Select True or False

1 When the internal rate of return on an investment increases as the loan-to value ratio increases, positive leverage exists.

2 Properties with a higher ratio of debt are considered to also have a higher risk assuming everything else is equal.

3 Long term leases may protect against market downturns but may be a drag on value during market upturns.

4 NCREIF index was created largely to allow wealthy individuals to invest in Real Estate

5 If vacancy is at or below equilibrium, a large rise in absorption will potentially cause a spike in market rents.

6 Office demand is generally driven by white collar jobs.

7 Retailers would pay a premium in rent for an "end cap"

8 Having tenants with rents that are above market makes the building less risky.

9 We underwrite vacancy because buildings are usually fully occupied.

10 Percentage rents are used in situations where the tenant or location are untested.

11 The load factor is the same for multi-tenanted floors as well as single-tenanted floors.

12 The landlord may negotiate a clause allowing it to remove tenants that do not sell enough product.

13 A tenant may be able to negotiate a "co-tenancy" clause allowing them to cancel the lease of an anchor goes dark.

14 We adjust the subject up when comparing to comparables with superior characteristics.

15 Significant deferred maintenance is a form of depreciation.

16 Land is risky because its value is generally the residual of property value less construction costs.

17 Applying market cap rates will always provide a similar value that was derived by a market PGIM.

18 Reversion represents the value beyond the hold period into infinity.

19 If property value is anticipated to decline, the cap rate would be greater than the yield.

20 Reconciliation is not necessary in any appraisal.

21 Obtaining permits is not considered part of the entitlement process

22 In highest and best use analysis, analyzing "as built" and "as vacant" always will provide the same results.

23 Preferred return means that the investor is able to choose its return level at the end of the year.

24 A REIT is just a fancy name for a C-corp that invests in Real Estate.

25 In a typical development deal an investor and a developer will have equal amounts of equity and will get similar returns.