The following information relates to Questions 13-28 First Life Insurance Company, Led, a life insurance company located in the United Kingdom, maintains a stock and bond portfolio and also invests in all four quadrants of the real estate market; private equity, public equity, private debt, and public debt. Each of the four real estate quadrants has a manager assigned to it. First Life intends to increase its allocation to real estate The Chief Investment Officer (CIO) has scheduled a meeting with the four real estate managers to discuss the allocation to real estate and to each real estate quadrant Leslie Green, who manages the private equity quadrant, believes her quadrant offers the greatest potential and has identified three investment properties to consider for acquisition Selected information for the three properties is presented in Exhibit I. Exhiha. Selected deformationen Potential Private Equity Real Estate Investments Property Single Tenant Office Property descrita Sequare meters) Shopping Center Warehouse 5.000 Lp Geos 70 50 years 30 years $575 000 Expected low to value ratio Total economic life Remaining comic lite Rental com full epancy) Other income Vacancy and collection loss Property manage Other operating expenses Duco Growth 27000 50 years 20 years 590 000 129.500 59000 22.000 610 000 183000 661 000 5.000 14.000 11:39 20% 30 9254 See A 2 11.00% 1.750.000 Market value of land 1 500 000 4.000.000 Building costs 8.725.000 14 500000 12.500.000 Deep 30.000 210.000 54.104.000 E1329.000 8.021.000 Dec Obec Formal 50,000 1000000 500,000 500,000 Eco 100,000 1 000 000 Compleaded price per que Cow Property T30 - Cow Party 2 1,825 1.675 Compable Property 3 1875 To prepare for the upcoming meeting, Green has asked her research analyst, Ian Cook, for a To prepare for the upcoming meeting. Green has asked her research analyst, Ian Cook, for a valuation of each of these properties under the income, cost and sales comparison approaches using the information provided in Exhibit 1, and the following the assumptions 1. Assumption 1 The holding period for each property is expected to be five years 2. Assumption 2 Property B is expected to have the same net operating income for the holding period due to existing leases, and a one-time 20% increase in year 6 due to lease rollovers. No further growth is assumed thereafter In reviewing Exhibit 1, Green notes the disproportionate estimated obsolescence charges for Property C relative to the other properties and asks Cook to verify the reasonableness of these estimates. Green also reminds Cook that they will need to conduct proper due diligence. In that regard, Green indicates that she is concerned whether a covered parking lot that was added to Property A encroaches (is partially located on adjoining properties. Green would like for Cook to identify an expert and present documentation to address her concerns regarding the parking lot. In addition to discussing the new allocation, the CTO informs Green that she wants to discuss the appropriate real estate index for the private equity real estate quadrant at the upcoming meeting. The CIO believes that the current index may result in over-allocating resources to the private equity real estate quadrant 13. The most effective justification that Green could present for directing the increased allocation to her quadrant would be that relative to the other quadrants, her quadrant of real estate investments A provides greater liquidity B. requires less professional management C enables greater decision-making control 14. Relative to the expected correlation between First Life's portfolio of public REIT holdings and its stock and bond portfolio, the expected correlation between First Life's private equity real estate portfolio and its stock and bond portfolio is most likely to be A lower B. higher C. the same 15. Which of the properties in Exhibit I exposes the owner to the greatest risk related to operating expenses? A Property A B Property B C. Property 16. Which property in Exhibit is most likely to be affected by import and export activity! A. Property A B. Property B C. Property C 17. Which property in Exhibit I would most likely require the greatest amount of active management? A Property A B. Property B C. Property C 18. Which property in Exhibit I is most likely to have a percentage lease? A Property A B. Property B c. Property 19. The disproportionate charges for Property C noted by Green are least likely to explicitly factor into the estimate of property value using the: A. cost approach B. income approach C. sales comparison approach 20. Based upon Exhibit I, which of the following statements regarding Property A is most accurate? A. The going-in capitalization rate is 13.5%. B. It appears the riskiest of the three properties. C. The net operating income in the first year is 298,000. 21. Based upon Exhibit 1, the value of Property C using the direct capitalization method is closest to: A. 3,778.900 B. 4,786,700 C. 6,527,300. 22. Based upon Exhibit I and Assumptions 1 and 2, the value of Property B using the discounted cash flow method, assuming a five-year holding period, is closest to: A. 4,708,700. B. 5,035,600 C. 5,050,900. 23. Which method under the income approach is least likely to provide a realistic valuation for Property B? A. Layer method B. Direct capitalization method C. Discounted cash flow method 24. Based upon Exhibit 1, the value of Property A using the cost approach is closest to A. 5,281,000. B. 6,531,000. C. 9,385,000 25. Based upon Exhibit 1, the value of Property B using the sales comparison approach is closest to: A. 4,781,000. B. 4,858,000 C. 6,110,000 26. Which due diligence item would be most useful in addressing Green's concems regarding Property A? A. Property survey B. Engineering inspection Environmental inspection 26. Which due diligence item would be most useful in addressing Green's concerns regarding Property A? A Property Survey B. Engineering inspection C. Environmental inspection 27. The real estate index currently being used by First Life to evaluate private equity real estate investments is most likely: A. an appraisal-based index. B. a transaction-based index. C. the NCREIF property index. 28. Based upon Exhibit 1, the property expected to be most highly leveraged is: A. Property A B. Property B C. Property C The following information relates to Questions 13-28 First Life Insurance Company, Led, a life insurance company located in the United Kingdom, maintains a stock and bond portfolio and also invests in all four quadrants of the real estate market; private equity, public equity, private debt, and public debt. Each of the four real estate quadrants has a manager assigned to it. First Life intends to increase its allocation to real estate The Chief Investment Officer (CIO) has scheduled a meeting with the four real estate managers to discuss the allocation to real estate and to each real estate quadrant Leslie Green, who manages the private equity quadrant, believes her quadrant offers the greatest potential and has identified three investment properties to consider for acquisition Selected information for the three properties is presented in Exhibit I. Exhiha. Selected deformationen Potential Private Equity Real Estate Investments Property Single Tenant Office Property descrita Sequare meters) Shopping Center Warehouse 5.000 Lp Geos 70 50 years 30 years $575 000 Expected low to value ratio Total economic life Remaining comic lite Rental com full epancy) Other income Vacancy and collection loss Property manage Other operating expenses Duco Growth 27000 50 years 20 years 590 000 129.500 59000 22.000 610 000 183000 661 000 5.000 14.000 11:39 20% 30 9254 See A 2 11.00% 1.750.000 Market value of land 1 500 000 4.000.000 Building costs 8.725.000 14 500000 12.500.000 Deep 30.000 210.000 54.104.000 E1329.000 8.021.000 Dec Obec Formal 50,000 1000000 500,000 500,000 Eco 100,000 1 000 000 Compleaded price per que Cow Property T30 - Cow Party 2 1,825 1.675 Compable Property 3 1875 To prepare for the upcoming meeting, Green has asked her research analyst, Ian Cook, for a To prepare for the upcoming meeting. Green has asked her research analyst, Ian Cook, for a valuation of each of these properties under the income, cost and sales comparison approaches using the information provided in Exhibit 1, and the following the assumptions 1. Assumption 1 The holding period for each property is expected to be five years 2. Assumption 2 Property B is expected to have the same net operating income for the holding period due to existing leases, and a one-time 20% increase in year 6 due to lease rollovers. No further growth is assumed thereafter In reviewing Exhibit 1, Green notes the disproportionate estimated obsolescence charges for Property C relative to the other properties and asks Cook to verify the reasonableness of these estimates. Green also reminds Cook that they will need to conduct proper due diligence. In that regard, Green indicates that she is concerned whether a covered parking lot that was added to Property A encroaches (is partially located on adjoining properties. Green would like for Cook to identify an expert and present documentation to address her concerns regarding the parking lot. In addition to discussing the new allocation, the CTO informs Green that she wants to discuss the appropriate real estate index for the private equity real estate quadrant at the upcoming meeting. The CIO believes that the current index may result in over-allocating resources to the private equity real estate quadrant 13. The most effective justification that Green could present for directing the increased allocation to her quadrant would be that relative to the other quadrants, her quadrant of real estate investments A provides greater liquidity B. requires less professional management C enables greater decision-making control 14. Relative to the expected correlation between First Life's portfolio of public REIT holdings and its stock and bond portfolio, the expected correlation between First Life's private equity real estate portfolio and its stock and bond portfolio is most likely to be A lower B. higher C. the same 15. Which of the properties in Exhibit I exposes the owner to the greatest risk related to operating expenses? A Property A B Property B C. Property 16. Which property in Exhibit is most likely to be affected by import and export activity! A. Property A B. Property B C. Property C 17. Which property in Exhibit I would most likely require the greatest amount of active management? A Property A B. Property B C. Property C 18. Which property in Exhibit I is most likely to have a percentage lease? A Property A B. Property B c. Property 19. The disproportionate charges for Property C noted by Green are least likely to explicitly factor into the estimate of property value using the: A. cost approach B. income approach C. sales comparison approach 20. Based upon Exhibit I, which of the following statements regarding Property A is most accurate? A. The going-in capitalization rate is 13.5%. B. It appears the riskiest of the three properties. C. The net operating income in the first year is 298,000. 21. Based upon Exhibit 1, the value of Property C using the direct capitalization method is closest to: A. 3,778.900 B. 4,786,700 C. 6,527,300. 22. Based upon Exhibit I and Assumptions 1 and 2, the value of Property B using the discounted cash flow method, assuming a five-year holding period, is closest to: A. 4,708,700. B. 5,035,600 C. 5,050,900. 23. Which method under the income approach is least likely to provide a realistic valuation for Property B? A. Layer method B. Direct capitalization method C. Discounted cash flow method 24. Based upon Exhibit 1, the value of Property A using the cost approach is closest to A. 5,281,000. B. 6,531,000. C. 9,385,000 25. Based upon Exhibit 1, the value of Property B using the sales comparison approach is closest to: A. 4,781,000. B. 4,858,000 C. 6,110,000 26. Which due diligence item would be most useful in addressing Green's concems regarding Property A? A. Property survey B. Engineering inspection Environmental inspection 26. Which due diligence item would be most useful in addressing Green's concerns regarding Property A? A Property Survey B. Engineering inspection C. Environmental inspection 27. The real estate index currently being used by First Life to evaluate private equity real estate investments is most likely: A. an appraisal-based index. B. a transaction-based index. C. the NCREIF property index. 28. Based upon Exhibit 1, the property expected to be most highly leveraged is: A. Property A B. Property B C. Property C