Real estate or real property? While both real estate investing terms have much in common, a key difference sets them apart. Let’s consider real estate versus real property and get some clarity on these two concepts.
What is real estate?
Real estate refers to a plot of land along with any attachments or improvements, whether natural or man-made, that may be present on that land. Natural attachments may include water, trees, minerals, and oil. Man-made or artificial attachments include houses, buildings, sidewalks, and other features built to enhance the land for residential or commercial use.
Residential real estate includes properties intended to be sold to a buyer or rented to a tenant; these include houses, townhouses, and apartment buildings. Commercial real estate also deals with land and buildings, but it has a distinct focus on business tenancy, which includes offices, restaurants, and retail establishments. There’s also a subcategory of commercial real estate known as industrial real estate, which includes investment properties like warehouses that are used in large-scale manufacturing and production.
What is real property?
Real property is not exactly the same as real estate. It’s similar in that the term refers to the land and any additions or improvements made to it. But behind the physical nature of the real estate, real property also includes the owner’s rights of use and enjoyment of that property.
What is the bundle of rights?
There are five property rights — known collectively as the bundle of rights — granted to those who have ownership interest in a real property:
The right to possess: This means an owner or investor has the title and is therefore allowed to occupy the property.
The right to control: This means a property owner, landlord, or real estate investor is allowed full usage of the property — as long as they don’t break any laws doing so.
The right of exclusion: This means the title owner is allowed to prevent other parties from entering the property. This right, however, is superseded by a property search warrant by law enforcement. Another scenario would involve a utility company needing access to the property, in which case an easement might be used to waive this right.
The right of enjoyment: Just as with the right to control, the title holder is allowed to use the property at their own discretion, as long as they are not breaking the law.
The right of disposition: This right allows the current owner to transfer property ownership (fee simple) to another party, whether temporarily or permanently. This right is enjoyed only when the property is free of a mortgage, lien, or other encumbrance.
A word about semantics
You might be thinking, “Well, of course a property transaction includes the land and the buildings on it.” Or, “Real property? Does that mean there’s fake property?”
Even when the details of the property in question seem obvious, making assumptions in real estate isn’t wise. Contracts are vital, and getting their language right is everything, so it’s important to know when we’re talking about the land and building alone or the ownership rights that go along with it.
The Millionacres bottom line
It’s easy for the terms “real estate” and “real property” to be used interchangeably when referring to the real estate market. However, real property refers to the entire experience of being a property owner, not just the land and structures on it.
(Bloomberg) — Compass, a SoftBank-backed company that’s among the largest real estate brokerages in the U.S., has selected underwriters for a potential initial public offering, according to a person with knowledge of the matter.
The New York-based startup is working with Goldman Sachs Group Inc. and Morgan Stanley ahead of a listing that’s slated for 2021, said the person, who requested anonymity because the information isn’t public.
Representatives for Compass and Goldman declined to comment. A spokesman for Morgan Stanley didn’t immediately have a comment.
Compass was founded in 2012 by Ori Allon and Robert Reffkin, a Goldman alum who was once Gary Cohn’s chief of staff at the bank. It positions itself as a real estate firm that uses technology to give its agents an advantage over rivals. The company has used capital from venture investors to expand by acquiring smaller brokerages across the U.S.
Low mortgage rates have fueled a housing rally in the U.S. as Americans seek more space to spread out in the pandemic. That’s boosted residential real estate companies, including Zillow Group Inc. and Opendoor, another SoftBank-backed company. Realogy Holdings Corp., which owns Compass competitor Corcoran Group, has seen its shares rally about 28% this year.
In addition to SoftBank, which participated in a $370 million funding round last year that valued Compass at $6.4 billion, investors include Goldman Sachs, Fidelity, Wellington Management, Founders Fund, Dragoneer Investment Group and Canada Pension Plan Investment Board, according to its website.
Former American Express Chief Executive Officer Ken Chenault and Salesforce.com CEO Marc Benioff are also investors.
Commercial Real Estate: Navigating Opportunities And Challenges Ahead (Video)
25 November 2020
To print this article, all you need is to be registered or login on Mondaq.com.
Uncertainties currently abound in many sectors and commercial
real estate is no exception. While the COVID-19 pandemic has caused
some level of distress in certain sectors of the commercial real
estate market, it has also opened doors for stakeholders and
presented opportunistic transactions with their own unique set of
risks and important structuring considerations, particularly in the
restructuring and insolvency space.
In this video, Graham Rawlinson and Charlene Schafer briefly
discuss what to expect in our upcoming webinar on December 3 on
commercial real estate. Some of the key topics to be explored
preparing for bankruptcy or insolvency opportunities that may
affect the Canadian real estate market, and what to consider when
dealing with assets going through some type of a debtor/creditor
funds focused on distressed and opportunistic real estate
assets, and whether the ongoing distress in the market will
continue to present new opportunities; and
distressed opportunities south of the border and unique
considerations affecting the U.S. commercial real estate
Play the short clip below and register for the webinar here.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
POPULAR ARTICLES ON: Real Estate and Construction from Canada
Montreal-based software company Nakisa is expanding into the real estate technology market with the acquisition of IMNAT Software, a cloud-based real estate management solution.
Nakisa CEO Babak Varjavandi said IMNAT’s real estate management technology will be added to Nakisa’s lease management solutions portfolio.
“By combining the breadth of our lease accounting knowledge with their real estate expertise, we’re poised to disrupt the corporate real estate market, which is currently reliant on outdated processes and proptech legacy software,” he told RENX.
IMNAT is also Montreal-based. The start-up has about a half dozen employees and has entered the sales phase for its platform, which it markets specifically at businesses which manage their real estate.
“Our reimagined corporate real estate solution will offer customers a complete modern end-to-end solution that leverages the Nakisa cloud platform and provides full ITGC (IT general controls), GDPR (General Data Protection Regulation), user management and more,” Varjavandi said. “We truly believe we can disrupt this market because I think we are much further ahead . . . of our competitors with the technology.
“At the end of the day, because of the technology that we have, we believe we can bring in all these other pillars to provide an end-to-end solution.”
He said IMNAT Software’s technology will complement and extend Nakisa’s existing lease accounting product line and address increasing demand for global corporate real estate management solutions.
The acquisition is set to close on Jan. 1, 2021.
Nakisa and IMNAT
Nakisa released the first version of its product in 2000. The company has two lines of business – one addressing human resources and the other in leasing. It will now expand to provide end-to-end lease management which will include real estate and lease accounting.
The company also has offices in Frankfurt, Singapore, Florida and Pakistan.
Varjavandi said the company name is also his mother’s name.
He said IMNAT Software, founded in 2011, has a core product, InfoSite, which is a leading edge corporate real estate management software designed to centralize and manage corporate real estate accounts.
The platform features databased reporting and dashboards, streamlines corporate lease operations and manages data for leases, taxation, payments and rent rolls.
“When we talked to our customers and looked at the market, what we found that was interesting is that the real estate software industry hasn’t really evolved,” said Varjavandi. “They’re still using very old technology and it’s very costly to implement.
“Even if they’re on the cloud, they’re really not what we call a native cloud application.
“We saw huge opportunity in that area. For us to enter that market, we had a choice of either building the whole real estate functionality, which is the operation day-to-day activity of maintaining your real estate.
“Or we had to acquire a company that already had a customer base, they already had the expertise and they could use their expertise and that’s what happened. We saw this made-in-Montreal company.”
IMNAT has some major clients
Nakisa became familiar with IMNAT because the companies share some of the same clients.
IMNAT’s customer base include large private corporations such as Dollarama, Transcontinental and Lowe’s Canada, as well as some of the largest public government institutions in Canada.
Nakisa and IMNAT will combine their technology and networks. They will also combine their company-level data to generate a more accurate financial planning repository of information for trends and projections.
Varjavandi said InfoSite will be integrated into Nakisa’s product line and branded under the Nakisa umbrella. In January, IMNAT’s team, including CEO and co-owner Alexis Dénommée-Godin and co-owner Jean-François Bechard, will join Nakisa.
“I’m extremely proud of the quality software our team has built over the years and it’s an honour to be recognized and chosen by an established lease accounting brand that serves Fortune 500 companies around the world,” said Dénommée-Godin in a statement announcing the sale.
“Joining Nakisa allows us to take our real estate expertise to the global market and fulfill a need that has a tangible impact on both businesses and people.”
Unify divergent software products
Varjavandi said Nakisa serves more than 900 enterprise customers and over one million subscribers in 24 industries. Its client base includes a number of different industries, including retail, pharmaceutical and airlines. It has users in over 120 countries and supports 18 languages.
He said the acquisition of IMNAT presents a huge opportunity for Nakisa to both better serve existing customers and attract new ones.
“We are seeing companies having multiple software and we think we can actually unify the whole leasing, both for accounting and operations side, under one umbrella,” Varjavandi said. “From our perspective, any kind of asset you have we can provide an end-to-end solution.
“On the real estate side, we have a few customers who are interested in expanding on that to things like facility management and project management. Those are areas we’re also working with them. The beauty of the customers that we have, because these are very large customers, they’re actually willing to engage with us . . .
“From a customer perspective, the whole implementation and management is already done for them because it falls on the same platform.”
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