Which of the following is not a major source of REIT capital
a) public market equity
b) mortgage financing
c) issuance of corporate debt
d) investment of after tax profits
Answer:
Which of the following does not represent government support of home ownership?
a)LIHTC
b)Section 8
c)FHA Mortgage Guarantee
d)Mortgage interest deductibility
Answer:
Which type of lender is typically involved in the securitization process?
a) Balance sheet lender
b) Relationship lender
c) Conduit lender
d) Construction lender
Answer:
Which of the following is not a factor that supports investment in Real Estate?
a) Real estate has low covariance with other asset classes.
b) The real estate industry can facilitate large capital investments
c) Debt capital is always available to finance property purchases
d) Long term leases can provide low cash flow volatility
e) Tenant credit risk can be mitigated by having real property collateral
Answer:
Which of the following is not a qualified construction cost for Low Income Tax Credit?
a) foundation
b) roof
c) land acquisition
d) plumbing
Answer:
A discounted cash flow analysis based on NOI is used to determine which value?
a) Land allocation
b) Asset value
c) Equity value
d) Leverage
Answer:
Which of the following asset allocations is not possible for a REIT?
a) 100% CMBS
b) 30% industrial stock
c) 25% of a taxable subsidiary
d) 95% real estate
Answer:
The sum of the occupancy rate and the vacancy rate for the same property are:
a) Always 100%
b) Always greater than 100%
c) Always less than 100%
d) Are unrelated
Answer:
An investor has just purchased the office building where her office is located. She is
visiting her insurance broker to buy insurance for her new acquisition. What type of
insurance is she least likely to buy?
a) Property Casualty
b) Personal Lines
c) Liability
d) Title
Answer:
Which of the following did not result from the internet?
a) multi-channel retailing
b) telecommuting
c) value retailing
d) just-in-time sourcing
Answer:
When purchasing which of the following types of housing does the owner not actually
own title to real estate?
a) Condominium apartment
b) Cooperative apartment
c) Single family house
d) Townhouse apartment
Answer:
1. Which of the following protects the owner of the senior tranche of a CMBS?
I. Overcollateralization
II. Prepayment speed
III. Underwriting standards
IV. Pool diversification
a) I,II,III
b) I,III,IV
c) I,II
d) II,III,IV
Answer:
In what interest rate environment are Terminal Value estimates most important
a) High rate
b) Low rate
c) Declining market fundamentals
d) None of the above
Answer:
Depreciation does not impact which of the following?
a) Recapture Tax
b) Taxable Income.
c) Cash Flow.
d) NOI.
Answer:
Which strategies can protect against currency risk?
i) currency swap
ii) mortgage and rent payments in the same currency
iii) mortgage and rent payments in different currencies
a) i,iii
b) i,ii
c) ii,iii
d) all of the above
Answer:
Which of the following are not considered direct interests in real estate
i) Buying a shopping center
ii) Buying a share in an office building REIT
iii) Buying a 50% of an office building
iv) Buying a security from a REMIC
a) i,iv
b) ii,iv
c) ii, iii
d) they are all direct investments
Answer:
Overseas investment can provide which of the following benefits
a) Diversification
b) Exposure to growth markets
c) Access to additional assets
d) All of the above
Answer:
The site for the Cobble Creek development was priced at $40,000,000. In addition to an
outright sale, the prior land owner originally offered a number of financing alternatives:
a) an unsubordinated ground lease at $4,000,000 per year
b) a subordinated ground lease at $6,000,000, per year
c) contribution of the site into the JV for a 50% equity interest
d) a three year option at $1,000,000 per year
Prepare an economic analysis and state the pros and cons of each offer.
Answer:
Dewie, Cheatem and Howe is a major law firm with over 200 partners. Its lease in its
west coast high rise is expiring next year and it is considering moving out of Major City
to EdgeBurb, a short commute and near where most of its high net worth partners and
customers live. EdgeBurb has no income tax while Major City does. Which of the
following can Major City offer directly to the law firm?
a) Space in an enterprise zone
b) industrial development bond financing
c) historic tax credit
d) tax increment financing
Answer:
REITS may invest in assets at which stage of completion?
a) land
b) projects under development
c) construction completed with cash flow
d) all of the above
Answer:
Intrinsic to a strong securities market are all of the following except
a) liquidity
b) transparency
c) volatility
d) regulation
Answer:
Which type of equity structure offers all investors the most protection against personal
liability?
a) Limited partnership
b) Joint venture
c) General partnership
d) Corporation
Answer:
Which of the following is not considered commercial real estate?
a) single family housing
b) shopping center
c) biotech laboratory
d) office building
Answer:
Which types of returns are not typically earned by the operating partner in a joint
venture:
a) Promoted interest
b) Carried interest
c) Pro rata interest
d) Preferred interest
Answer:
Which of the following is not subtracted when calculating taxable income?
a) Operating Expenses.
b) Depreciation.
c) Interest.
d) Principal.
Answer:
Which is a method used by corporations to reduce the amount of property on the
company’s balance sheet?
a) sale-leaseback
b) industrial development bond
c) historic tax credit
d) enterprise zone
Answer:
An umbrella partnership allows all of the following except
a) liquidity for owners of privately held properties
b) unitholders who can request REIT stock
c) sale of real estate as inventory
d) tax efficient acquisition of property
Answer:
Which is not a method for estimating collateral pool prepayment?
a) Average Market
b) Double Declining Balance
c) CPR statistics
d) PSA model
Answer:
Which is not a real estate valuation method?
a) DCF
b) Price-earnings
c) Comparable sales
d) Capped NOI
Answer:
In order to provide mortgage financing which of the following is not required?
a) Property and casualty insurance
b) Title insurance
c) First responders
d) Rapid economic growth
Answer:
An office building has a 2,000 square foot floor plate. A 500 square foot portion of each
floor is used for common area including restrooms, elevator and common lobby. What
is the rentable and usable square footage of each floor?
Answer:
Upmarket Builders, a builder of fine homes, owns twenty 2 acre lots in a subdivision
outside of Princeton, New Jersey. The 5,000 square foot homes built on these lots will
sell for $2 million. Appraisers value the lots at 30% of the final home price. Regent
Bank is willing to make a land loan at a 50% Loan to Value. How much will they lend?
Answer:
What is the after tax cash available to the GP and LPs after taking into account the
payment of taxes. What is the after-tax return on investment (for ease of calculation, use
one year as the holding period.)
Answer:
In the event that the REIT accepts the $50 million loan, a mezz lender has offered a $15
m, 10 year loan at 13% interest only. Is this a better alternative?
Answer:
Sleepy Hollow Green is a 500 unit multifamily complex in Harrison, New York. Units
rent at an average of $1,000 per month. The property’s operating expenses run at 40%
of revenues. The complex is typically 90% occupied. The owners pay a management
fee equal to 3% of revenue to Rye Management Company for running the property.
How much is the annual management fee? Calculate Adjusted NOI for this asset.
Answer:
New Market Commons has adjusted NOI of $4 million. The bank is willing to make a
ten year 6% $ 20 million loan with a 30 year amortization schedule. What is the debt
service coverage ratio?
Answer:
An office building has a 5,000 square foot floor plate. A 1,000 square foot portion of
each floor is used for common area including restrooms, elevator and common lobby.
Calculate the load factor and the loss factor for this building.
Answer:
At the end of 2 years your income is now $55,000 per year. The value of your house is
up to 300,000. Instead of accepting the new 9% interest rate, can you refinance with a
traditional loan (terms as stated in example 13) in an amount sufficient to pay off your
mortgage? What is the maximum amount you can qualify to refinance?
Answer:
An institutional investor offers $5 million of preferred equity at an 8% dividend yield.
What impact does this have on the original investor group’s return on equity?
Answer:
Marvin Garden’s a 200 unit B grade apartment complex in Scottsdale Arizona is
currently 97% occupied and has Rent Revenue of $2,328,000 per year. Net Operating
Income for the period is $1,500,000. Next year the property’s rents will not increase,
expenses will remain constant. Vacancy Loss will be 5% of Gross Potential Rent.
Estimate the Gross Potential Rent, Vacancy Loss and NOI for next year.
Answer:
The Center at Cobble Creek is a mixed use project with apartments, office and a retail
center. The cost of construction was $200 million, before interest.
Cobble Creek was originally financed with $60 million of equity and a construction
loan for $140m. The construction period was eight quarters in length. The construction
draws at $20 m each were made at the end of the second through eighth quarters.
Interest accrued on all draws at 10%, compounded quarterly. Prepare a draw schedule
showing interest and principal.
Answer:
One of the following was not a result of the financial crisis:
a. Interest-only loans
b. Increased amortization
c. Higher credit spreads
d. Lower LTV limits
Answer:
Mutual of Atlanta, a large insurance company that buys properties for its real estate
investment account, comes forth with an unsolicited bid for the property at $300
million. They can close in 90 days. Analyze the implications of their offer.
Answer:
A downdraft hits the real estate market and tenants start leaving Bluestone Park (8) at
the end of year 3. Cash flow declines 15% year over year in each of years 4 thru 6.
Does the property generate enough cash in year six to service the debt?
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.
How much excess interest is generated by the securitization during the first year? Does
this amount rise or fall during the expected seven year life?
Answer:
MB REIT owns a shopping center with adjusted NOI of $10 m. Market cap rates for
similar properties are 8%. The property currently has a $50 m 7% mortgage that expires
in 6 months. The REIT is offered three replacement mortgages $50 million at 6%, $60
million at 7% and $70 m at 8.25%. All of the loans are for ten years and are interest
only. MB REIT is not a tax payer. Which loan is best?
Answer:
