The estimated market value of investible commercial real estate in the United States at the end of 2008 was approximately $6 trillion. In terms of market size, which of the following asset categories is most closely related to commercial real estate?
A. O
C. U.S. Treasury securities
The $6 trillion total market value of commercial real estate can be broken into four quadrants. Which of the following sectors of the commercial real estate market accounts for the largest proportion of market value?
A. Public equity
B. Privately held equ
D. Privately held mortgage debt
In contrast to public markets, private markets are characterized by individually negotiated transactions that take place without the aid of a centralized market. Therefore, private markets will generally have:
A. High transaction costs and high liquidity
B. High transaction costs and low liquidity
There are a set of restrictive conditions that REITs must satisfy on an ongoing basis in order to maintain their special tax status. All of the following statements regarding the main restrictions are true EXCEPT:
A. At least 100 investors must own a REIT
D. A REIT must distribute at least 75% of its taxable income to shareholders in the form of dividends.
There are three major types of REITs: Equity REITs, Mortgage REITs, and Hybrid REITs. Each differs in terms of what they invest in. Which of the following choices best describes the investment focus of an Equity REIT?
A. Invests a significant percentage o
B. Invests primarily in and operates commercial properties
The market value of U.S. real estate held by non-real estate corporations is estimated to exceed $2 trillion. All of the following are examples of noninvestible commercial real estate that are held by non-real estate entities EXCEPT:
A. Medical office bui
D. Assembly plant building owned by a group of investors as part of a sale-leaseback agreement with an auto manufacturer
When fund managers collect contributions from multiple sources and "commingle" them to purchase properties, this is referred to as the use of commingled real estate funds. Which of the following institutional investors utilize commingled real estate funds
D. Pension funds
At the end of 2008, commercial banks and other financial institutions collectively owned $20 billion in commercial real estate equity. The vast majority of these holding are the result of which of the following types of investment by these institutions?
A
D. Real estate obtained as a result of borrower default and foreclosure.
As of 2008, nearly 88% of private commercial real estate equity was owned by "noninstitutional investors." Which of the following investor categories represents the most common form of noninstitutional ownership?
A. Pension funds
B. Sole proprietorship
C.
C. Syndicate
The pooling of equity capital by investors to purchase real estate in the private market is referred to as syndication. With pooled ownership structures, investors expect to receive all of the following benefits EXCEPT:
A. Diversification.
B. Economies of
D. Management control of each of the properties in the syndicate's portfolio.
The choice of ownership form for pooled equity investments depends heavily on federal tax considerations. Which of the following ownership structures suffers from the major disadvantage of double taxation?
A. C Corporation
B. Subchapter S Corporation
C. G
A. C Corporation
Ownership forms for pooled equity investment can differ in terms of how the entity's cash flows are distributed to its investors. Which of the following ownership structures requires cash flows to be allocated to each shareholder in proportion to his or h
A. Subchapter S Corporation
Section 1031 of the Internal Revenue Code permits investors to defer some or all of the taxable gain that would ordinarily be due on the sale of a property if they exchange for "like-kind" property. In order to avoid income taxes, many investors attempted
C. Tenancy-in-common
The choice of ownership form for pooled equity investments can also depend on the desire to avoid personal liability. Which of the following ownership structures suffers from the major disadvantage of unlimited liability for all investors?
A. C Corporatio
C. General Partnership
Of the $3.6 trillion in outstanding mortgage debt in the U.S., approximately 71% is privately held by institutional and individual investors. Which of the following institutions is the largest single source of private mortgage funds?
A. Savings institutio
D. Commercial banks
Up until the market for these instruments collapsed in 2008, which of the following was the fastest-growing source of long-term commercial mortgage funds from 2002-2007?
A. Real estate investment trusts (REITs)
B. Commercial mortgage backed securities (CM
B. Commercial mortgage backed securities (CMBS)
In most small to medium private real estate deals, syndicators play important roles within the origination, operation, and completion phases of a real estate syndicate's life. All of the following are responsibilities of the syndicator in the operation ph
D. Prepare the properties for sale
While the development of the secondary market for mortgages focuses on funding provided by long-term holders of mortgage assets, loan originators still play an important role in the growth of the commercial real estate market. Historically, the most activ
A. Mortgage conduits
The syndication agreement generally creates a principal/agent relationship in which the syndicator (agent) is empowered to act on behalf of the investors (principals). In most principal/agent relationships, there is the concern that the agent will act in
B. moral hazard
One measure of the importance of a publicly traded asset class in the U.S. economy can be calculated by multiplying the number of publicly traded shares by the current market price of the stock. The result of this calculation is more commonly referred to
A. market capitalization
Most real estate investment trusts (REITs) are actively managed operating companies that typically focus their investments either by property type or geographic market. Which of the following commercial property types represents the largest proportion of
D. Retail
Since most real estate assets are depreciable, using accounting income to measure a REIT's cash flow may actually understate the funds that are available to distribute to investors as dividends. Therefore, REITs utilize a measure that adds back depreciati
C. Funds from operations
If the per share stock price of a REIT is greater than its per share net asset value (NAV), the REIT is said to be selling at:
A. par value
B. a discount
C. a premium
D. an auction
C. a premium
Which of the following measures, equal to the estimated total market value of a REITs underlying assets, allows investors to compare the value of a publicly traded security to the value of the properties that it holds in the private market?
A. Net income
B. Net asset value
Given the following information, calculate the funds from operation (FFO). Net income: $1,200,000, Gain/losses from infrequent and unusual events: $0, Amortization of tenant improvements: $120,000, Amortization of leasing expenses: $75,000, Depreciation (
D. $4,070,000