During our class, one student asked the following question: How is real estate performing in the current recession? The answer is that it depends which real estate sector you are looking at. We have been using a Price Tracker file to chart the pricing action of various REIT stocks from pre-Covid times to the present. The sectors that serve e-commerce, like industrial, are performing very well. Data centers are also doing well because of the growing role of technology in business and society. REITs based on traditional business models, like brick and mortar retail, have been doing poorly.

True

False

A single tenant property measures 200,000 SF. It has a tenant paying an in-place rent of $70/SF/Yr and operating expenses of $40/SF/Yr. The lease is month-to-month. Based on market levels, the rent should be $67/SF/Yr. The property is up for sale and the prevailing cap rate for this type of property is 5.5%. By how much would a buyer over pay if they purchased the property based on the in-place rent?

		$5.9M
		$19M
		$10.9M
		$8.8M

The financial markets like predictability of cash flows. Hotels have the shortest leases of all major property types and the leases can be as short as one day. This is why hotels are often thought of as operating businesses first and real estate second. Office leases, by contrast, are longer term and and it is not uncommon to find office leases with 10-year terms or longer. As a result of having short term leases, hotels as an asset class are more vulnerable than office to sudden changes in the market, like the changes being precipitated by the Corona Virus?

True

False