6.

Which of the following statements regarding valuation of land is/are correct?

I. For land with regulatory time constraint to develop, construction should start whenever the property value is higher than the cost of development.

II. A land site should be developed as soon as possible if the ratio of the present value of all future NOIs to be derived from the property on the land site to the cost of construction cost net of the saved maintenance cost is less than some threshold value.

III. The fair value of an old property with an opportunity for redevelopment approaches the fair value of land as the old property ages.

Select one:

a. II only

b. I and III only

c. I only

d. III only

e. I, II and III

7.

Use the following information

Usable area (sq. ft)	110,000
Current rent per square foot per month	$29
Average vacancy rate on usable area	8%
Number of car parks	150
Average monthly car park income per car park	$3,000
Property taxes: Government rent and rates	6% of total rental revenue
Management, security and maintenance cost	25% of total rental revenue
Profit tax rate	15%
Constant growth rate of rental and car park income	5.5%
Current property value	$1,300,000,000

What is the capitalization rate for the property?

Select one:

a. 4.25%

b. 1.15%

c. 2.16%

d. 2.88%

e. 3.46%

8.

Use the following information

Usable area (sq. ft)	110,000
Current rent per square foot per month	$29
Average vacancy rate on usable area	8%
Number of car parks	150
Average monthly car park income per car park	$3,000
Property taxes: Government rent and rates	6% of total rental revenue
Management, security and maintenance cost	25% of total rental revenue
Profit tax rate	15%
Constant growth rate of rental and car park income	5.5%
Current property value	$1,300,000,000

What is the required rate of return for the property?

Select one:

a. 5.12%

b. 6.50%

c. 7.77%

d. 5.78%

e. 8.42%

9.

You are assessing the market value of a new flat using the sales comparison approach with three comparable properties (A, B, and C) that were sold in November 2013. The subject property is at the best location.

Market Area Analysis and Sales Data (Market Approach)
Subject Item Property		Comparable Properties
		A	B	C
Sale Date		Nov/13	Nov/13	Nov/13
Sale Price		$4,000,000	$4,750,000	$5,200,000
Gross Area (sf)	1,300	1,450	1,375	1,600
Percent leasable sf	90%	91%	93%	86%
Rent per sf		$30	$35	$38
Proximity to subject		4 miles	5 miles	2 miles
Age	New	6 yrs	8 yrs	4 yrs

Which of the following best represents the correct adjustments of the location and the age factor from the three comparable properties to the subject property as percentage of sale price?

Select one:

a. Location: A: +4%, B: +5%, C: +2%; Age: A: +6%, B: +8%, C: +4%;

b. Location: A: -4%, B: -5%, C: -2%; Age: A: -6%, B: -8%, C: -4%;

c. Insufficient information

d. Location: A: +2%, B: +5%, C: +4%; Age: A: +4%, B: +8%, C: +6%;

e. Location: A: -2%, B: -5%, C: -4%; Age: A: -4%, B: -8%, C: -6%;

10.

An old office building in Central produces first-year net operating income of $10 million. The income is expected to grow at 2% for years 2 and 3 and then decline at 3% thereafter. Assuming a long economic life of the building and using a discount rate of 12% per year, the property value in millions is closest to:

Select one:

a. $74

b. $72

c. $76

d. $78

e. $70