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Question 1

Which of the following statement is correct?

Select one:

a. The three principal types of REITs are private equity, venture capital, and hybrid.

b. Lodging and resorts REITs can be subdivided into those that own industrial, office, or a mix of office and industrial properties.

c. All the answers are incorrect.

d. Critics suggest that unlisted REITs are very expensive and illiquid compared to listed REITs.

e. Because REITs never own real estate assets and therefore do not have large depreciation allowances.

Question 2

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Which of the following statement is incorrect?

Select one:

a. Currently, most REITs are mortgage trusts.

b. Prior to 1986, a management activity restriction existed to ensure the passive nature of REITs.

c. Most of the answers are correct.

d. Critics suggest that unlisted REITs are very expensive and illiquid compared to listed REITs.

e. The vast majority of todays equity REITs are self-advised, vertically integrated operating companies that actively manage their portfolios in an effort to grow their cash flow and their portfolios, a fundamentally different entity from the earlier passive REIT.

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Which of the following statement is correct?

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a. After the sale of a REIT-owned property, if a capital gain is realized, the REIT can retain the gain for future investment and be taxed at the appropriate corporate capital gains tax rate.

b. To qualify as a real estate investment trust for tax purposes, the distributions to shareholders must equal or exceed the sum of 10 percent of REIT taxable income.

c. All the answers are incorrect.

d. Generally, listed REITs have list or liquidate provisions under which the REIT must liquidate the assets and return the net proceeds of the liquidation if the stocks are listed by a particular date.

e. After 1986, a management activity restriction was put in effect to ensure the passive nature of REITs.

Question 4

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Which of the following statement is incorrect?

Select one:

a. Most of the answers are correct.

b. The equity trust acquires property interests, while the mortgage trust purchases mortgage obligations and thus becomes a creditor with mortgage liens given priority to equity holders.

c. Retail REITs own a variety of property types, or own properties of one type that is not otherwise categorized, such as single-family rental housing, data centers, or prisons.

d. REITs that are not listed on an exchange or traded over-the-counter are called public nonlisted REITs.

e. After the sale of a REIT-owned property, if a capital gain is realized, the REIT can retain the gain for future investment and be taxed at the appropriate corporate capital gains tax rate.

Question 5

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Which of the following statement is correct?

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a. Only 5% of todays equity REITs actively manage their capital structure, securing capital through public equity and debt offerings, property- and portfolio-level debt, and joint ventures with institutional and foreign investors.

b. Any capital gains by the real estate investment trusts (REITs) are kept by the REITs to be used for the future REIT investments because REITs do not pay capital gains tax.

c. Finite-life REITs reinvest any sale and financing proceeds in new or existing properties and tend to operate more like a going concern, as opposed to an investment conduit.

d. All the answers are incorrect.

e. To safeguard against the conflicts of interest in REIT operations, most REITs put a provision in the articles of incorporation that a majority of the trustees or directors may not be affiliated with the sponsors of a REIT.

Question 6

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Which of the following statement is correct?

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a. FFO is used by analysts and investors as a measure of the "net sales" available to the REIT for distributions (dividends) to shareholders.

b. The vast majority of todays equity REITs actively manage their capital structure, securing capital through public equity and debt offerings, property- and portfolio-level debt, and joint ventures with institutional and foreign investors.

c. All the answers are incorrect.

d. A nonfinite-life (or nonself-liquidating) REIT is undertaken with the goal of disposing of its assets and distributing all proceeds to shareholders by a specified date.

e. Residential REITs can be subdivided into those that own strip centers, regional malls, and free-standing retail properties.

Question 7

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Which of the following statement is correct?

Select one:

a. For REITs, earnings are not the best measure of cash flow, largely due to the element of depreciation.

b. In the post-1986 era, all REITs are organized or sponsored by a financial institution, such as an insurance company, a commercial bank, or a mortgage banker.

c. For REITs, earnings are the best measure of cash flow, and depreciation has no effect on FFO.

d. All the answers are incorrect.

e. Real estate assets, cash, and government securities represent at least 25% of REIT assets.

Question 8

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Which of the following statement is incorrect?

Select one:

a. A "private equity trust" is a REIT type that is organized to acquire the specific property or properties described in its prospectus.

b. The two principal types of publicly traded real estate trusts are equity trusts and mortgage trusts.

c. Health care REITs are highly specialized form of REITs and many do not consider them to be true, real estatebacked securities.

d. Most of the answers are correct.

e. The equity-oriented real estate investment trust has provided investors with opportunities to invest funds in a diversified portfolio of real estate under professional management and own equity shares that trade on organized exchanges, thus providing more liquidity than if a property were acquired outright.

Question 9

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Which of the following statement is correct?

Select one:

a. The REIT shares are usually readily salable in the over-the-counter market or on major stock exchanges.

b. To safeguard against the conflicts of interest in REIT operations, most REITs put a provision in the articles of incorporation that a majority of the trustees or directors must be affiliated with the sponsors of a REIT.

c. Prior to 1986, the trustees, directors, or employees of a REIT were permitted to actively engage in managing or operating REIT property, rendering services to tenants of REIT property, or collecting rents from tenants.

d. Most new REITs are finite-life REITs, and several existing nonfinite-life REITs have amended their articles of incorporation to become finite-life REITs.

e. All the answers are incorrect.

Question 10

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Which of the following statement is incorrect?

Select one:

a. Self-Storage REITs specialize in ownership of self-storage facilities.

b. To qualify as a real estate investment trust for tax purposes, in general, at least 95 percent of a REITs gross income must be from dividends, interest, rents, or gains from the sale of certain assets.

c. Most of the answers are correct.

d. Following the 1986 Tax Act, the REIT became a less attractive vehicle for real estate developers and operators who stop sponsoring REITs, particularly for larger companies.

e. Mortgage REITs use debt financing to increase their capital bases.

Question 11

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Which of the following statement is incorrect?

Select one:

a. The three principal types of REITs are mortgage, equity, and hybrid.

b. A hybrid REIT is comprised of mortgage and equity REITs.

c. A "private equity trust" is a REIT type that is organized to acquire the specific property or properties described in its prospectus.

d. A mortgage REIT is a REIT that primarily invests in mortgages rather than equity ownership.

e. Most of the answers are correct.

Question 12

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Which of the following statement is incorrect?

Select one:

a. Most new REITs are nonfinite-life REITs, and several existing finite-life REITs have amended their articles of incorporation to become nonfinite-life REITs.

b. Most of the answers are correct.

c. The equity-oriented real estate investment trust has provided investors with opportunities to invest funds in a diversified portfolio of real estate under professional management and own equity shares that trade on organized exchanges, thus providing more liquidity than if a property were acquired outright.

d. A real estate investment trust (REIT) is a real estate company or trust that qualifies under certain tax provisions that distributes 10% of its taxable earnings to shareholders and keep any capital gains generated from the sale or disposition of its properties for future REIT investments because REITs do not pay capital gains tax.

e. In accordance with the tax provisions under which it was established, the real estate investment trusts (REITs) can deduct distributions to shareholders when calculating taxable income.

Question 13

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Which of the following statement is correct?

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a. Timber REITs specialize in owning various types of infrastructure, including railroads, electric and gas transmission and distribution, cell towers, and other forms of infrastructure.

b. The real estate investment trusts (REITs) do not distribute most of their income to shareholders, and therefore they pay excessive amounts for federal income tax.

c. Health care REITs are highly specialized form of REITs and many do not consider them to be true, real estatebacked securities.

d. The difference between EPS (earnings per share) and FFO (funds from operations) is due to fixed and variable costs.

e. All the answers are incorrect.

Question 14

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Which of the following statement is correct?

Select one:

a. All the answers are incorrect.

b. REITs that are not listed on an exchange or traded over-the-counter are called public nonlisted REITs.

c. After 1986, a management activity restriction was put in effect to ensure the passive nature of REITs.

d. A "private equity trust" is a REIT type that is organized to acquire the specific property or properties described in its prospectus.

e. To safeguard against the conflicts of interest in REIT operations, most REITs put a provision in the articles of incorporation that a majority of the trustees or directors must be affiliated with the sponsors of a REIT.

Question 15

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Which of the following statement is incorrect?

Select one:

a. Finite-life REITs reinvest any sale and financing proceeds in new or existing properties and tend to operate more like a going concern, as opposed to an investment conduit.

b. Most of the answers are correct.

c. REIT dividends are considered portfolio income and thus do not qualify as passive income to offset passive losses.

d. Retail REITs can be subdivided into those that own strip centers, regional malls, and free-standing retail properties.

e. FFO stands for funds from operations, which most analysts consider the REIT equivalent of earnings in industrial stocks.