GLOSSARY L - P

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Lease

Long-term rental agreement and a form of secured long-term debt.

Lease Rate

The payment per period stated in a lease contract.

Lease Rollover

The re-leasing of a space with the same tenant after the expiration of a prior lease on the same space.

Lend

To provide money temporarily on the condition it or its equivalent will be returned, often with an interest fee.

Lessee

This term refers to an entity leasing an asset from another entity.

Leaser

This term refers to an entity leasing an asset to another entity.

Leverage

The utilization of debt to finance property acquisitions. The amount of debt in relation to either equity capital or total capital.

Leverage Ratios

Measures of the relative contribution of stockholders and creditors, and of the firm's ability to pay financing charges. Value of firm's debt to the total value of the firm.

Liability

A financial obligation or the cash outlay made at a specific time to satisfy the contractual terms of such an obligation.

Limited Partner

A partner who has limited legal liability for the obligations of the partnership.

Limited Partnership

This term refers to a partnership including one or more partners who have limited liability.

Liquidition Preference

Liquidation preference determines the payout order in case of an company or asset liquidation. Liquidation preference is frequently used in financing contracts to specify which investors get paid first and how much they get paid in the event of a liquidation event.

Liquidition Preference for Preferred Shares

There are three types of liquidation preferences for preferred shares:
Straight (or non-participating) preferred – This liquidation preference is most favorable to the company. Upon the sale of the company (or any other liquidation), the preferred stockholders would be entitled to the return of their entire investment (plus any accrued dividends) prior to the distribution of any proceeds to the common stockholders.Alternatively, the preferred stockholders could choose to convert their preferred stock to common stock and simply be treated the same as the common stockholders (letting them share ratably in the proceeds).

Participating preferred – This liquidation preference is most favorable to the investor (and is sometimes referred to as “double-dip preferred”). Similar to straight preferred, the preferred stockholders would be entitled to the return of their entire investment (plus any accrued dividends) prior to the distribution of any proceeds to the common stockholders.However, the preferred stockholders would then also be treated like common stockholders and would share ratably in the remaining proceeds –in effect, being paid twice (or “double”). Issuing participating preferred has the same economic effect as issuing a promissory note and shares of common stock (or a warrant) to the investor.

Capped (or partially) participating preferred – This liquidation preference is often viewed as an intermediate approach. The preferred stockholders have the same rights as participating preferred (i.e., return of investment, plus share ratably in the reminder), but their aggregate return is capped. Once they have received the capped amount, they no longer have the right to share in the remaining proceeds with the other common stockholders.

Liquidity

The ability to convert assets into cash without an appreciable loss in value. Investments are said to have good liquidity if they can quickly and easily be converted into cash.

Long-Term Assets

Value of property, equipment and other capital assets minus the depreciation. This is an entry in the bookkeeping records of a company, usually on a "cost" basis and thus does not necessarily reflect the market value of the assets.

Long-Term Debt

An obligation having a maturity of more than one year from the date it was issued.

Long-Term Debt Ratio

The ratio of long-term debt to total capitalization.

Long-Term Debt to Equity Ratio

Capitalization ratio comparing long-term debt to shareholders' equity.

Long-Term Debt / Capitalization

Determined by dividing long-term debt by the sum of long-term debt, preferred stock and common stockholder equity. It is a good indicator of a firm’s financial leverage.

Management's Discussion

This term refers to a report from management to the shareholders accompanying the firm's financial statements in the annual report. This report explains the period's financial results and enables management to discuss other ideas not otherwise apparent in the financial statements in the annual report.

Market Capitalization

The total dollar value of all outstanding shares, computed as shares times current market price.

Market Capitalization Rate

The market-consensus estimate of the appropriate discount rate for a firm's cash flows.

Market Value

(1) The price at which a security is trading and could presumably be purchased or sold; or (2) The value investors believe a firm is worth; calculated by multiplying the number of shares outstanding by the current market price of a firm's shares.

Market-to-Market

The process whereby the book value or collateral value of a security is adjusted to reflect current market value.

Mortgage

A loan secured by the collateral of some specified real estate property which obliges the borrower to make a predetermined series of payments.

Mortgage Rate

The interest rate on a mortgage loan.

Mortgage REIT

A REIT making or owning loans and other obligations secured by real estate collateral.

Mortgagee

The lender of a loan secured by property.

Mortgager

The borrower of a loan secured by property.

Net Asset Value (NAV)

The market value of a company’s properties and other assets after subtracting its liabilities and other obligations.

Net Assets

The difference between total assets on the one hand and current liabilities and non-capitalized long-term liabilities on the other hand.

Net Book Value

The current book value of an asset or liability; that is, its original book value net of any accounting adjustments such as depreciation.

Net Cash Balance

Beginning cash balance plus cash receipts minus cash disbursements.

Net Income

The company's total earnings, reflecting revenues adjusted for costs of doing business, depreciation, interest, taxes and other expenses.

Net Lease

A lease arrangement under which the lessee is responsible for all property taxes, maintenance expenses, insurance, and other costs associated with keeping the asset in good working condition.

Net Operating Losses

Losses a firm can take advantage of to reduce taxes.

Passive Investment Management

Buying a well-diversified portfolio to represent a broad-based market index without attempting to search out mispriced securities.

Payout Ratio

Generally, the proportion of earnings paid out to the common stockholders as cash dividends. More specifically, the firm's cash dividend divided by the firm's earnings in the same reporting period.

Positive Spread Investing (PSI)

The ability to raise funds (both equity and debt) at a cost significantly less than the initial returns obtained on real estate transactions.

Price / Book Ratio

Determined by dividing current stock price by common stockholder equity per share (book value), adjusted for stock splits. Compares a stock's market value to the value of total assets less total liabilities (book value).

Prime Rate

The interest rate at which banks lend to their best (prime) customers. Much more often than not, a bank's most creditworthy customers borrow at rates below the prime rate.

Principal

The total amount of money being borrowed or lent.

Private Placement

The sale of a bond or other security directly to a limited number of investors.

Pro Forma Statement

A financial statement showing the forecast or projected operating results and balance sheet, as in pro forma income statements, balance sheets, and statements of cash flows.

Prospectus

This term refers to a formal written document to sell securities describing the plan for a proposed business enterprise.

Proxy

Document intended to provide shareholders with information necessary to vote in an informed manner on matters to be brought up at a stockholders' meeting. Shareholders can and often do give management their proxy, representing the right and responsibility to vote their shares as specified in the proxy statement.

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