the same building, and on the same floor, which can be combined and rented to a single tenant; (2) A block of space located on multiple adjoining floors in a building, if a tenant were to lease floors six through 12 in a building for example. Contract Documents: A complete set of design plans and specifications required for the con- struction of a building, or of a building's interior improvements. Working drawings include spe- cific directions for the contractor for which a project is to be constructed. Conveyance: Refers to the transfer of title to property between parties by deed. Cost Approach: A method of appraising real property whereby the value of a structure is cal- culated using current costs of construction.

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110 Guidebook for Developing and Leasing Airport Property Covenant: A written agreement inserted into deeds or other legal instruments stipulating per- formance or non-performance of certain acts, or uses or nonuse, of a property and/or land. D Deed: A legal instrument transferring title to real property from the seller to the buyer upon the sale of property. Default: The general failure to perform a legal or contractual duty or to discharge an obliga- tion when due. Some specific examples are (1) failure to make a payment of rent when due or (2) the breach or failure to perform any of the terms of a lease agreement. Demising Walls: The partition wall that separates one tenant's space from another, or from the building's common areas such as public corridors. Depreciation: Spreading out the cost of a capital asset over its estimated useful life or a decrease in the usefulness, and therefore value, of real property improvements or other assets caused by deterioration or obsolescence. Development Impact Fee: Fees placed on the development of land, or conditions required for the approval of a development project, such as the conveyance of certain land or money to spe- cific public uses. Development Impact Fees are typically justified as an offset to the future impact that the development will have on existing infrastructure. Distraint: The act of seizing personal property, based on the rights and interest the landlord has in the property of a tenant in default. Dollar Stop: An agreed dollar amount of taxes and operating expense (expressed for the build- ing as a whole or on a square foot basis) over which the tenant will pay its pro rata share of increases. This terminology may be applied to specific expenses such as property taxes or insurances. E Earnest Money: The monetary advance, by a buyer, of a portion of the purchase price in a real estate transaction, to indicate the intention and ability of the buyer to carry out the contract. Easement: A right of use over the property of another, created by grant, reservation, agree- ment, prescription, or necessary implication. An easement is typically granted either for the ben- efit of adjoining land ("appurtenant"), such as the right to cross A to get to B, or for the benefit of a specific individual ("in gross"), such as a public utility easement. Economic Feasibility: A building or project's feasibility in terms of costs and revenue, with excess revenue establishing the degree of viability. Economic Rent: The market rental value of a property at a given point in time, even though the actual rent may be different. Effective Rent: The actual rental rate to be achieved by the landlord after deducting the value of concessions from the base rental rate paid by a tenant, usually expressed as an average rate over the term of the lease. Efficiency Factor: Represents the percentage of Net Rentable Square Feet devoted to the build- ing's common areas (such as lobbies, restrooms, and corridors). This factor can be computed for an entire building or a single floor of a building. Efficiency Factor is also known as a Core

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Glossary 111 Factor or Rentable/Usable (R/U) Factor, calculated by dividing the rentable square footage by the usable square footage. Egress: The right of a person to leave a property. Eminent Domain: A power of the state, a municipality, private person, or corporation author- ized to exercise functions of public character, to acquire private property for public use by con- demnation, in return for just compensation. Encroachment: The intrusion of a structure that extends, without permission, over a property line, an easement boundary, or a building setback line. Encumbrance: Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of title. Examples of encumbrances include claims, liens, charges, or liabilities attached to real property. Equity: The fair market value of an asset, less any outstanding indebtedness or other encum- brances. Escalation Clause: A clause in a lease that provides for increase in rent to reflect changes in expenses paid by the landlord, such as real estate taxes and operating costs. Escalation may be a fixed periodic increase, an increase tied to the Consumer Price Index, or adjustments based on changes in expenses paid by the landlord in relation to a dollar-stop or base-year reference. Escrow Agreement: A written agreement made between parties, setting forth basic obliga- tions, a description of the monies (or other things of value) to be deposited into escrow (a fidu- ciary third party for safe keeping), and instructions as to how and when the escrow agent is to dispose of the monies or things of value deposited. Estoppel Certificate: A signed statement, certifying certain facts are correct as of the date of the statement, which can be relied upon by a third party, including a prospective lender or purchaser. Expense Stop: An agreed dollar amount to be paid for taxes and operating expense, which can be expressed for either the building as a whole, or on a square foot basis, over which the tenant will pay its pro rata share of increases. This terminology may be applied to specific expenses such as property taxes or insurances. F Face Rental Rate: The "asking" rental rate published by the landlord. Fair Market Value (FMV): The sale price at which a property would change hands between a willing buyer and willing seller, neither being under any compulsion to buy or sell, and both hav- ing reasonable knowledge of the relevant facts. Federal Aviation Regulations (FAR) Part 77: Objects Affecting Navigable Airspace - Part 77 (a) establishes standards for determining obstructions in navigable airspace, (b) defines the requirements for notice to the FAA Administrator of certain proposed construction or alteration, (c) provides for aeronautical studies of obstructions to air navigation, to determine their effect on the safe and efficient use of the airspace, (d) provides for public hearings on the hazardous effect of proposed construction or alteration on air navigation, and (e) provides for establishing antenna farm areas. Fee Simple Land Acquisition (Purchase): The full purchase by the airport sponsor of land and improvements. The land is usually maintained for airport purposes or leased for uses that are compatible with airport operations. Alternatively, the airport sponsor can resell the land with

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112 Guidebook for Developing and Leasing Airport Property an avigation easement and deed restrictions that specify compatible land uses permitted. The resale option has the benefit of returning the land to the tax rolls. Federal Aviation Administration (FAA): The United States government agency responsible for ensuring the safe and efficient use of the nation's airports and airspace. Federal Aviation Regulation (FAR): Regulations established by the Federal Aviation Admin- istration (FAA) to govern the operation of aircraft, airways, and airmen. First Generation Space: Generally refers to new space that is currently available for lease and that has never before been occupied by a tenant. First Mortgage: A mortgage that has a first-priority claim against property, in the event the borrower defaults on the loan secured by property. First Refusal (Purchase): A lease clause giving a tenant the first opportunity to buy a prop- erty, at the same price and on the same terms and conditions as those contained in a third-party offer that the owner has expressed a willingness to accept. First Refusal (Adjacent Space): A lease clause giving a tenant the first opportunity to lease additional space that might become available on a property at the same price and on the same terms and conditions as those contained in a third-party offer that the owner has expressed a willingness to accept. This right is often restricted to specific areas of the building such as adja- cent suites or other suites on the same floor. Fixed-Base Operator (FBO): Provides aviation services to the general public, including, but not limited to, the sale of fuel and oil; aircraft sales, rental, maintenance, and repair; parking and tie-down or storage of aircraft; flight training; air taxi/charter operations; and specialty services such as instrument and avionics maintenance, painting, overhaul, aerial application, aerial photo- graphy, aerial hoists, and pipeline patrol. Flex Space: A building that provides its occupants with the flexibility to utilize space in a vari- ety of manners. The building is usually constructed in a manner that allows the ratio of finished space to unfinished space for uses such as manufacturing, laboratory, and warehouse distribu- tion to vary. To accomplish flexibility, the building is typically constructed so that overhead doors can be easily relocated, there is little or no common area, clear-span roof systems are incor- porated, the floors are load bearing, and the facility has high ceilings. Floor Area Ratio: The ratio of the gross square footage of a building to the land on which it is situated. FAR is calculated by dividing the total square footage within the building by the square footage of the land area within the leasehold. Force Majeure: A force that cannot be controlled by the parties to a contract and that prevents said parties from complying with the provisions of the contract. This includes acts of God such as floods, hurricanes, or acts of man such as a strike, fire, or war. Full Recourse: A loan on which an endorser or guarantor is liable in the event of default by the borrower. Full Service Rent: An all-inclusive rental rate that includes operating expenses and real estate taxes for the first year. The tenant is generally still responsible for any increase in operating expenses over the base year amount. Future Proposed Space: Space in a proposed commercial development that is not yet under construction or where no construction start date has been set. Future Proposed projects include all those projects waiting for a lead tenant, financing, zoning, approvals, or any other detail necessary to begin construction. Also may refer to the future phases of a multi-phase project not yet built.

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Glossary 113 G General Aviation (GA): That portion of civil aviation that encompasses all facets of aviation, except air carriers. General Contractor: The prime contractor, who contracts for the construction of an entire building or project rather than just a portion of the work. The general contractor may hire sub- contractors (such as plumbing, electrical, and mechanical, for example), coordinates all work, and is responsible for payment to subcontractors. Graduated Lease: A lease that includes variable terms. The variable terms are triggered to change after a specific event takes place, such as periodic appraisals, the tenant's gross income changes, or simply the passage of time. Grant: To bestow or transfer an interest in real property, by deed or other instrument. Grantee: One to whom a grant is made. Grantor: The person making the grant. Gross Area/Acreage: An area measurement, in acres, of the entire site, parcel, or zone. Gross Building Area: The total floor area of the building measured from the outer surface of the exterior walls and windows and including all vertical penetrations (such as elevator shafts) and basement space. Gross Lease: The tenant pays a flat rental rate, out of which the landlord must pay for all expenses including taxes, insurance, maintenance, and utilities. Ground Rent: Rent paid to the owner for the use of land, normally on which to build a build- ing. Generally, the arrangement is that of a long-term lease (at least 20 to 30 years in the case of airport property), with the lessor retaining title to the land. Guarantor: One who makes a guaranty. Guaranty: A contract agreement, whereby the guarantor undertakes collateral to assure sat- isfaction of the debt if and when the guarantor fails to satisfy the terms of the agreement. A guar- anty differs from a surety agreement in that there is a separate and distinct contract rather than a joint undertaking with the principal. H Hard Cost: The cost of actually constructing the improvements (construction costs). Hardstand: Reinforced concrete pads on the apron for parking large aircraft. Highest and Best Use: The use of land and/or buildings that will bring the greatest economic return over a given time, which must be physically possible, appropriately supported, and finan- cially feasible. Hold Harmless Clause: Provision in an agreement under which one or both parties agree not to hold the other party responsible for any loss, damage, or legal liability. Hold Over Tenant: A tenant retaining possession of the leased premises after the expiration of a lease. HVAC: The acronym for "heating, ventilation, and air conditioning."

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114 Guidebook for Developing and Leasing Airport Property I Improvements: In the context of leasing, the term typically refers to the improvements made to or inside a building but may include any permanent structure or other development, such as street, sidewalks, and utilities. Indirect Costs: Development costs, other than material and labor costs that are directly related to the construction of improvements, including administrative and office expenses, commissions, and architectural, engineering, and financing costs. Infill: Development that takes place on vacant property largely surrounded by existing development. Ingress: The right of a person to enter a property. Inventory: The total amount of rentable square feet of existing and any forthcoming space (whether it be a tenant vacating space or new buildings coming on the market) in a given cate- gory (warehouse space for example). Inventory refers to all space within a certain prescribed market, without regard to its availability or condition. Categories can include all types of leased space, such as office, flex, and warehouse space. Inverse Condemnation: An action brought by a property owner, seeking just compensation for land taken for a public use, against a government or private entity having the power of emi- nent domain. This is a remedy peculiar to the property owner, and is exercisable when it appears that the taker of the property does not intend to bring eminent domain proceedings. J Judgment: The final decision of a court, resolving a dispute and determining the rights and obligations of the parties. Money judgments, when recorded, become a lien on real property of the defendant. Judgment Lien: An encumbrance that arises when a judgment for the recovery of money attaches to the debtor's real estate. Just Compensation: Compensation, which is fair to both the owner and the public, when property is taken for public use through condemnation (eminent domain). The theory is that in order to be "just," the property owner should be no richer and no poorer than before the taking. L Land Banking: Entering into a land lease agreement to reserve land for unstated future development. Land Lease: A long-term land lease, generally for the purpose of erecting a building or buildings, or for constructing improvements to the land to be used by lessee. At the end of lease, the land and all structures and enhancements revert to the owner. Land leases should follow the basic format of the hangar lease and include all of the same references to the airport's rules, regulations, and mini- mum standards. The land lease price per square foot could vary by location, and possibly by the length of the term, and may also be connected to a business permit or an FBO lease. Landlord's Lien: A lien that can be created either by contract or by law. Examples include (1) a contractual landlord's lien as might be found in a lease agreement; (2) a statutory landlord's lien; and (3) landlord's remedy of distress (or right of distraint), which is not truly a lien but has a similar effect.

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Glossary 115 Land Use Compatibility Assurance: Documentation provided by an airport sponsor to the FAA. The documentation is related to an application for an airport development grant. Its pur- pose is to assure that a reasonably appropriate action, including the adoption of zoning laws, has been taken, or will be taken, to restrict the use of land adjacent to the airport or in the immedi- ate vicinity of the airport. Such uses are limited to activities and purposes compatible with nor- mal airport operations, including the landing and takeoff of aircraft. This assurance is required of airport sponsors by Section 511 (a) (5) of the Airport and Airway Improvement Act of 1981. Lease: An agreement whereby the owner of real property (landlord or lessor) gives the right of possession to another (tenant or lessee) for a specified period of time (term) and for a specified consideration (rent). Lease Agreement: The formal legal document entered into between a landlord and a tenant, to reflect the terms of the negotiations between them. Leasehold Improvements: Improvements made to the leased premises by or for a tenant. Gen- erally, especially in new space, part of the negotiations will include, in some detail, the improve- ments to be made in the leased premises, by the landlord. See also TENANT IMPROVEMENTS. Lease Term: A fixed, noncancelable period of time for which a lease agreement is in force. This terminology refers to the lease period and is sometimes referred to as the lease tenure. Legal Description: A geographical description identifying a parcel of land by government sur- vey, metes and bounds, or lot numbers of a recorded plat, which includes a description of any portion thereof that is subject to an easement or reservation. Legal Owner: Term used in technical contrast to equitable owner. The legal owner has title to the property, although the title may actually carry no rights to the property other than as a lien. Lessee: The user of leased property, or tenant. Lessor: The owner of the leased property, or landlord. Letter of Attornment: A letter from the grantor to a tenant stating that a property has been sold and directing rent to be paid to the grantee (buyer). Letter of Credit: A commitment by a bank or other person, made at the request of a customer, that the issuer will honor drafts or other demands for payment upon full compliance with the conditions specified in the letter of credit. Letters of credit are often used in place of cash, deposited with the landlord to satisfy the security deposit provisions of a lease. Letter of Intent (LOI): A preliminary agreement stating the proposed terms for a final con- tract. LOI can be "binding" or "nonbinding." Levy: To impose taxes or special assessments for the support of governmental activities. Lien: A claim or encumbrance against property used to secure a debt, charge, or the performance of some act. This definition includes liens that are acquired by contract or by operation of law. Lien Waiver: A waiver of mechanic's lien rights, signed by a general contractor and his sub- contractors, that is often required before the general contractor can receive a draw under the pay- ment provisions of a construction contract. A lien waiver may also be required before the owner can receive a draw on a construction loan. Limited Partnership: A type of partnership, created under state law, composed of one or more general partners who manage the business and who are personally liable for partnership debts and one or more special or limited partners who contribute capital and share in profits, but who take no part in running the business and incur no liability over and above the amount contributed.

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116 Guidebook for Developing and Leasing Airport Property Lot: One of several contiguous parcels of land making up a fractional part or subdivision, the boundaries of which are shown on recorded maps and "plats." M Market Rent: The rental income that a property would command on the open market, with a landlord and a tenant ready and willing to consummate a lease in the ordinary course of business. Market Study: A forecast of future demand for real estate with certain attributes, which gen- erally includes an estimate of the square footage that can be absorbed and the rents that can be charged. Marketability Study is another terminology used for this activity. Market Value: The highest price a property would command in a competitive and open mar- ket under all conditions requisite to a fair sale, with the buyer and seller each acting prudently and knowledgeably in the ordinary course of trade. Master Lease: A primary lease that controls subsequent leases, and which may cover more property than subsequent leases. An Executive Suite operation is a good example, in that a pri- mary lease is signed with the landlord and then individual offices within the leased premises are leased to other individuals or companies. Mechanic's Lien: A claim created by state statutes for the purpose of securing priority of pay- ment for the price and value of work performed and materials furnished in constructing, repair- ing, or improving a building or other structure, and which attaches to the land as well as to the buildings and improvements thereon. Metes and Bounds: The boundary lines of land with their terminal points and angles, described by listing the compass directions and distances of the boundaries. Originally, metes referred to distance and bounds referred to direction. Mortgage: A written instrument creating an interest in real estate that provides security for the performance duty or the payment of a debt. The borrower retains possession and use of the property. N Net Absorption: The number of square feet leased in a specific geographic area, over a fixed period of time, after deducting space vacated in the same area during the same period. Net Lease: A lease where the payments to the lessor do not include insurance and maintenance expenses, which are usually paid by the lessee separately. Noncompatible Land Use: Residential, certain public (such as libraries), medical, and certain other noise-sensitive land uses that are designated as unacceptable within specific ranges of cumu- lative noise exposure as set forth in Table 2 of Appendix A of FAR Part 150. Noncompete Clause: A clause that can be inserted into a lease to specify that the business of the tenant is exclusive to the property, and that no other tenant operating the same or similar type of business can occupy space at the airport without the consent of the tenant(s) exercising a noncompete clause. Nonconforming Use: An existing land use, which does not conform to subsequently adopted or amended zoning or other land use development standards.

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Glossary 117 Nondisturbance Clause: (1) Provision in a tenancy or lease agreement whereby the tenant or lessee will continue to occupy the property under the current terms, even if that property is sold or is taken over from the current landlord or lessor by his or her creditors; and (2) provision in a land sale contract whereby the seller retains mineral rights to that land, but does not interfere with the surface development rights of the buyer. Normal Wear And Tear: The deterioration or loss in value caused by the tenant's normal and reasonable use. In many leases, the tenant is not responsible for "normal wear and tear." O Obstruction: Any object or natural growth, terrain, or permanent or temporary construction or alteration, including equipment or materials used therein, the height of which exceed the standards established in Subpart C of Federal Aviation Regulations Part 77, Objects Affecting Navigable Airspace. Off-Airport Property: Property that is beyond the boundary of land owned by the airport sponsor. Operating Cost Escalation: Although there are many variations of escalation clauses, all are intended to adjust rents by reference to external standards, such as published indexes, negotiated wage levels, or expenses related to the ownership and operation of buildings. Operating Expenses: The actual costs associated with operating a property, including main- tenance, repairs, management, utilities, taxes, and insurance. A landlord's definition of operat- ing expenses is likely to be quite broad, covering most aspects of operating a building or facility. Overflight Easement: An easement, which describes the right to overfly the property above a specified surface, and which includes the right to subject the property to noise, vibrations, fumes, and emissions. An overflight easement is used primarily as a form of buyer notification. P Parking Ratio/Index: Provides a uniform method of expressing the amount of parking avail- able. Dividing the total rentable square footage of a building by the building's total number of parking spaces provides the amount of rentable square feet per each individual parking space (expressed as 1/xxx or 1 per xxx). Dividing 1,000 by the previous result provides the ratio of park- ing spaces available per each 1,000 rentable square feet (expressed as x per 1,000). Partial Taking: The taking of part (a portion) of an owner's property under the laws of eminent domain. Pass Throughs: Refers to the tenant's pro rata share of operating expenses (such as taxes, util- ities, and repairs) paid in addition to the base rent. Percentage Lease/Percent of Revenue: A lease whose rental is based on a percentage of the monthly or annual gross sales made on the premises. Performance Bond: A surety bond posted by a contractor, guaranteeing full performance of a contract, with the proceeds to be used to complete the contract or compensate for the owner's loss in the event of nonperformance. Plat (Plat Map): A map of a specific area, such as a subdivision, which shows the boundaries of individual parcels of land (lots), together with streets and easements.

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118 Guidebook for Developing and Leasing Airport Property Possessory Interest Tax: A private property interest in government-owned property, or the right to occupancy and use of any benefit in government-owned property that is granted through lease, permit, license, concession, contract, or agreement. Practical Difficulty or Unnecessary Hardship: When the property in question cannot be put to a reasonable use under conditions allowed by an airport zoning ordinance, and the plight of the landowner is due to circumstances unique to the property not created by the landowner, and the variance, if granted, will not be contrary to the purpose and intent of the ordinance. Eco- nomic considerations alone shall not constitute a "practical difficulty or unnecessary hardship" if reasonable use of the property exists under the terms of the zoning ordinance. Preleased: Refers to space in a proposed building that has been leased before the start of con- struction or in advance of the issuance of a Certificate of Occupancy. Premises: The land and improvements that, in total, constitute the property subject to the lease agreement. Pro Rata: Proportionately, according to measure, interest, or liability. In the case of a tenant, the proportionate share of expenses for the maintenance and operation of the property. Proprietary Use Restrictions: Restrictions by an airport sponsor on the number, type, class, manner, or time of aircraft operations at the airport. The imposition of a curfew is an example of a proprietary use restriction. Punch List: An itemized list, typically prepared by the architect or construction manager, doc- umenting incomplete or unsatisfactory items after the contractor has notified the owner that the tenant space is substantially complete. Q Quiet Enjoyment: Possession and use of an asset or property, without interference from a superior title holder. R Ramp: The area surrounding the hangars, cargo-sort buildings, and terminals, excluding the taxiways and runways, where aircraft and airport vehicles operate. Raw Land: Unimproved land that remains in its natural state. Raw Space: Unimproved shell space in a building. Real Estate Owned: Real estate that has come to be owned by a lender, including real estate taken to satisfy a debt. Includes real estate acquired by lenders through foreclosure or in settlement of some other obligation. Real Property: Land, and generally whatever is erected or affixed to the land, such as buildings, fences, light fixtures, plumbing and heating fixtures, or other items that would be personal property if not attached. Reliever Airport: An airport designated as having the function of relieving congestion at a commercial service airport, and providing more general aviation access to the overall community or region. Renewal Option: A clause giving a tenant the right to extend the term of a lease, usually for a stated period of time, and at a rent amount provided for in the option language.

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Glossary 119 Rent: Compensation or fee paid, usually periodically (monthly rent payments, for example), for the occupancy and use of any rental property, land, buildings, and/or equipment. Rent Commencement Date: The date on which a tenant begins paying rent. The dynam- ics of a marketplace will dictate whether this date coincides with the lease commencement date, or if it commences months later (sometimes in a weak market, the tenant may be granted several months free rent). Rent Commencement Date will never begin before the lease com- mencement date. Rentable/Useable Ratio: That number obtained when the Total Rentable Area in a building is divided by the Usable Area in the building. The inverse of this ratio describes the proportion of space that an occupant can expect to actually utilize/physically occupy. Rental Concession: Concessions a landlord may offer a tenant in order to secure tenancy. While rental abatement is one form of concession, there are many others, such as increased ten- ant improvement allowances, signage concessions, lower than market rental rates, and moving allowances. See also ABATEMENT. Rent-Up Period: That period of time, following construction of a new building, when tenants are actively being sought. Request for Proposal (RFP): The formalized Request for Proposal represents a compilation of the many considerations that a tenant might have and should be customized to reflect their specific needs. Just as the building's standard form lease document represents the landlord's "wish list," the RFP serves in that same capacity for the tenant. Reversionary Clause: Provision in a transfer deed under which the transferred property reverts to the grantor if any deed condition is violated. This clause may also speak to the reversion of improvements to the landlord at the end of the lease agreement. Right-of-First Refusal: A contractual right that gives its holder the option to enter into a business transaction with the owner of something, according to specified terms, before the owner is entitled to enter into that transaction with a third party. Runway Protection Zone (RPZ): A trapezoid-shaped area off the runway end that enhances the protection of people and property on the ground. Runway Safety Area (RSA): A defined surface surrounding the runway, prepared or suitable for reducing the risk of damage to airplanes in the event of an undershoot, overshoot, or excur- sion from the runway. S Second Generation Space: Refers to previously occupied space that becomes available for lease, either directly from the landlord or as sublease space. Second Mortgage: A mortgage on property that ranks below a first mortgage in priority. Prop- erties may have two, three, or more mortgages, deeds of trust, or land contracts as liens at the same time. Legal sequence priority, indicated by the date of recording, determines the designation of first, second, and third. Security Deposit: A deposit of money paid by a tenant to a landlord, to secure performance of a lease. This deposit can also take the form of a Letter of Credit or other financial instrument. Setback: The distance from a curb, property line, or other reference point, within which build- ing is prohibited.

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120 Guidebook for Developing and Leasing Airport Property Site Development: The installation of all necessary improvements (such as utilities and grading) made to a site before a building or project can be constructed on the site. Site Plan: A detailed depiction of proposed improvements to a given parcel of land, to include a description of how the proposed site development will comply with zoning ordinances. Slab: The exposed wearing surface laid over the structural support beams of a building that forms the floor(s) of the building, or laid slab-on-grade in the case of a nonstructural ground- level concrete slab. Soft Cost: That portion of an equity investment, other than the actual cost of improvements themselves, such as architectural costs, engineering fees, and commissions, which may be tax- deductible in the first year. Space Plan: A graphic representation of a tenant's space requirements, showing wall and door locations, room sizes, and which sometimes includes furniture layouts. Specific Performance: A requirement compelling one of the parties to perform or carry out the provisions of a contract into which he has entered. Speculative Space: Any tenant space that has not been leased before the start of construction on a new building. Step-up Lease: A lease specifying set increases in rent, at set intervals, during the term of the lease. Straight Lease: A lease specifying the same, fixed amount of rent to be paid periodically dur- ing the entire term of the lease. Subordination Agreement: As used in a lease, the tenant generally accepts the leased prem- ises subject to any recorded mortgage or deed of trust lien and all existing recorded restrictions, and the landlord is often given the power to subordinate the tenant's interest to any first mort- gage or deed of trust lien subsequently placed upon the leased premises. Surface Rights: A right or easement granted with mineral rights, enabling the possessor of the mineral rights to drill or mine through the surface. Survey: The process by which a parcel of land is measured, and its boundaries and contents ascertained. T Taking: A common synonym for condemnation or any actual or material interference with private property rights. Physical seizure or appropriation is not essential to a taking. Tax Lien: A statutory lien, existing in favor of the state or municipality, for nonpayment of property taxes attached only to the property upon which the taxes are unpaid. Tax Roll: A list or record containing the descriptions of all land parcels located within the county, the names of the owners or those receiving the tax bill, assessed values, and tax amounts. Tenant Improvements: Improvements made to the leased premises by or for a tenant. Gen- erally, especially in new space, part of the negotiations will include in some detail the improve- ments to be made in the leased premises by the landlord. Tenant Improvement Allowance (TIA): Defines the fixed amount of money contributed by the landlord toward tenant improvements. The tenant pays costs that exceed the TIA, which is also commonly referred to as Tenant Finish Allowance. Tenant (Lessee): One who rents real estate from another and holds an estate by virtue of a lease.

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Glossary 121 Tenant at Will: A tenant that has possession of premises, with the permission of the owner or landlord, for an undetermined period of time, whereby either party has the right to terminate the relationship once proper notice is given. Terminal Area: A general term used to describe airspace in which approach control service or airport traffic control service is provided. Through-the-Fence (TTF): An arrangement where the public airport sponsor permits access to the public landing area, by independent operators undertaking aeronautical activities, from privately-owned land adjacent to, but not a part of, the airport. Title: The means whereby the owner of lands has the just and full possession of real property. Total Inventory: The total amount of square footage of a type of property within a geographical area, whether vacant or occupied. This computation normally includes owner-occupied space. Trade Fixtures: Personal property that is attached to a structure (typically on the walls of the leased premises) and used for a purpose unique to that business. Since this property is part of the business, and not deemed to be part of the real estate, it is typically removable upon lease termination. Triple Net Rent: A lease in which the tenant pays, in addition to rent, certain costs associated with a leased property, which may include property taxes, insurance premiums, repairs, utilities, and maintenance. There are also "Net Leases" and "NN" (double net) leases, depending upon the degree to which the tenant is responsible for operating costs. Turn Key Project: The construction of a project in which a third party, usually a developer or general contractor, is responsible for the total completion of a building (including construction and interior design), or the construction of tenant improvements to the customized require- ments and specifications of a future owner or tenant. U Under Construction: When construction has started but the Certificate of Occupancy has not yet been issued. Under Contract: A property for which the seller has accepted the buyer's offer to purchase is referred to as being "under contract." Unencumbered: Describes title to property that is free of liens and any other encumbrances. Free and clear. Unimproved Land: Most commonly refers to land without improvements or buildings, but can also mean land in its natural state. Usable Square Footage: The area contained within the demising walls of the tenant space. Total Usable Square Footage equals the Net Square Footage multiplied by the Circulation Factor. Use: The specific purpose and authorized activity for which a parcel of land or a building is utilized, or for which it has been designed or arranged. V Vacancy Factor: The amount of gross revenue that pro forma income statements anticipate will be lost because of vacancies, often expressed as a percentage of the total rentable square footage available in a building or project.

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122 Guidebook for Developing and Leasing Airport Property Vacancy Rate: The total amount of available space compared to the total inventory of space and expressed as a percentage. Vacancy rate is calculated by multiplying the vacant space by 100, then dividing it by the total inventory. Vacant Space: Refers to existing tenant space currently being marketed for lease. This excludes space available for sublease. Variance: Refers to permission given to a property owner to depart from the literal requirements of a zoning ordinance that, because of special circumstances, cause a unique hardship. W Warranty of Possession: Provides a warranty by the landlord that the landlord has the legal ability to convey the possession of the premises to the tenant. Wasting Asset: An asset that tends to decline in value over time as its expected life is used. Weighted Average Rental Rates: The mean proportion or medial sum made out of the unequal rental rates in two or more buildings within a market area. Wildlife Hazards: Species of wildlife, including feral animals and domesticated animals not under control, that are associated with aircraft strike problems, are capable of causing structural damage to airport facilities, or act as attractants to other wildlife that pose a strike hazard. Working Drawings: The set of plans for a building or a project that comprises the contract documents and indicates the precise manner in which a project is to be built. This set of plans includes a set of specifications for the building or project. Workletter: A list of the items that the landlord will contribute, as part of the tenant improve- ments. The Workletter often carries a dollar value, but is contrasted with a fixed-dollar tenant improvement allowance that can be used at the tenant's discretion. Z Zoning Ordinance: Laws and regulations, generally at the city or county level that controls the use of land, allowable construction, and improvements to property within a given area or zone. Zoning: A police power measure, enacted primarily by units of local government, in which the community is divided into districts or zones, within which permitted and special uses are established. Regulations governing lot size, building bulk, placement, and other development standards are examples of zoning criteria. Requirements vary from district to district, but they must be uniform within districts.