Glossary of Real Estate Terms and Organizations
Real Estate Board of New York (REBNY): A real estate trade
group that Longstreet is an active part of. The organization, that is over one hundred years old (1896) , is known for its
lobbying on behalf of the industry and for its annual banquet and diary.
Rent: A description of an amount of time that is negotiated between a landlord and tenant during which rent is not
paid. Often times a prospective tenant might request five month’s free rent on a five year lease, which if accepted
by a landlord would mean that rent payments would commence on the sixth month.
Letter: Improvements requested by a tenant for a landlord to perform. Often, in lieu of this, a price per square
foot is agreed on, with the landlord then giving the tenant that amount of money to do the work himself.
Rentable Area: This is the amount of space that is "listed," which is often 15-25% less
than there actually exists in the space. The measurements are conducted in a manner that is approved by REBNY, and often includes
common spaces, such as roofs, elevators, hallways, bathrooms, etc. All commercial space shown in New York City is "rentable,"
meaning that you are somewhat comparing apples to apples, although different buildings have different loss factors.
Usable Area: Also referred to carpetable area: The real square footage of space
that one leases. This could be compared to how residential condominiums are listed, meaning that they are sold with exact
and true measurements.
Brokerage Commission: This is the fee that
is paid to the broker (Longstreet) by the landlord (building owner). Such expenses are built into the rate asked for a space,
so it could be argued that one pays for this whether a broker is used or not. We very rarely are compensated by those who
are looking for space, meaning the tenant, and can only be paid by one side or the other, unless there is full disclosure
otherwise. It is important to note that all commissions are negotiable in New York State, as is who pays the broker.
Electricity: Harry Helmsley, a major player in the New York Real Estate world
(RIP), once said that he made all of his millions off of electric charges, and not rent. One pays for electricity in addition
to rent, and this is usually done in terms of a fixed amount per year per rentable square foot. A common figure is $3.00 a
square foot. This, like everything else, is negotiable. There are three kinds of electric payment options, though, which are
determined by the landlord:
Direct -meter: This would be just like the meter that you have at home. You would
pay Con.Ed for what you use, with a meter making that determination. This is very unusual in class A office buildings but
is often the best option for a tenant.
Sub-meter: This should save
a tenant money as landlords get a break for large amounts of power used, but this rarely happens. It is usual that the landlord
marks-up the money owed to more than a direct meter would cost.
Rent Inclusion: A set price per square foot per year, which assumes that the
tenant is using the maximum amount of electricity 24/7, as if one were running a lighting shop.. A large profit center for
HVAC: Heat, ventilation and air conditioning. Heat
is always included in office space, as per law. Air conditioning is optional, and usually costs extra after hours. A large
hidden expense. We always put in leases that the air conditioning should be working at "season turn on."
Lease: A binding agreement for a tenant to occupy a space for a fixed amount
of time, which only becomes active when signed on both sides. All real estate is effective only when in writing, and so there
are no oral leases for office space–offers are not anything but the beginning of a conversation.
Net-Lease: A lease which compels the tenant to pay insurance, utilities, taxes and all other services.
This is somewhat unusual for smaller office space leases.
In this situation, which is what most tenants have leases for Manhattan office space, one pays a base rent which includes
current operating expenses and taxes. After the first year is over, one then often pays for their percentage of the escalations
for operating expenses and taxes, which can add more than 5% to lease costs per year.
Expenses: What it costs to run a building, including building staff, cleaning, utilities, repairs and water.
Porter’s Wage: This can be added to tenant’s expenses in addition
to operating expenses after the first year’s occupancy. It is subject to negotiation and is based on the Local 32B/32J
Class A, B & C Buildings (and Trophy Buildings): A recent (7/27/11) New York Times article summed the differences in these buildings quite well. Trophy buildings
are rare indeed: The General Motors Building, 9 West 57th Street, One Bryant Park, Lever House and The Seagram's Building
are the best known examples. These are the few that get top rents, with the buzz going to in excess of $200 per square foot.
Just because a property is well known, like the Chrysler Building, it is not necessarily a Trophy. Class A means that
a building is "well maintained, with stellar ownership in prime neighborhoods and high credit tenants". I think
of Class A buildings usually as being built post World War II, but others may differ, and certainly Rockefeller Center would
be an example of a Class A complex that is older. Class B is defined by the Times as having "smaller tenants as
well as a prewar vintage." Services are often the same as in Class A, though. Class C properties are "Class
B with fewer services." Many Class C buildings can't compete in today's market, and are being converted into condominiums
and hotels. Most brokers are like Justice Potter in regard to his famous definition of pornography in determinating
as to which building is what, in that we "know it when (we) see it...."
Rent Tax (CRT): If you pay more than $250,000 a year in rent, then the city charges you in the area of 6% extra
with this tax, which was created in the 1960's.
Recent "trophy sales"
11 Madison Avenue: $2.6 billion...730 Fifth Avenue (The Crown Building) : $1.78 billion...550 Madison
Avenue / Sony: $1.1 billion....650 Madison Avenue: $1.3 billion....620 Sixth Avenue (mainly retail) $500 million....111 Eighth
Avenue (for Google's New York headquarters) / former Port Authority Building $2 billion
New York's Biggest Landlords
Asset Management, 27.529 million square feet
SL Greene Realty Corp. 27,240,372
Vornado Realty Trust 24,669,785
Silverstein Properties 13,413,719
The Durst Organization 12,325,582
RXR Realty 9,621,724
Boston Properties 8,961,755