Capitalization
The conversion of a future net income stream into present value by using a specified desired rate of earnings as a discount rate. This capitalization rate is divided into the expected periodic income to derive a capital value for the expected income.

Capitalization Rate
The rate of return on net operating income considered acceptable for an investor. A rate of return used to derive the capital value of an income stream. The formula is value = annual income divided by the capitalization rate. Also known as cap rate.

Carve-outs
Specific items that a Lender will require the Borrower to personally guarantee for the life of the loan. Typically include (but are not limited to) environmental, fraud, misappropriation of funds, and theft.

Closing Costs
Various fees and expenses payable by the seller and buyer at the time of a real estate closing, (also termed transaction costs). Includes brokerage commissions, lender fees, title insurance, recording fees, prepayment penalty, inspection and appraisal fees, and attorney fees.

Combined Loan-To-Cost
The amount of the loan (first-position and mezzanine combined)compared to the total cost of the purchase/project.

Commercial Bank
A financial institution authorized to provide a variety of financial services, including consumer and business loans (generally short-term with full recourse to the Borrower). Commercial banks may be members of the Federal Reserve System.

Commitment Fee
A charge required by a lender to lock in specific terms on a loan at the time of Commitment.

Commitment Letter
An official notification from a Lender to a Borrower indicating that the Borrower's loan application has been approved. It will state in detail the terms and conditions of the prospective loan.

Common Area Maintenance
Operational expenses related to the maintenance of retail and office properties. Under a Triple-Net lease the Tenant is required to reimburse the Landlord for their proportionate amount (based on square footage) of this expense.

Conduit
An entity, which issues mortgage-backed securities, which were originated by other lenders.

Constant
Percentage of the original loan paid in equal annual payments that provides principal reduction and interest payments over the life of the loan.

Construction Loan
A short-term, interim loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as work progresses. Typically, a recourse loan to the borrower.

Consumer Price Index
The most widely known measures of price levels and inflation that are reported to the U. S. government. It measures and compares, on a monthly basis, the total cost of a statistically determined "typical market basket" of goods and services consumed by U. S. households.

Correspondent
A specialized type of mortgage banker whose function is limited to the origination of mortgage loans which are sold to other mortgage bankers or investment bankers under a specific commitment.

Cost Approach
A method of appraising property based on the depreciated reproduction or replacement cost (new) of improvements, plus the market value of the site.

Credit Rating
An evaluation of a person's capacity (or history) of debt repayment. Generally available for individuals from a local retail credit association; for publicly held companies by such firms as Dunn & Bradstreet; and for bonds by such firms as Moody's, Standard & Poor’s, and Fitch's.

Cross-Collateralization
Net income shortfalls on one property are offset by excess cash flow from other properties in a pool of crossed loans. Significantly enhances a transaction from the viewpoint of investors and rating agencies.

Current Yield
A measurement of investment returns based on the percentage relationship of annual cash income to the investment cost.