This Glossary provides definitions of terms related to property and property investing.
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Term and Definition
Debt arrangement fee / debt financing fees

Fees paid to the fund manager for its services for arranging debt for asset purchases or refinancing. This fee would be in addition to any arrangement fees paid directly to debt providers.

Depreciation

A loss of value caused by deterioration, or obsolescence, or both. Deterioration is evidenced by wear and tear and decay. Obsolescence is divisible into two parts; functional and economic. Functional obsolescence may be due to: poor planning, functional inadequacy or over-adequacy due to size, style, age or otherwise. It is evidenced by conditions within the property. Economic obsolescence is caused by changes external to the property such as property use (change in occupier habits or social).

Development costs

The costs incurred from the commencement of a project to its implementation including, but not limited to, site preparation costs, preliminary costs, professional fees, earthworks and construction costs.

Development management fee

Fee paid to the fund manager for its service in supervising and project managing the development of a property. Fees are a proportion of the total development cost and capital expenditure.

Development pipeline

Proposed projects that are not committed but are likely to proceed.

Direct costs

Direct construction costs include:
Cost of Site:
– purchase price of land
– title, legal and recording expenses
– commission, if paid by purchaser

Cost of Improvements:
– preliminary: consultations, surveys or permits
– architects' and engineers' fees
– cost of building and equipment
– cost of improvements on land, such as landscaping, walls, fences, roads, grading

Direct property

Investments held directly in real estate, as opposed to investing in property through a listed property trust. See also indirect property.

Discount Department Store / DDS

A large retail department store offering a variety of branded merchandise which sells products at prices lower than those charged by traditional retail outlets. See also mini-major tenant. e.g. Big W, Kmart, JB Hi-Fi.

Discount rate

The interest rate used to convert future cash flows, both income and outgoings, to their present value, i.e. 'what it is worth today'. The term 'discount' does not refer to the meaning of the word, but the discounting of future cash flows by a particular rate of interest to determine the present value.

Discounted cash flow (DCF)

Financial modelling technique where a discounted cash flow is used to analyse an investment opportunity. Annual cash flows are discounted by a discount rate to arrive at a net present value (NPV) or internal rate of return (IRR) which are then used to consider the potential of the investment. Usually a 10 year period.

Discretionary Manager

Investment portfolios managed by Fund Managers on behalf of individual investors and conforming to specific guidelines set by the investor. Usually the Fund Manager has the ability to buy and sell on behalf of the investors without referring to the investors for each transaction. The Discretionary Manager most operate within the investors guidelines. See also Non-discretionary Manager

Disposal costs

The total cost of selling an asset. Includes the agents' commission, marketing/advertising costs, legal fees, valuation fees, and any other costs directly related to the disposal.

Distribution (Dividend) Re-investment Plan (DRP)

A plan offered by a fund allowing investors to reinvest their distributions for additional units.

Distribution (Dividend) yield

Distribution yield is the income distribution as a percentage of net asset value (NAV).

Distribution centre

Conventional industrial warehouse accommodation greater than 20,000 sqm in size. e.g. 85 William Angliss Drive, Laverton North, VIC.

Distributions / dividends

A payment of cash from a company's profits to its investors. Income received by a managed fund from its portfolio is distributed to its unitholders as fund distributions.

Diversification

Spreading of investments among different asset classes (e.g. office, retail, industrial) and locations in order to control and minimise risk.

Diversified portfolio

A portfolio that invests in a mix of different types of assets. (e.g. office, retail and industrial).

Due diligence

The detailed research carried out prior to the acquisition of a property, management team or asset's individual characteristics, including leases and environments, etc. Includes research into the legal, tax and accounting terms and conditions of the deal to ensure their accuracy, completeness and soundness.

Dutch auction

An auction where the auctioneer will commence proceedings by quoting a price above the actual value and gradually reduce the figure until a participant is willing to accept the auctioneer's price.

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