Real Estate Securities Glossary
122 key terms across syndication, fund formation, securities law, and tokenization — defined by the counsel who uses them daily.
3(c)(5)(C)
An exemption under the Investment Company Act that allows certain funds to avoid registration as inv...
506(b)
An exemption under Regulation D that allows a fund or syndication to raise capital privately from an...
506(c)
An exemption under Regulation D that allows a fund or syndication to raise capital through general a...
Accredited Investor
An individual or entity that meets certain financial or professional eligibility criteria — set by t...
Acquisition Fee
A one-time fee paid to the GP, Manager, or Sponsor upon the closing of an asset acquisition, typical...
Administrator
A third-party service provider engaged by the fund to handle back-office operations such as bookkeep...
Airdrop
The distribution of tokens directly to investor or user wallets, typically at no cost, often used fo...
American Waterfall
A method of calculating and distributing carried interest on a deal-by-deal basis, rather than acros...
AML/KYC (Anti-Money Laundering / Know Your Customer)
A set of regulatory requirements obligating financial institutions and securities issuers — includin...
Auditor
An independent professional or firm that reviews and verifies the accuracy and integrity of the fund...
Blockchain
A distributed digital ledger that records transactions across a network of computers in a way that i...
Blocker
A legal entity — often a corporation — inserted between the fund and certain investors to prevent th...
Blue Sky Filings
State-level regulatory filings required to qualify or notify the relevant state securities authority...
Blue Sky Laws
State-level securities laws designed to protect investors from fraud by regulating the offering and ...
Capital Call
A formal request from the GP or Manager to investors to contribute a specified portion of their comm...
Capital Commitment
The total amount of capital an investor agrees to contribute to the fund or syndication over its lif...
Capital Contribution
The actual cash — or, in some tokenized structures, digital currency such as a stablecoin — transfer...
Capitalization Rate (Cap Rate)
A common real estate valuation metric calculated by dividing a property’s net operating income (NOI)...
Carried Interest
The GP’s or Manager’s share of the fund’s profits, earned as compensation for managing the fund and ...
Cause Event
A serious violation — such as fraud, willful misconduct, or breach of fiduciary duty — that, as defi...
Clawback
A provision in the fund agreement requiring the GP to return previously distributed carried interest...
Closed-End Fund
A fund with a fixed term and a defined investment period, after which the fund is wound down and pro...
Co-Investment
An opportunity for one or more LPs to invest directly alongside the fund in a specific deal, typical...
Consensus Mechanism
The process by which participants in a blockchain network agree on the validity of transactions and ...
Continuation Fund
A new fund vehicle created to hold and continue managing select assets from an existing fund beyond ...
Debt Service Coverage Ratio (DSCR)
A measure of a property’s ability to service its debt, calculated by dividing the property’s net ope...
Decentralized Autonomous Organization (DAO)
An organization governed by rules encoded in smart contracts on a blockchain, with decisions made co...
Decentralized Finance (DeFi)
A broad term for financial applications and protocols built on public blockchain networks that opera...
Defaulting Partner
A partner—typically an LP—who fails to fulfill their obligations, most commonly by failing to fund a...
Digital Wallet
A software application — or hardware device — that stores a user’s private keys and enables them to ...
Disposition Fee
A fee paid to the GP or Manager upon the sale or other disposition of a fund asset, typically calcul...
Distribution
A payment made by the fund to investors, either in cash or in kind. In tokenized funds, distribution...
Distributions in Kind
Distributions made in the form of non-cash assets—such as shares of stock or property—rather than ca...
Drawdown
See: Capital Call. This term is often used interchangeably with “capital call”.
Dry Powder
Committed but uncalled capital—i.e., capital that LPs have committed to the fund but that has not ye...
Effectively Connected Income (ECI)
Income earned by a non-US person that is treated as effectively connected with the conduct of a US t...
Employer Identification Number (EIN)
A unique nine-digit tax identification number assigned by the IRS to entities such as partnerships, ...
European Waterfall
A method of distributing profits in which all returns are pooled across the entire portfolio before ...
Evergreen Fund
An open-ended fund with no fixed termination date, designed to operate indefinitely. Capital returne...
Fee Waiver
An arrangement in which a GP voluntarily waives its right to receive a management fee or other fee i...
Feeder Fund
A separate fund entity that pools investor capital and channels it into a larger master fund. Feeder...
Final Closing Date
The deadline after which no new investors may be admitted to a closed-end fund. All LPs who join aft...
Follow-On Investment
Additional capital deployed into a property or asset that the fund already owns, for example to fund...
Foreign Investment in Real Property Tax Act (FIRPTA)
A US federal law that subjects foreign investors to US income tax on gains from the sale of US real ...
Form D
A brief notice filed with the SEC by issuers conducting private securities offerings under Regulatio...
Fund
A pooled investment vehicle that collects capital from investors and deploys it into real estate ass...
Fund Expenses
Costs that are borne by the fund itself (and thus shared among investors), as opposed to costs borne...
Fundraising Period
The period during which the GP actively markets the fund and accepts capital commitments from invest...
Gas Fee
The transaction fee paid by a user to compensate the blockchain network for the computational resour...
Gate
A contractual provision, more common in open-end or evergreen funds, that limits the total amount of...
General Partner (GP)
The entity responsible for managing a fund structured as a limited partnership. The GP has broad aut...
Governance Token
A type of digital token that grants its holder the right to participate in the governance of a block...
GP Catch-Up
A distribution provision that allows the GP to receive an accelerated share of profits after LPs hav...
GP Commitment
The GP’s own capital contribution to the fund, which demonstrates alignment of interest with LPs. GP...
GP Expenses
Costs incurred by the GP in connection with managing the fund, such as salaries and overhead. These ...
GP Removal Clause
A provision in the fund agreement that gives LPs the right to remove the GP, either “for cause” (e.g...
Gross Asset Value (GAV) / Net Asset Value (NAV)
GAV is the total fair market value of a fund’s assets before deducting liabilities. NAV is the GAV m...
Guarantee Fee
A fee paid to a person or entity—often the GP or a key principal—in exchange for personally guarante...
Hurdle Rate
See: Preferred Return
Initial Closing Date
The date on which the first group of investors are formally admitted to the fund and their commitmen...
Investment Adviser
An entity or individual that provides investment advice to the fund for compensation. Investment adv...
Investment Advisers Act
The Investment Advisers Act of 1940, a US federal law regulating investment advisers. Advisers to to...
Investment Company Act
The Investment Company Act of 1940, a US federal law regulating pooled investment vehicles. Tokenize...
Investment Period
The period during which the fund is permitted to make new investments. Once the investment period ex...
K-1 (Schedule K-1)
A tax form issued annually by the fund to each investor, reporting the investor’s allocable share of...
Key Person Event
An event triggered when one or more designated key persons fails to devote the required amount of ti...
Key Persons
Individuals identified in the fund agreement whose active involvement is considered essential to the...
Late Admission Fee
An amount paid by LPs admitted to a closed-end fund after the initial closing, designed to compensat...
Layer 2 (L2)
A secondary framework or protocol built on top of a primary blockchain (Layer 1) designed to improve...
Ledger
In blockchain terminology, the distributed record of all transactions that have occurred on a given ...
Leverage
The use of borrowed funds (debt) to finance a portion of the fund’s investments, with the goal of en...
Limited Partner (LP)
An investor in a fund structured as a limited partnership. LPs contribute capital and share in the f...
Limited Partnership Agreement (LPA)
The primary governing document for a fund structured as a limited partnership. In a tokenized fund, ...
Liquidity Pool
In DeFi, a pool of tokens locked in a smart contract that enables decentralized trading without a tr...
Lockup Period
A period during which investors in an open-end fund are restricted from withdrawing their capital. I...
LP Advisory Committee (LPAC)
A committee composed of representatives from a select group of LPs, typically the fund’s largest or ...
Management Fee
A recurring fee paid by the fund (or directly by LPs) to the GP or Manager as compensation for manag...
Management Fee Offset
A reduction in the management fee triggered by certain events specified in the fund agreement, such ...
Manager
The entity responsible for managing a fund structured as a limited liability company (LLC). In a tok...
Marketing Deck (or Pitch Deck)
A presentation—typically in slide format—used by the GP to introduce the fund to prospective investo...
Master Fund
The central investment entity into which one or more feeder funds pool their capital. In a tokenized...
Metadata
Additional descriptive information embedded within or associated with a token on a blockchain. For r...
Minting
The process of creating new tokens on a blockchain. In a tokenized real estate offering, minting occ...
Net Operating Income (NOI)
A property’s gross revenue less operating expenses (excluding debt service, depreciation, and taxes)...
No-Fault Divorce
An informal term for a GP removal clause that allows LPs to remove the GP without needing to prove w...
Node
A computer that participates in a blockchain network by storing a copy of the ledger, validating tra...
Non-Fungible Token (NFT)
A unique digital token on a blockchain that represents ownership of a specific, one-of-a-kind item —...
North American Securities Administrators Association (NASAA)
An organization of securities regulators from across the US, Canada, and Mexico, focused on investor...
Offering Period
See: Fundraising Period.
Open-End Fund
A fund with no fixed termination date that allows investors to contribute capital and request redemp...
Operating Agreement
The primary governing document for a fund structured as an LLC. As with the LPA in a limited partner...
Organizational Expenses
Costs incurred in forming and establishing the fund, such as legal fees for drafting the fund docume...
Parallel Fund
A separate investment vehicle that operates alongside the primary fund, invests in the same assets o...
Placement Agent
A FINRA-licensed broker-dealer engaged by the GP to assist in marketing the fund and raising capital...
Preferred Return (or “Hurdle Rate”)
A minimum annualized return that LPs must receive on their invested capital before the GP is entitle...
Private Placement Memorandum (PPM)
A comprehensive disclosure document provided to prospective investors. In a tokenized offering, the ...
Profits Interest
An equity interest in a partnership or LLC entitling the holder to a share of future profits. In a t...
Qualified Client
A higher eligibility standard than “accredited investor” under the Investment Advisers Act, required...
Qualified Purchaser
The highest individual investor eligibility standard under the Investment Company Act, required for ...
Real Estate Investment Trust (REIT)
A tax-advantaged entity that owns income-producing real estate and must distribute at least 90% of i...
Recycling
A provision in some fund agreements that allows the GP to reinvest returned capital (e.g., from earl...
Regulation A
A securities law exemption that allows companies to raise capital from the public — including non-ac...
Regulation D (Reg D)
A set of SEC rules providing exemptions from securities registration requirements, making it the pri...
Regulation S
A safe harbor from US securities registration requirements for offers and sales of securities made o...
Reserves
Capital set aside by the fund from LP commitments or asset-level cash flow to cover anticipated futu...
Securities Act of 1933
The foundational US federal law requiring registration of securities offerings unless a specific exe...
Securities and Exchange Commission (SEC)
The primary US federal regulatory agency overseeing securities markets, investment funds, and invest...
Security
A broad legal term for a financial instrument representing an ownership stake, creditor relationship...
Security Token
A digital token that represents ownership of a regulated financial asset — such as an interest in a ...
Security Token Offering (STO)
The process of issuing security tokens to investors in a regulated offering, analogous to a traditio...
Side Letter
A separate, bilateral agreement between the GP and a specific LP that grants that LP particular righ...
Smart Contract
Self-executing computer code deployed on a blockchain that automatically carries out predefined acti...
Soft Commitment
An informal, non-binding expression of interest by a prospective investor to commit capital to a fun...
Special Purpose Vehicle (SPV)
A separate legal entity created by the fund to hold a specific investment or group of investments, o...
Subscription Agreement (or Subscription Documents / “Sub Docs”)
The legal agreement through which an investor formally commits to invest in the fund, represents the...
Successor Fund
A new fund raised by the same GP following—or near the end of—the current fund’s investment period, ...
Summary of Terms (or “Term Sheet”)
A concise document summarizing the key commercial and legal terms of a fund, provided to prospective...
Syndication
See: Special Purpose Vehicle (SPV).
Transfer Restrictions
Limitations in the fund agreement on an LP’s ability to transfer or assign its interest in the fund ...
Unrelated Business Taxable Income (UBTI)
Income earned by a tax-exempt entity (such as a pension fund, endowment, or 501(c)(3) organization) ...
Vintage Year
The year in which a fund makes its first investment (or, in some contexts, its first capital call). ...
Waterfall
The contractual mechanism—set out in the fund’s LPA or Operating Agreement, typically under a “Distr...
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