Amortisation is the process by which the loan principal decreases over some or all of the life of a loan. With each mortgage payment that is made, a portion of the payment is applied towards reducing principal and another portion of the payment is applied towards paying the interest on the loan.

Amortised Repayments are repayments of capital and interest which will fully repay the outstanding loan over the agreed term. The loan payment consists of a portion which is used to pay the interest on the loan, with the remainder of the payment being applied to the capital. The interest portion will decrease as the loan balance decreases, and the amount applied to capital increases so that the loan is paid off (amortised) in the specific time (loan term). Providing the interest rate does not change the total amount of the repayment will be the same throughout the loan term.

Annualised rents are gross rents at a given date together with an estimate of likely increases where rent reviews are outstanding or due imminently.

Bridging Loan is a type of short-term loan taken out for a period typically up to 18 months, pending the arrangement of larger or longer term financing or a resale of all or part of the asset.

Certificate of Title is a document normally supplied by a lawyer that presents the legal status of the property.

Certified High Net Worth Individual To qualify under this FSMA definition and for the purposes of the Relendex website, an individual must have signed, within the twelve months ending with the day on which this website is made available to him, a statement complying with Part 1 of Schedule 5 to the Order. The individual must declare in that statement that, among other things, in the financial year immediately preceding the date of the statement, he:

• had an annual income to the value of at least £100,000; and/or
• held throughout that year net assets to the value of at least £250,000

Certified Sophisticated Investor as defined by FSMA and for the purposes of the Relendex website, the relevant person must have:

• a certificate complying with article 50(1)(a) of the Order, in legible form signed by an authorised person within the meaning of FSMA and dated not more than three years before the day on which this website is made available to the relevant person, to the effect that he is sufficiently knowldegeable to understand the risks associated with the investments of the kind referred to in this website; and
• a statement signed by the relevant person himself, within the twelve months ending with the day on which this website is made available to him, in accordance with article 50(1)(a) of the Order and relating to investments of the kind referred to in this website.

Collateral is a borrower’s pledge of specific security to a lender in order to secure repayment of a loan.

Completion The day on which the loan legally completes. The legal documents relating to the loan will be dated with this date and repayment of the loan may commence.

Closing The day on which the loan legally completes. The legal documents relating to the loan will be dated with this date and repayment of the loan may commence.

Development construction cost is the cost of construction of a project to a date or completion which excludes the cost of the site.

Early Repayment The pre-payment of all or any part of the Loan prior to the end of the contractual loan term. An early repayment fee or penalty may be payable on some loans.

Estimated Rental Value (ERV) is an estimate of the open market rent which on a given date could be obtained for the property on a new letting or rent review.

Equity in relation to real estate financing arrangements means the portion of cash an owner allocates in to a property asset. It is the difference between the total debt and the cost or value of property, e.g. debt £700,000 and value of property £1m = £300,000 equity.

Equivalent yield is the net weighted average income return a property is likely to produce based upon the timing of future income streams.

Fees

Arrangement fee - is the commitment or administration fee payable to a lender, for underwriting the loan and reserving the mortgage funds.

The arrangement fee can vary from lender to lender but generally is a percentage of the loan amount.

Legal fees - cover the lawyer’s cost of due diligence including the preparation of a Report on Title for the property (properties) concerned and the Loan and Security documentation for a mortgage. These are usually payable by the borrower direct to the lawyer.

Valuation fees – cover the surveyor’s cost of assessing and preparing a valuation or appraisal of the property (properties) which are to be taken as security for the mortgage. These are usually payable by the borrower direct to the surveyor.

Financial Services and Markets Act 2000 (“FSMA”) - UK Financial Services legislation relating to the regulation of various different institutions and investments.

Fixed Interest Rate – An interest rate which remains the same throughout the loan.

Guarantor A person who enters into a legally binding agreement to become responsible for the debt of the borrower(s) in the event that the borrower(s) is unable to pay.

High Net Worth Companies, Unincorporated Associations etc as defined by FSMA and for the purposes of the Relendex website, include:

a) a body corporate which has, or which is a member of the same group as an undertaking which has, a share capital or net assets of at least £5 million, or, if it has more than 20 members or is a subsidiary undertaking of an undertaking which has more than 20 members, £500,000;

b) an unincorporated association or partnership which has net assets of at least £5 million;

c) the trustee of a trust, the assets of which have a gross value of at least £10 million; and

d) a director, officer or employee of any person falling within any of paragraphs (a) to (c) above, whose responsibilities involve him in that person’s engaging in investment activity.

Initial yield is the net rent generated by a property expressed as a percentage of the cost or valuation of the property.

Interest cover is the number of times net interest payable under a loan is covered by rental incomefrom a property pledged as security for the same loan.

Internal Rate of Return (“IRR”) is the rate of return used in capital budgeting to measure and compare different investments. The calculation is expressed as an annual rate over the life of an investment.

IPD is Investment Property Databank Ltd which produces an independent benchmark of property returns.
http://www1.ipd.com/Pages/default.aspx

Loan Offer A legal document offering to advance the loan amount, detailing the terms and conditions. It is normally issued to a borrower once a loan application has been approved.

Loan to Value (“LTV”) The relationship between a loan and the value of the property charged as security, e.g. loan £700,000 and value of security £1m = LTV of 70%.

Market Value is the estimated amount for which a property should sell between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing.

Maturity The end date of the loan term.

Mezzanine Loan refers to a secondary or subordinated loan usually at a higher rate than senior debt.

Money Laundering Regulations We are required to verify the identity and address of all applicants.

Net rental income is the rental income receivable after payment of ground rents and property outgoings.

Occupancy rate is the estimated rental value of let or rented units expressed as a percentage of the total estimated rental value of all units.

Open A1 is a planning consent for a retail store enabling the sale of a wide range of goods, including food, fashion, footwear, books, electronics and household goods – as set out in The Town and Country Planning (Use Classes) Order 1987.

Order as referred to in this Glossary and website means the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005.

Passing rent is the gross rent, less any ground rent payable under head leases.

Planning consent gives consent for a development, and covers matters such as use and design. Full details of the development scheme must be provided in an application for full planning consent, including detailed design, external appearance and landscaping before a project can proceed. Outline planning consent establishes the broad outline of the scheme and is subject to the later approval of the details of the design.

Privity of Contract The rules of Privity of Contract in the UK were changed by the Landlord and Tenant (Covenants) Act 1995 which came into force on the 1 January 1996.

For Leases granted before this date, the original tenant remains liable for the covenants in the lease throughout the term of the lease, even after assignment of the lease to a third party.

For Leases granted after this date, the tenant is only liable for the covenants in the lease for the duration of the first assignment to a third party and no further assignments.

Real Estate Investment Trust (REIT) A listed property company which qualifies for and has elected into a tax regime, which exempts qualifying UK property rental income and gains on investment property disposals from corporation tax.

Report on Title is a legal document that includes a history of ownership of the property (deed), records of any liens and encumbrances, as well as any tax information and a legal description of the property.

Reversion is the increase in rent to an estimated rental value. It applies where a property is let below market rental value and will increase on a rent review, or expiry of a rent-free period.

Reversionary yield is the expected yield, which the initial yield will rise to once the rent reaches the estimated rental value.

RPI Uplifts Where the lease contains rental uplifts which are linked to the retail price index.

Security Mortgages and other collateral taken to secure repayment of a loan.

Self-Certified Sophisticated Investor, as defined by FSMA and in order to qualify under this classification for the purposes of the Relendex website, an individual must have signed, within the twelve months ending with the day on which this website is made available to him, a statement complying with Part II of Schedule 5 to the Order. The individual must declare in that statement that, among other things, at least one of the following applies:

a) has been a member of a network or syndicate of business angels for at least 6 months ending with the date of this statement;

b) he has made more than one investment in a non-publicly traded company in the two years ending on the date of the statement;

c) he is working, or has worked in the past two years, ina professional capacity in the private equity sector, or in the provision of finance for small and medium enterprises;

d) he is currently, or has been at some point in the past two years, a director of a company with an annual turnover of at least £1 million.

Senior Debt A loan that holds a first mortgage or charge against a property asset.

Vacancy rate is the estimated rental value of vacant units expressed as a percentage of the total estimated rental value of all units.

Virtual freehold represents a property held on a long leasehold basis without onerous covenants at a ‘peppercorn’, or nominal ground rent.

Weighted average lease term is the average lease term remaining to first break, or expiry, across the portfolio weighted by rental income. This is also disclosed assuming all break clauses are exercised at the earliest date, as stated. Excludes short-term licences and residential leases.

Yield shift is a movement (usually expressed in basis points) in the equivalent yield of a property asset.