Glossary

Central Business Districts (CBDs) – Often referred to as “downtown” comprise the geographic area of a city where there is a high level of activity and large concentration of commercial and retail operations.  For purposes of the California real estate market, CBDs are also characterized by a large concentration of Class A Buildings.

Class A Buildings – Investment-grade properties built after 1980 and typically greater than 10 stories that command the highest rents or sale prices compared to other buildings in the same market.  Such buildings are well located and provide efficient tenant layouts as well as high quality one-of-a-kind floor plans.  These buildings contain modern mechanical systems, and have above-average maintenance and management as well as the best quality materials and workmanship in their trim and interior fittings.  They are generally the most attractive and eagerly sought by investors willing to pay a premium for quality.

Class B Buildings – Generally realizing lower rents or sale prices compared to Class A properties in the same market.  Such buildings offer utilitarian space without special attractions, and have ordinary design, if new or fairly new; good to excellent design if an older non-landmark building.  These buildings typically have average to good maintenance, management and tenants. They are less appealing to tenants than Class A properties, and may be deficient in a number of respects including floor size. They lack prestige and must depend chiefly on a lower rental price to attract tenants and investors.

Class C Buildings – Generally no-frills, older buildings that offer basic space and command lower rents or sale prices compared to all other buildings in the same market.  Such buildings typically have below-average maintenance and management, and could have mixed or low tenant prestige, inferior elevators, and/or mechanical and electrical systems.

Core and Shell – Structural and shared building elements, such as the design and construction of the structure itself, including materials and layout; the building envelope (windows, doors and insulation); and central systems such as heating, ventilation and air conditioning (HVAC).

ENERGY STAR – A joint program of the U.S. Environmental Protection Agency and the U.S. Department of Energy that provides tools and techniques for benchmarking the energy performance of buildings, equipment and appliances.

First Costs – The initial cost of purchasing or upgrading an asset.

“Green” – A broad encompassing term used by many people and organizations to generally represent the universe of environmentally preferable choices for a wide variety of applications from development, design and construction methods that are deemed to have fewer environmental impacts than “conventional” approaches, to aggressive climate action strategies designed to significantly reduce air emissions, increase resource efficiency (energy, water and materials), increase use of zero to low emissions products, reduce environmental impacts of operations, etc.

Green Building – The practice of creating structures and using processes that are environmentally responsible and resource-efficient throughout a building's life-cycle from siting to design, construction, operation, maintenance, renovation and decommissioning.

Green Building Value Proposition – The total bundle of net benefits, economic and other, realized through modifying a building design to produce a more environmentally responsible and resource-efficient asset.

Green Leasing – The process of integrating “green” elements (e.g., resource efficient building design, equipment, appliances, materials and operations) into lease negotiations.

Full Service Lease – Lease that includes all operating expenses such as utilities, electricity, janitorial services, taxes and insurance, similar to a gross lease with expense stops.

Gross Lease – Under a gross lease, the tenant pays a fixed amount of rent per month or year, regardless of the landlord's operating costs, such as maintenance, utilities, taxes and insurance.  A "gross lease with expense stops" means that the tenant will contribute additional money if the landlord's operating costs rise above a certain amount or the “stop” amount.  In addition to the stipulated rent schedule in the lease, a tenant is only exposed to future increases in expenses above a base year or expense stop.

Leadership in Energy and Environmental Design (LEED®) - A green building rating system and program developed and managed by the U.S. Green Building Council.

Life Cycle Costs [and Benefits] – The total discounted cost of owning, operating, maintaining, and disposing of a building or other type of long-lived asset.

Net Lease – Under a net lease, the tenant is obligated to pay rent and is directly responsible for the operating expenses for the building including maintenance, utilities, taxes, insurance and the common areas.  When all three of the typical operating expenses - taxes, maintenance and insurance - are passed through to the tenant, the arrangement is known as a "triple net lease."  A net lease with caps establishes a ceiling on the amount of such costs.

On-Bill Financing – A utility program finances the net costs of energy efficiency improvements and collects loan payments through the monthly utility bill.

Split Incentives – A circumstance in which the flow of investments and benefits are not properly rationed among the parties to a transaction, impairing investment decisions.

Tenant Improvements or “TI” – Improvements made to leased premises by or for a tenant.

Zero Net Energy – Zero net purchases of energy, typically achieved by first making a building or system as energy efficient as possible, and then meeting its net energy requirements through self production of energy, usually through a distributed renewable or “clean” (zero emissions) resource.