1. 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. 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, cap rates for hotels are generally higher than cap rates for office buildings?

   True

   False

5 points

QUESTION 2

1. On the asset side of the REIT balance sheet, the largest line item is normally the value for properties?

   True

   False

5 points

QUESTION 3

1. The development cycle for industrial real estate is the shortest of all major product types and can take 9 to 12 months. The development cycle for office is riskier because it can take three years or longer to develop an office building. The economy is cyclical and a big risk associated with speculative office development is delivering completed product into the down phase of the economic cycle.

   True

   False

5 points

QUESTION 4

1. C corporations like Apple, Starbucks, and Coca Cola, pay taxes at the corporate level. Because dividends issued by C corps are taxed at the personal level, an investor in a C corporation is hit with double taxation. REITs are pass-through entities. This means that an investor in a REIT avoids double taxation?

   True

   False

5 points

QUESTION 5

1. When a REIT stock is trading for less than its liquidation value, the stock is said to be trading a discount to NAV?

   True

   False

5 points

QUESTION 6

1. As a public company, REITs are required to report quarterly earnings on a GAAP basis. A big difference between net income on a GAAP basis and net income on FFO is the treatment of depreciation?

   True

   False

5 points

QUESTION 7

1. A REIT is producing a Return on Equity of 6.67% on an ongoing basis. The REIT is considering an acquisition that produces an ROE of 7.3%. Is the acquisition accretive to the REITs earnings?

   True

   False

5 points

QUESTION 8

1. Due to their distribution requirements and cash flow oriented business models, REITs typically offer higher dividend yields than other equities with similar risk profiles?

   True

   False

5 points

QUESTION 9

1. The breadth and operating complexity of the commercial real estate market make it a driving factor in why real estate companies like Pro Logis, Kimco, and Avalon Bay specialize in a product type.

   True

   False

5 points

QUESTION 10

1. Cap rates are influenced by the yield on US government bonds and interest rates but are ultimately set by the flow of funds into the commercial real estate market?

   True

   False

5 points

QUESTION 11

1. If the value of a property is $12,222,222.00, and the NOI is $550,000.00, what is the implied cap rate?

   		4.0%
   		4.5%
   		5.0%
   		5.5%

5 points

QUESTION 12

1. If a property has an NOI of $700K, and a comparable property traded at a 5% cap rate, what is a reasonable estimate of the property's value?

   		$13M
   		$13.5M
   		$14.0M
   		$14.5M

5 points

QUESTION 13

1. Assume a real estate company pursues a develop-to-sell strategy. Its yield on cost is 7%. At the time of sale, at what dispostion cap rate will it make the most money?

   		8%
   		7%
   		6%
   		5%

5 points

QUESTION 14

1. Investors like REITs for the current income they produce. Knowledgable real estate investors know that leasing commissions and capital expenditures take a big bite out of cash flows. What is the measure of cash flow for a REIT that is net of capital expenditures?

   		Fund from Operations
   		Adjusted Funds from Operations
   		Net Operating Income
   		Cash Flow after Debt Service

5 points

QUESTION 15

1. Assume the following on a $/SF basis: on the revenue side, rent 100. On the expense side, property taxes 12, insurance 8, utilities 4, maintenance 8, security 6, and management 5. Assume a prevailing cap rate of 5% and that the cash flows are in perpetuity. What is the value of the income stream to an owner in a gross lease scenario?

   		1140
   		1200
   		1400
   		2000

5 points

QUESTION 16

1. Assume the following in $/SF. On the revenue side, rent 100. On the expense side, property taxes 12, insurance 8, utilities 4, maintenance 8, security 6 and management 5. Assume a cap rate of 5% and that the cash flows are in perpetuity. What is the value of this cash flow stream to the landlord on a triple net lease basis?

   		$2,000
   		$2050
   		$2,063
   		$1,140

5 points

QUESTION 17

1. ABC Realty Trust has an annual NOI of $100M. Net debt equals $700M. The company has 90M shares outstanding. If the stock trades at $3.37/share, and the stock price is equal to the value of NAV/share, what is the implied cap rate?

   		8.0%
   		8.07%
   		8.5%
   		10.0%

5 points

QUESTION 18

1. Assume a REIT has net debt of $700M, and 90M shares outstanding. Both the stock price and NAV/share = to $3.37 and a fair cap rate for the portfolio is 8.5%. What is the implied NOI?

   		$100M
   		$102.5M
   		$85.3M
   		$110.0M

5 points

QUESTION 19

1. A single tenant property has an in-place rent of $7.2M/Yr and operating expenses of $2.5M/Yr. Based on market levels, the rent should be $7.0M/Yr. Assume a cap rate of 4%. By how much would a buyer over pay if they purchased the property based on the in-place rent?

   		$5M
   		$19M
   		$1M
   		$8M

5 points

QUESTION 20

1. Copy of

   An existing building generates revenues of $10M and expenses of $3M. The prevailing cap rate for this property is 4%. Assume during due diligence that the buyer discovered that the roof needs to replaced at a cost of $3M. Assume that the seller agrees to an adjustment in price equal to the cost to replace the roof. What is the buyers effective acquisition cap rate after getting a credit for the roof work?

   		4.0%
   		4.02%
   		4.07%
   		4.10%