Global property investment is always more profitable than domestic investing.
True or False
Answer:
Increasing the amount of leverage applied has what impact on the risk associated with a
property investment?
a) decreases
b) remains the same
c) increases
d) no impact
Answer:
An office park property has lost occupancy because a large corporate tenant that had
space in a number of buildings has decide to relocate to another city. The market for
other office properties in my area is still good and I think my property is well located
and in good physical condition. Whom do I call?
a) Property brokerage company
b) Construction company
c) Leasing company
d) Law firm
Answer:
Characteristics of Reg D offerings generally include all of the following except:
a) limited to accredited investors
b) greater than 100 investors
c) Less than 35 investors
d) exemption from registration
Answer:
Which of the following are adjustments commonly made to NOI in a valuation
exercise?
I. Subtract Recurring Capital Expense
II. Add Revenue Generating Capital Expense
III. Subtract Mortgage Principal Payments
IV. Add Management Fees
V. Subtract Management Fees
a) I, V
b) II, III
c) II, III, IV
d) I, II, IV
Answer:
Which is not a factor in choosing a corporate location?
a) access to transportation
b) sufficient utilities
c) availability of skilled labor
d) availability of greenhouse gasses
Answer:
Put the following stages of the development process in the correct order
A. Entitlement
B. Site-work
C. Pre development
D. Pre-leasing
E. Shell construction
F. Tenant build-out
G. Pad delivery
I. C, A, D, B, F, E, G
II. D, C, A, B, E, F, G
III. A, D, C, B, G, E, F
IV C, A, D, B, G, E, F
Answer:
Which is not an option for a partnership requiring more capital?
a) assess limited partners
b) assess general partners
c) borrow cash
d) admit additional partners
Answer:
Which two credit metrics are defined correctly:
I. Loan to Value (debt /asset value)
II. Loan to Value (debt service/ asset value)
III. Debt Service Coverage (cash flow / interest and principal)
IV. Debt Service Coverage (cash flow / interest)
a) I, III
b) I, IV
c) II, III
d) II, IV
Answer:
If one million homes are sold at a price of $300,000 per home and the housing industry
has an economic multiplier of 2.0x what is the total economic impact of the housing
industry?
a) $100 Million
b) $6.0 Billion
c) $600 Billion
d) $6.0 Trillion
Answer:
Match the following with its most likely source
a) Construction loan I. Investment bank
b) Balance sheet loan II. CMBS underwriter
c) REIT shares III. Commercial bank
d) Stabilized property loan IV. Life insurance company
Answer:
Which of the following is not an approach to property valuation based on income?
a) Gross income multiplier method.
b) Discounted present value method.
c) Direct capitalization method.
d) Future accretion method.
Answer:
Which of the following is not considered a type of commercial real estate?
a) Single family housing
b) Office buildings
c) Shopping Centers
d) Hotels
Answer:
Which of the following increases the tenants cost of occupying space?
a) Free rent.
b) Expenses in a gross lease.
c) Percentage rent.
d) Allowance for tenant improvements.
Answer:
Rising interest rates will have what effect on RMBS securities?
a) Extend maturities of IO securities
b) Shorten maturities of PO tranches
c) Decrease value of IO tranches
d) Increase value of PO tranches
Answer:
Feasibility analysis determines whether a project is currently feasible given:
a) Prevailing market rents
b) Existing land prices
c) Financing costs
d) All of the above
Answer:
The following regulation impacts the willingness of foreign investors to invest in the
US property market?
a) FIRPTA
b) IFRS
c) GAAP
d) USBLM
Answer:
If LTV increases and debt service coverage decreases what is the impact on the cost of
debt?
a) decreases
b) remains the same
c) increases
d) no impact
Answer:
Which of the following are considered positive economic indicators for real estate?
i) GDP growth
ii) Rising unemployment
iii) Rising consumer confidence
iv) Declining corporate profits
a) i,ii
b) ii,iii
c) i,iii
d) i,iv
Answer:
The project is expected to show NOI of $20m in its first year of operation. The property
will be managed by a third party management firm for $500,000. Calculate the expected
first year ROA.
Answer:
Put the stages of the land development process in the proper order:
a) Contact Broker, Option, Development, Sales
b) Contact Broker, Development, Option, Sales
c) Development, Contact Broker, Sales, Option
d) Option, Contact Broker, Sales, Development
Answer:
The economic multiplier is a measurement of which of the following?
a) the sales of a relocated company / the government incentives provided
b) the rent paid by the new company / the landlords lease incentives
c) the total economic activity generated by the new company / the new company’s
revenues
d) the historic tax credit / the cost of building renovation
Answer:
Approximately how many housing units are there in the United States as of the 2010
census?
a) 50.000,000
b) 131,000,000
c) 250,000,000
d) 308,000,000
Answer:
Which of the following characteristics of the mortgages in a collateral pool stabilize
cash flow?
a) Limited geography
b) Varied interest rates
c) Seasoning
d) Varied payment patterns
Answer:
Order these securities according to preference in a liquidation:
I. Preference Stock
II. Senior Debt
III. Common Stock
IV. Convertible Debt
a) I, II, III, IV
b) II, IV, I, III
c) I, III, II, IV
d) II, I, IV, III
Answer:
Which of the following are added to capital accounts?
a) income and cash invested
b) income and cash distributed
c) losses and cash distributed
d) losses and cash invested
Answer:
A cash-out refinancing is:
a) Subject to tax
b) Not subject to tax
c) Impacts depreciation
d) Decreases basis
Answer:
Which of the following was not a factor in the early development of the secondary
mortgage market?
a) VA and FHA guarantees
b) Deregulation of interest rates
c) Standardized underwriting
d) Availability of title insurance
Answer:
In which of the following would an institutional investor generally earn a preferential
return?
a) Syndication
b) REIT
c)..JV
d) Corporation
Answer:
A loan secured by property with a further guarantee of payment by the borrower is
called:
a) Release of Dower
b) Non-Recourse
c) Covenant of Seisin
d) Recourse Loan
Answer:
Asset level due diligence for an existing property includes all of the following historic
performance metrics except?
a) Rent
b) Vacancy
c) Operating expenses
d) Time to entitlement
Answer:
In addition to their mortgage, Fred and Wilma must also pay property taxes of $5,000
per year (tax deductible) and insurance of $2,000 per year. Property upkeep costs $300
per month on average. What are the average monthly pre and after tax costs of
homeownership during year two?
Answer:
The Freeling Tower, a major office building, is held for a year and one day and then
sold. The NOI in year one is $2.5m.
The original financing is:
$ 10.0 m mortgage, interest only 6%
$ 5.0 m mezzanine debt, interest only 10%
$ 5.0 m equity
Assume the allocation to land is 20% of the purchase price and depreciable life is 39
years. What is the partnership income?
Answer:
Collateral Pool
Ten loans, each with an original principal balance $10 m. All loans are 6.4% 7 year
commercial mortgages and were originated on January 1, 2010 with 20 year
amortization schedules.
How much of the A tranche will be repaid during the first year of its life?
Answer:
The bank in (13) offers you a subprime adjustable rate loan with 30 year amortization
and a teaser rate of 2% for the first two years, maximum LTV of 90%. At the end of that
period you can refinance or the rate adjusts to 3% over then current 10 year treasury.
The 10 year T at the end of two years is forecast to be 6%. (At that point the remaining
principal balance will amortize over the next 28 years). Do you qualify for the teaser
loan? How much will your monthly payment rise at the reset date?
Answer:
East REIT
Income Statement
(for period ending December 31, 2010, in millions)
Balance Sheet
(as of December 31, 2010, in millions)
The debt is interest only with a 5% coupon rate. There are ten million shares
outstanding. The shares trade at $80 per share.
Calculate debt to market capitalization
Answer:
Which of the following is not typically used as a mortgage covenant?
a. Debt Service Coverage
b. Quick ratio
c. Loan to Value Ratio
d. Interest Coverage
Answer:
East REIT
Income Statement
(for period ending December 31, 2010, in millions)
Balance Sheet
(as of December 31, 2010, in millions)
The debt is interest only with a 5% coupon rate. There are ten million shares
outstanding. The shares trade at $80 per share.
Calculate FFO per share
Answer:
An investor group is considering purchasing Warren Woods, a multifamily property
with 200 units each 1,000 sq. feet. Rents are running $2.00 per sq ft per month.
Adjusted NOI is 50% of revenues. The property is currently valued at $150,000 per
unit. The bank is offering a loan of $20 million at 6% with 25 year amortization. What
are the LTV and DSC ratios?
Answer:
Seaside on Dune Road is a 50 unit garden apartment project on Long Island. The
project cost $12.5 million to build and is now subject to a 7 year, 8%, interest only
mini-perm loan in the amount of $9 million that has two years to run. The project shows
stabilized NOI of $2 million. What is the cash return on equity.(assume no taxes, no cap
ex)
Answer:
The Crescent Arms is a 15 story luxury apartment building in New Orlean’s warehouse
district. In 2009 the property had adjusted NOI of 2.5 million. The property was
marketed to a broad range of investors and sold for 29.5 million. At what cap rate did
the property sell?
Answer:
Harold’s Video Hideaway sells movies and Hollywood memorabilia in a 1,000 square
foot store at the Starlite Mall in an urban location on the West Coast. The mall has
1,000,000 feet of total gross leasable area including 450,000 feet of inline space and
550,000 feet of anchor space. Expenses this year are expected to total $20,000,000. In
total, the three anchor tenants contribute $2,000,000 to expenses. Assuming Harold’s
pays full pro rata CAM charges, what is Harold’s expected total annual CAM
contribution? Harold has negotiated a CAM cap of $25 per square foot. Does the cap
lower Harold’s costs in the current year?
Answer:
First Bank has proposed a 10 year 6% fixed rate permanent loan at $160m with a 25
year amortization schedule. The ten year treasury bond is currently 3.5%. First Bank
believes that this is a 55%LTV loan. At what cap rate are they valuing the property?
Answer:
You just placed a ten year $15 million CMBS loan on your warehouse with an 8% rate
and a 25 year amortization schedule. What is your annual debt service?
Answer:
Banco de Poco offers three-year mortgage at 5%, a five year mortgage at 6.50% at a 7
year mortgage at 7.5%. What assumption about rates in years four and five would make
you choose the five-year over the three year mortgage. What assumptions about rates in
the second five years would make you favor the 7- year mortgage over the five year?
Answer:
Three major class A office properties have recently traded in Baltimore. Building A sold
at $300 per square foot, Building B at $250 per square foot and Building C at $ 350 per
square foot. You believe that your building, a 20 story class A office property with
20,000 square foot floor plates, has attributes of all three properties. What is your
building worth?
Answer: