Common mortgage types include all of the following except:
a) Interest-only
b) Fully amortizing
c) Preferred
d) Convertible
Answer:
Equity REITs generally concentrate their investment focus by
a) property geography
b) property type
c) life of investment
d) all of the above
Answer:
US Government Sponsored Agencies support lending to which of property types listed?
a) Office buildings
b) Retail centers
c) Industrial and warehouse
d) Multifamily
Answer:
Which factor does not contribute to regional concentration within a particular industry?
a) Concentration of skilled workforce
b) Location of relevant institution of higher education
c) Availability of unique natural resources
d) Geographic isolation
Answer:
Which of the following does not provide liquidity to the housing market?
a) RMBS
b) Ginnie Mae
c) S & Ls
d) DINC
Answer:
Which is not an alternative to foreclosure?
a) Workout
b) Deed in Lieu
c) Restructuring
d) Acceleration
Answer:
Which of the following statements about the impact of adding additional debt are
incorrect?
I. More tax benefit
II. While I <ROAROE increases
III. While I > ROAROE increases
IV. Distress can result
V. Credit spread decreases
a) I, II, V
b) II, IV
c) III, IV
d) I, II, IV
Answer:
When you look at the pro forma interest carry for a land development loan, you must
estimate all of these except:
a) Amount of draws
b) Depreciation
c) Timing of draws
d) Projected interest rates
Answer:
The REIT concept is
a) used in many countries
b) limited to companies owning US assets
c) declining in appeal to the capital markets
d) limited to companies listed in the US
Answer:
Which is not a participant in the mortgage securitization process?
a) Depositor
b) Balance sheet lender
c) Special Servicer
d) Underwriter
Answer:
Which are true about mortgage backed securities?
I. When interest rates ↑ price drop is > than implied by ∆ rate
II. When interest rates ↑ price drop is < than implied by ∆ rate.
III. When interest rate ↓ price rise is > than implied by ∆ rate
IV. When interest rate ↓ price rise is < than implied by ∆ rate
a) I, III
b) I, IV
c) II, III
d) II, IV
Answer:
At which kind of retail properties can shoppers not drive up to stores?
a) power center
b) lifestyle center
c) regional mall
d) shopping center
Answer:
Which is not a benefit of home ownership in the US?
a) Creation of wealth over long period of time
b) The right to vote in local and state elections
c) Access to government supported financing program
d) Potential for capital appreciation
Answer:
What is the fundamental measure of REIT operating performance?
a) Net income per share
b) debt service coverage
c) FFO per share
d) IRR
Answer:
Which of the following is not a reason to sell an asset in a sale-leaseback transaction?
a) because the property owner does not want to use the space
b) to transfer depreciation expense to an investor
c) as an alternative to refinancing the property
d) to provide financing for a new acquisition
Answer:
Benefits of investing in Real Estate include all of the following except:
a) Guaranteed cash flow
b) Income plus growth
c) Inflation protection
d) Portfolio diversification
Answer:
The opening balance of a capital account is created by:
a) gain on sale
b) cash contribution
c) cash distribution
d) allocation of losses
Answer:
What before tax return will the GP make on its investment?
A) 11%
B) 37%
C) 49%
D) 67%
Answer:
Which of the following is not true about REITs?
a)..Must have at least 100 owners
b)..No five or fewer individuals can own >50%
c)..Must pay out 75% of earnings and profits
d)..Can have up to 25% of assets in a Taxable REIT sub
Answer:
Which is true about REMICs?
a) Tax free conduit
b) Owner of residual must consolidate
c) Can own credit card receivables
d) Cannot be organized as a trust
Answer:
Match at least 5 correctly:
A)___ Direct Investment __ 1. Fee Interest
B)___ Indirect Investment __ 2. Pension plan based on performance
C)___ Principal __ 3. Works on their own behalf
D)___ Agent __ 4. REIT Stock
E)___ Ground Lease __ 5. Works on behalf of another party
F)___ Defined Benefit Plan __ 6. Right to utilize land
G)___ Defined Contribution Plan __ 7. Set monthly pension payment
Answer:
Which age trends are most favorable for economic growth?
i) Birth rate < replacement
ii) Birth rate > replacement
iii) Average age increasing
iv) Average age decreasing
a) i,iii
b) ii,iii
c) i,iv
d) ii,iv
Answer:
Which of the following is not a tax pass through entity?
a) Limited Partnership
b) General Partnership
c) C Corporation
d) S Corporation
Answer:
What attributes of a property would influence the choice of valuation methods used and
the accuracy of the resultant valuation?
I. Future growth in rent.
II. Current property occupancy and cost of lease up.
III. Expected changes in major leases.
IV. Prospect for overbuilding in the market.
a) I, II, III
b) II, IV
c) I, III
d) All of the above
Answer:
Stages of a development project include sale (S), completion and occupancy (C&O),
management (M), construction (C), and land acquisition (LA). Place these in the correct
sequence.
a) C, C&O, M, S, LA
b) LA, C&O, M, S, C
c) C, LA, C&O, S, M
d) LA, C, C&O, M, S
Answer:
Which of the following are options?
I. Future
II. Put
III. Swap
IV. Call
a) I
b) II, III
c) II, IV
d) III
Answer:
Which market is larger?
a). US Commercial Property
b). US Residential Property
Answer:
If the property ROA is 10% for which Kd is the leverage positive?
a) 10%
b) 8%
c) 12%
d) 14%
Answer:
Assume the following circumstances in Review Exercise number 8.
You have $10 m of capital available to pursue this project.
Predevelopment costs excluding land are expected to be $5 million.
There is a 40% chance the project will progress to construction.
The bank will not lend unless you have “control of the land”
Answer:
New Shoes Inc. has negotiated a new ten year lease at the Three Rivers Mall. The lease
calls for a gross rent of $ 30 per square foot on a 10,000 square foot lease. The tenant
has negotiated for one year’s free rent and a $50 per square foot tenant allowance.
Leasing commissions are $5 per square foot. Expenses for the property are $10 per foot
per year. What is the net effective rent for the space?
Answer:
In New York City a young couple should expect to spend 40% of income on housing.
David makes $25,000 per year as an opera singer and Penny $60,000 as a teacher.
property taxes and condo fees, total $1,000 per month. Mortgage rates on 30 year fixed
rate loans are at 4%. The couples’ parents will gift them the required 10% down
payment. What can the couple spend on their condo?
Answer:
Maximum Loan Size
The maximum amount that the Stage Coach Bank and Trust will lend is determined by
the bank credit committee’s loan underwriting standard. This standard looks at the
property ability to support a minimum Debt Service Coverage ratio of 1.4x and a
maximum 65% loan to value. The asset presented to committee has adjusted NOI of $ 5
million. The loan officer believes the property would trade at a cap rate of 8%. Loans
on similar properties have ten year terms with interest rates of 7% and 25 year
amortization schedules. How much will the bank lend?
Answer:
REIT has an offer of $50 million five-year financing at 7% with 25 year amortization
on your property. You have three choices for increasing the financing:$60 million
five-year financing at 8% with 20 year amortization; add a$10 million preferred equity
investment at 14% to the $50 mortgage or add a five-year interest-only $10 million
second mortgage at 12% to the $50 million mortgage. Which is best?
Answer:
The Gramercy, a 25 story office building in Houston, Texas was purchased in
December, 1999 for $25 million. The property was sold on December 31, 2009 for $30
million. Assume 30% of the purchase price was allocated to land. What taxes were due
as a result of the sale?
Answer:
Stoney Creek, a 300 unit apartment complex in New Jersey was purchased in 1999 for
$ 12 million. Thirty percent of the purchase price was allocated to land. How much
depreciation should have been taken in 2010?
Answer:
The lender on the property in (5) also offers a 7.0% loan and requires that the loan
follow a thirty-year self-amortization schedule during its ten year term. How much can
be borrowed assuming the same 1.25 debt service coverage requirement. What will be
the remaining principal balance at the end of the ten year term?
Answer:
Collateral Pool
Ten loans, each with an original principal balance $10 m. All loans are 4% 7 year
commercial mortgages and were originated on January 1, 2010 with 20 year
amortization schedules.
Note: All questions refer to the schedule above:
What is the level of subordination of the A1 tranche?
Answer:
At the end of the project the developers believe the property should be valued using a
6% cap rate on the $20m NOI, without adjustment. How much do they believe the
property is worth. What is the value of the developer’s equity after repaying the
construction loan and all accrued interest.
Answer:
The new owners of Oak Ridge Mall purchased the asset on June 30th 2005 for $ 30
million. They sold the property for $37.5 million exactly three years later. What amount
of the sale proceeds were subject to the capital gains tax?
Answer:
Grant Industries owns a large warehouse outside of Austin, Texas. The property is
currently free and clear of any encumbrances. An investor has offered to purchase the
land under the warehouse for $10 m. The investor will charge Grant $75,000 per month
rent. At the end of ten years Grant may repurchase the land at $8 million. Assuming
Grant exercises its bargain repurchase option, what is Grant’s effective interest cost?
Answer:
Bob’s CPA Firm agrees to pay $25 per foot in annual rent with a $ 4 per square foot
expense stop. Expenses this year are $5 per square foot. Bob’s CPA Firm is renting
50,000 square feet. Including expenses, what is the amount of Bob’s payment to the
landlord?
Answer:
Peabody Park is a 200 unit apartment complex in Waltham, Massachusetts. The owners
of the property have just refinanced their previous ten year mortgage with a 20 year 5%
interest only $10 million on January 1st. What will be the deductible interest expense
for the first year of the mortgage?
Answer:
Abe’s Furniture Store, a long term tenant is at the end of its lease term. Abe currently
pays $15 per square foot on 20,000 feet and pays pro rata CAM of $4 per square foot.
You offered Abe a five year renewal at $25 per foot, with a $5 per foot allowance for
brightening up the store. Abe accepted your tenant allowance offer but has come back
with a $20 per square foot rent counter offer, last and final, threatening to close after
Christmas when his current term expires. You believe that if Abe closes, the store will
remain vacant for 12 months and you will need to give a new tenant $25 per square foot
as a tenant allowance. What rent would the new tenant have to pay on a four year lease,
with pro rata CAM, for you to reject Abe’s offer? Assume interest rates are zero.
Answer:
Harry’s Hat Shop operates a 2,000 square foot store in New Market Mall. There are 100
stores in New Market Mall totaling 400,000 square feet. What is the pro rata allocation
of expenses to Harry’s Hat Shop?
Answer: