Intermediate1 hour14 terms

CoCo Bonds in REI: Key Terms Collection

This collection offers a curated selection of key terms that might be helpful when exploring contingent convertible (CoCo) bonds within real estate investment strategies. It focuses on commonly referenced concepts and terminology you may encounter, providing a quick reference to support your learning.

Term Collection

Contingency Event

A contingency event in real estate is a condition or action that must be met for a real estate contract to become legally binding. These clauses protect buyers and sellers by allowing them to back out of a deal without penalty if specified conditions are not satisfied.

Intermediate5 min

Distressed Property

A distressed property is real estate facing financial, physical, or legal challenges, often sold below market value due to owner pressure or lender action, offering potential for investor profit.

Beginner15-18 min

Capital Stacking

Capital stacking is an advanced real estate financing strategy involving the layering of multiple debt and equity instruments to fund a property acquisition or development, optimizing the capital structure for specific risk-return profiles.

Advanced5 min

Default Risk

Default risk is the potential for a borrower or tenant to fail to meet their contractual financial obligations, such as making mortgage or rent payments, leading to financial losses for lenders and property owners.

Intermediate5 min

Private Equity Real Estate

Private Equity Real Estate (PERE) involves institutional or high-net-worth investors pooling capital to acquire, develop, manage, and sell real estate assets, typically through a fund structure, with the goal of generating significant returns over a medium to long-term horizon.

Advanced8 min

Trigger Event

A trigger event in real estate is a predefined condition or occurrence that, when met, automatically initiates a specific action or consequence outlined in a contract, loan agreement, or other legal document.

Intermediate1-2 min

Preferred Stock

Preferred stock is a hybrid security that combines features of both bonds and common stock, typically offering fixed dividend payments and priority over common stockholders in receiving dividends and assets upon liquidation.

Intermediate8-9 min

Mezzanine Financing

Mezzanine financing is a hybrid debt-equity instrument used in real estate to bridge the gap between senior debt and sponsor equity, offering higher leverage at a higher cost due to its subordinated position in the capital stack.

Intermediate13-16 min

Capital Stack

The capital stack is the hierarchical structure of all debt and equity financing used to fund a real estate investment, defining the priority of payment, risk, and return for each capital source.

Advanced13-16 min

Convertible Security

A convertible security is a type of investment that can be converted into a predetermined number of common shares of the issuing company or partnership at a specified conversion price or ratio, offering investors both income potential and equity upside.

Advanced5 min

Equity Conversion

Equity conversion is the process by which real estate investors transform the accumulated equity in their properties into accessible cash or other liquid assets, typically for reinvestment, debt consolidation, or other financial objectives.

Intermediate2-3 min

Preferred Equity

Preferred equity is a hybrid financing instrument in real estate that provides investors with a preferential claim on a property's cash flow and sale proceeds, typically paid before common equity but after senior debt.

Intermediate5-6 min

Contingent Convertible Bond

A Contingent Convertible (CoCo) Bond is a complex hybrid debt instrument issued by financial institutions, primarily banks, that automatically converts into equity or is written down if a pre-specified trigger event, typically related to the issuer's capital adequacy, occurs.

Advanced12-13 min

Debt Management

Debt management in real estate investing involves strategically handling financial obligations to optimize cash flow, reduce risk, and maximize returns from investment properties. It encompasses various strategies for acquiring, servicing, and restructuring debt.