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Question
Jack McKaid has built a great private real estate company in the warehouse business. He has always dreamed of taking his company public as a REIT. While preparing for the public offering he is approached by one of his competitors who proposes making a significant but non-controlling investment in Jacks business. What factors should Jack consider?
Answer
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Related questions
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Valuation: NPV The owners of the Centre at New Hope purchased the property at the end of 2002. Adjusted NOI for 2003 was projected at $4 million and expected to rise at 5% per annum over a seven year hold period. The property was purchased at a 9% cap rate based on 2003 adjusted NOI. The owners expect that they will be able to sell it at the end of the holding period at an 8% cap rate. Can the owners achieve a 10% return? (Assume the owners are tax exempt)
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Under GAAP accounting commercial properties are depreciated over a 39 year life. Do you agree with this accounting treatment? Explain the basis for your answer. Can you suggest an alternative method?
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General
An office building has 10,000 square feet. Average rent is $20 per foot. Average operating expenses are $10 per foot. The average expense stop is $6 per foot. Every fifth year a 5,000 square foot tenant comes up for renewal and it costs $25 per foot to replace the tenant (leasing commissions and tenant allowance). Non revenue generating capital expenditures is $1 per foot per year. What is the stabilized pre tax cash flow?
a) $105,000
b) $65,000
c) $25,000
d) $5,000
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Depreciation
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Adjustments to NOI: Vacancy Loss
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b) Minimum Rent.
c) Average Rent.
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One of the following was not a result of the financial crisis: a) Interest-only loans b) Increased amortization c) Higher credit spreads d) Lower LTV limits
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If LTV increases and debt service coverage decreases what is the impact on the cost of debt? a) decreases b) remains the same c) increases d) no impact
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You believe your property is reaching peak cash flow potential. You can sell an equity joint venture interest to a pension fund or increase the amount of the first mortgage outstanding. What are the implications of each of these choices? You read an article in the local paper about a new development that threatens the market dominance of your property. Does this change your choice of financing?
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If the property ROA is 10% for which Kd is the leverage positive? a) 10% b) 8% c) 12% d) 14%
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Characteristics of Reg D offerings generally include all of the following except:
a) limited to accredited investors
b) greater than 100 investors
c) Less than 35 investors
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a) pro rata allocations
b) allocations that are reflected in capital accounts
c) liquidations in accord with capital accounts
d) restoration of deficit capital accounts
Q:
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Q:
Introducing new business practices to a market is called X and generates Y
i) market transparency
ii) first mover advantage
iii) technology transfer
a) i,iii
b) i,ii
c) ii,iii
d) iii,ii
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True or False
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i) job creation tax credit
ii) access to lower cost capital
iii) moving allowance
iv) tenant allowance
v) lease buy-out
a) i,ii,iii
b) ii,iii,iv,v
c) i,iii
d) ii,iv
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Which is not a factor in choosing a corporate location?
a) access to transportation
b) sufficient utilities
c) availability of skilled labor
d) availability of greenhouse gasses
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Which is a method used by corporations to reduce the amount of property on the companys balance sheet?
a) sale-leaseback
b) industrial development bond
c) historic tax credit
d) enterprise zone
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In many cases, new housing developments require additional infrastructure. Who pays the cost of building and supporting the infrastructure? a)Developers b)Homebuyers c)Government d)All of the above
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Put the stages of the land development process in the proper order: a) Contact Broker, Option, Development, Sales b) Contact Broker, Development, Option, Sales c) Development, Contact Broker, Sales, Option d) Option, Contact Broker, Sales, Development
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Which tranche takes the greatest risk in CMBS?
a) Residual
b) Senior
c) Subordinated
d) PSA
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Q:
Five years ago you invested in a brand new 100,000 square foot office building. The building was fully leased to great tenants with 10 year leases. You financed your purchase with a ten year mortgage at a rate that would be considered high in todays market. You can refinance today and get a new ten year loan at a lower rate. You will however be required to pay your current lender a steep prepayment penalty. You can also wait until the loan comes to term and repay the loan without any penalty. This was your plan until you recently read about a brand new office park being discussed for the old farm just a mile down the road. Coincidentally, this development, if built, could open just as your tenant leases are coming up for renewal. What are your thoughts?