Glossary
Commercial and cannabis real estate, defined
41 terms across lease structures, investment metrics, entitlement mechanics and Michigan cannabis licensing — written for practitioners, not for search engines.
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What is this glossary?
This glossary defines the commercial and cannabis real estate terms that decide deals in Michigan and Tampa Bay: lease structures, investment metrics, entitlement mechanics and Michigan cannabis licence classes. Every term is cross-linked from the answers, guides and market pages where it appears.
8 terms
Leases
Lease structures and the clauses that shift cost and risk between landlord and tenant.
- Absolute NNN
- A lease structure where the tenant is responsible for all property expenses, including roof and structure, leaving the landlord with a purely passive income stream.
- CAM
- Common Area Maintenance — the operating costs of shared property areas (parking lot, landscaping, lighting, snow removal) that a landlord passes through to tenants, usually pro-rata by square footage.
- Gross Lease
- A lease structure where the landlord pays all or nearly all operating expenses — taxes, insurance, maintenance, and often utilities — out of the base rent, giving the tenant a single predictable payment.
- Ground Lease
- A long-term lease of land alone, under which the tenant typically constructs and owns the improvements for the lease term, with the land and improvements reverting to the landowner at expiration.
- Modified Gross
- A lease structure between gross and NNN where base rent covers some expenses (often taxes and insurance) while the tenant reimburses others (often CAM or utilities), with the specific split negotiated deal by deal.
- NN (Double Net)
- A lease where the tenant reimburses two of the three nets — property taxes and insurance — but not common area maintenance, which the landlord retains. CAM is the line that separates NN from NNN.
- NNN (Triple Net)
- A lease where the tenant pays base rent plus its pro-rata share of the three major operating costs — property taxes, insurance, and common area maintenance — leaving the landlord with reduced expense exposure.
- TI Allowance (Tenant Improvement Allowance)
- A sum of money a landlord contributes toward a tenant's buildout or renovation costs, typically expressed as dollars per square foot and negotiated as part of a new lease.
8 terms
Investment & Underwriting
Metrics and strategies used to price and compare income-producing property.
- 1031 Exchange
- A Section 1031 tax deferral mechanism letting an owner sell investment real estate and reinvest proceeds into replacement property without immediately recognizing capital gain.
- Cap Rate
- Capitalization rate — a property's net operating income divided by its purchase price or value, used as the primary shorthand for pricing and comparing income-producing real estate.
- Cash-on-Cash Return
- The ratio of a property's annual pre-tax cash flow to the actual cash invested (down payment plus closing costs), used to measure leveraged return rather than the unleveraged return a cap rate reflects.
- Core
- An investment strategy targeting stabilized, well-leased properties in strong markets, prioritizing low-risk, predictable income over appreciation upside.
- DSCR
- Debt Service Coverage Ratio — a property's net operating income divided by its annual debt service, used by lenders to measure how much cushion exists before income falls short of loan payments.
- NOI
- Net Operating Income — a property's total operating revenue minus operating expenses, before debt service, capital expenditures, and income taxes, used as the standard basis for valuing income property.
- Opportunistic
- The highest-risk, highest-return point on the CRE investment spectrum, involving ground-up development, major repositioning, or distressed assets with substantial vacancy or capital needs.
- Value-Add
- An investment strategy targeting underperforming or undermanaged property with the intent to increase income and value through renovation, releasing, or operational improvement, sitting between core and opportunistic on the risk spectrum.
6 terms
Transaction Mechanics
The documents and steps that move a deal from offer to closing.
- Due Diligence
- The contractual period after an offer is accepted during which a buyer investigates a property's physical, financial, legal, and regulatory condition before the purchase becomes non-contingent.
- Estoppel Certificate
- A signed statement from a tenant confirming the current terms of its lease — rent, term, deposit, defaults, and any side agreements — used by a buyer or lender to verify the seller's lease representations.
- LOI (Letter of Intent)
- A non-binding document outlining the proposed key terms of a transaction — price, structure, due diligence period, and timeline — used to establish agreement in principle before drafting a full purchase agreement or lease.
- Owner-User
- A buyer that purchases commercial property to occupy and operate its own business there, rather than as a landlord seeking rental income — a distinction that changes financing options, pricing, and diligence focus.
- Sale-Leaseback
- A transaction in which a property owner sells its building to an investor and simultaneously signs a lease to remain in occupancy, converting owned real estate into cash while retaining operational use of the space.
- SNDA
- Subordination, Non-Disturbance and Attornment agreement — a three-way agreement among lender, landlord, and tenant that protects a tenant's lease if the landlord defaults on its mortgage, while subordinating the lease to the lender's lien.
6 terms
Zoning & Incentives
Municipal entitlement processes and the tax tools that make deals pencil.
- Brownfield TIF
- Michigan's Brownfield Redevelopment Financing Act lets a developer capture future property tax increases on a contaminated, functionally obsolete, or blighted site to reimburse eligible cleanup and redevelopment costs.
- CUP (Conditional Use Permit)
- Municipal approval allowing a use that is not permitted by right in a zoning district but is allowed subject to conditions and a discretionary review process.
- Entitlement
- The municipal approvals — zoning compliance, site plan approval, special use permits, variances — that legally authorize a specific development or use on a parcel before construction or occupancy.
- PA 198 (Industrial Facilities Exemption)
- Michigan's Industrial Facilities Tax Exemption under Public Act 198 of 1974, which reduces or freezes the property tax burden on new industrial facility construction or the rehabilitation of obsolete industrial property.
- Opportunity Zone
- A federally designated low-income census tract where investors can defer and potentially reduce capital gains tax by reinvesting gains into a Qualified Opportunity Fund that develops or substantially improves property in the zone.
- Variance
- A discretionary approval, typically granted by a zoning board of appeals, allowing a property to deviate from a specific dimensional or use standard in the zoning ordinance where strict compliance would cause practical difficulty or unnecessary hardship.
13 terms
Cannabis Regulatory
Michigan CRA licensing, municipal opt-in status, and cannabis-specific real estate terms.
- C1D1
- Class I, Division 1 — an electrical hazard classification requiring explosion-proof equipment in rooms where flammable solvents (e.g., butane, propane) are used for cannabis extraction.
- Canopy
- The measured square footage of cultivation area actively used to grow cannabis plants. Several states tier grower licenses by canopy; Michigan does not — but canopy still drives facility sizing, lighting load and HVAC design.
- Excess Grower
- A Michigan CRA cultivation license that lets an operator already holding the requisite number of Class C grower licenses stack additional plant capacity beyond the standard Class C limit — commonly across multiple buildings on one campus.
- Green Zone
- A colloquial term for a municipal zoning overlay identifying the parcels where cannabis facilities are permitted, typically drawn to exclude required buffer distances from schools, parks, and other protected uses.
- METRC
- Michigan's state-mandated seed-to-sale tracking system, used by every licensed cannabis business to record plants, product, and transfers from cultivation through retail sale.
- Microbusiness
- A Michigan CRA license class allowing a single, smaller-scale facility to cultivate, process, and sell cannabis directly to consumers at one location, subject to a plant count cap.
- Opt-In
- Under the Medical Marihuana Facilities Licensing Act (MMFLA), the affirmative act a Michigan municipality must take — adopting an authorizing ordinance — before any medical marihuana facility license can be issued within its borders. Silence means no license.
- Opt-Out
- Under the Michigan Regulation and Taxation of Marihuana Act (MRTMA), the affirmative act a municipality must take — adopting a prohibition ordinance — to keep adult-use cannabis establishments out. Silence means adult-use establishments are permitted.
- Provisioning Center
- The Michigan statutory term for a licensed retail medical cannabis facility that sells directly to registered patients and caregiver-assigned customers; the parallel adult-use license class is called a retailer.
- Receivership
- A court-supervised process in which a neutral receiver takes control of a distressed property or business — including licensed cannabis operations — to preserve value and, often, sell the assets under court approval.
- Retailer (Adult-Use)
- The Michigan CRA license class authorizing a facility to sell cannabis products directly to adult-use (recreational) customers age 21 and older, established under the Michigan Regulation and Taxation of Marihuana Act.
- Sale of Licensed Premises
- A combined transaction structure in which a cannabis license and the real estate it operates from are sold together, requiring the deal to be sequenced against the Michigan CRA's license transfer or change-of-ownership approval process.
- Social Equity Community
- One of the municipalities on the Michigan CRA's designated list of communities disproportionately impacted by cannabis prohibition enforcement, whose residents receive reduced license fees and application assistance under the CRA's Social Equity Program.
A–Z
Every term, alphabetically
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