Build-to-Suit

Definition

A development where a building is specifically constructed according to a tenant's specifications before they sign the lease. A bold assumption that the tenant's vision won't change 47 times.

Example Usage

The pharmaceutical company negotiated a build-to-suit arrangement for their new 200K sq ft research facility.

Origin

Commercial real estate terminology from the 1990s

Fun Fact

Build-to-suits often include long lease commitments (10-15 years) to justify the developer's construction costs.

Source: CoreNet Global

Related Terms

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leasehold estate

Ownership of the right to use and occupy property for a specific time period under a lease, but not ownership of the land itself. You own the building but rent the ground—common in Hawaii and making zero sense everywhere else.

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transfer tax

A tax levied by state or local government when property ownership changes hands. It's the government's cut of your real estate transaction, because apparently they weren't getting enough already.

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break-even ratio

The percentage of gross income needed to cover operating expenses and debt service, revealing how close a property teeters to financial disaster. It's the fiscal tightrope number—anything approaching 100% means you're one vacancy from trouble.

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LTV (Loan-to-Value Ratio)

The percentage of a property's value that's financed through a loan versus down payment. Higher LTV means less cash down but more risk for the lender and more PMI for you.

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Debt Service Coverage Ratio (DSCR)

Annual net income divided by annual debt payments, basically whether you're making enough money to pay your mortgage.

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mortgage

A special loan where you borrow hundreds of thousands of dollars to buy a house, pledging that very house as collateral in case you can't pay it back—what could go wrong? This secured loan lets you own property now while spending the next 15-30 years paying for it, with the bank holding seizure rights until you make that final payment. It's the American Dream™, assuming your dream includes amortization schedules and interest calculations.

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