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Question
The cap rate is an important metric that investors use to analyze the state of commercial real estate markets. When interpreting cap rate movements, an increase in cap rates over time would indicate that:
A. The discount rate used in TVM (time value of money) calculations has increased
B. The discount rate used in TVM (time value of money) calculations has decreased
C. Property values have increased
D. Property values have decreased
Answer
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Related questions
Q:
Considered a fundamental pricing metric in commercial real estate markets, the ratio of a propertys annual net income to its market value is more commonly referred to as a(n):
A. Appreciation rate
B. Capitalization rate
C. Discount rate
D. Internal rate of return
Q:
Investors in real estate can choose to hold properties directly in the private market or indirectly through publicly traded real estate securities. The market for buying selling, and leasing real estate can be characterized by all of the following EXCEPT:
A. localized markets
B. highly segmented markets
C. privately negotiated contracts
D. low transaction costs
Q:
By the fourth quarter of 2015, U.S. households had accumulated $12.5 trillion in housing equity, which represents about 14 percent of their net worth. What proportion of U.S. households own their home?
A. one-third
B. one-half
C. two-thirds
D. three-fourths
Q:
Each property has unique features, whether it is its age, the building design of its structures, or its location. As such, real estate markets consist of assets that are considered:
A. homogeneous
B. heterogeneous
C. substitutes
D. complements
Q:
Competition for the currently available supply of locations and space coupled with the existing supply of leasable space, determines:
A. the current level of rental rates for each submarket and property
B. the riskiness of the expected cash flows of an income-producing property
C. the timing of the expected cash flows of an income-producing property
D. the cost of financing the purchase of a property
Q:
An example of a real estate asset that trades in the public debt market is:
A. real property
B. real estate operating companies
C. equity REITs
D. commercial mortgage backed securities (CMBS)
Q:
If we desire to classify land by its use, land that does not include any improvements to the land would be categorized as:
A. Raw land
B. Building site
C. Developed land
D. Property infrastructure
Q:
In more complex development projects, a developer may choose to combine the roles of the architect and general contractor into one in order to mitigate design-cost conflicts that otherwise must be negotiated when plans are revised. This arrangement is more commonly referred to as a:
A. build-to-suit
B. subordination agreement
C. design-build
D. fast-track
Q:
There are a number of ways that a developer can finance the establishment of site control, each with its own advantages and disadvantages. Which of the following methodologies calls for only the initial land rent to be paid out before development actually gets under way?
A. Joint venture
B. Option
C. Contract for deed
D. Ground lease
Q:
Assume a retail tenant is paying a base rent of $120,000 per year (or $10,000 per month). In addition, the tenant must pay 7 percent of gross store sales in excess of $143,000 per month as percentage rent. If the store produces $170,000 in gross sales in a month, what is the total rent due for the month?
A. $10,000
B. $10,158
C. $11,890
D. $21,900
Q:
Given the following information, calculate the effective monthly rent payment. Lease Term: 10 years, Concession: 1 year free rent to be spread over the term of the lease, Rental Space: 5000 square feet, Rental Rate: $20 per square foot per year, Landlord's discount rate: 10%.
A. $4,676
B. $5,901
C. $7,081
D. $10,122
Q:
Which of the following core property types includes buildings designed for the temporary storage of goods such as inventory, company records, and excess raw materials?
A. Apartment
B. Industrial
C. Office
D. Retail
Q:
In some leases, the method used to share responsibility for operating expenses is a hybrid of the four basic lease types. For example, the inclusion of which of the following clauses calls for only increases in one or more operating expenses, relative to a base year, to become the responsibility of the tenant?
A. Operating expense escalation clause
B. Tenant improvement allowance clause
C. Operating expense stop clause
D. Subordination clause
Q:
In a net lease, the tenant is responsible for paying a clearly defined portion of the propertys operating expenses. Based on your understanding of the standard definitions of netness in commercial leases, the tenant is responsible for which of the following in a net-net lease?
A. No operating expenses
B. Only property taxes
C. Both property taxes and insurance
D. All operating expenses
Q:
To the extent the tenant is permitted to alter the leased premises, the lease should clearly state when this may be done, and under what circumstances. The lease must also be clear about the ownership of such improvements once completed. Which of the following terms refers to items of personal property that are attached to the real property, are paid for and installed by the tenant, and may be removed by the tenant at the termination of the lease?
A. Trade fixtures
B. Anchors
C. Concessions
D. Expense stop
Q:
The large and generally well-known retailers who draw the majority of customers to a shopping center are more commonly referred to as:
A. Outlets
B. Anchors
C. Strips
D. Chains
Q:
In retail property types, rents are quoted on the basis of which of the following?
A. Usable area
B. Gross floor area
C. Gross leasable area
D. Rentable area
Q:
The two most important determinants of the classification of an office property are age and obsolescence. Which of the following classes includes office buildings that are older and reasonably maintained, but are below current standards for one or more reasons?
A. Class A office
B. Class B office
C. Class C office
D. Investment grade property
Q:
A lease option is a clause that grants an option holder the right, but not the obligation, to renew the lease, cancel the agreement, relocate within a property, or even expand to adjacent space. The existence of these options in a leasing agreement:
A. reduces the expected present value of lease cash flows to the owner
B. increases the expected present value of lease cash flows to the owner
C. does not impact the expected present value of lease cash flows to the owner
D. causes the expected present value of lease cash flows to equal zero
Q:
In commercial leases, rents do not necessarily have to be kept constant over the life of the lease term. One option is for there to be pre-specified increases in the contract rental rate over time, sometimes referred to as step-ups or escalations. This type of rent treatment is commonly referred to as:
A. flat rent
B. graduated rent
C. indexed rent
D. percentage rent
Q:
Suppose an owner is trying to decide whether or not to make improvements to her
property. Given the following information, what would be the value added or potential loss if the improvements are undertaken? Current rent per square foot: $8.75, Anticipated rent per square foot: $14.50, Cost of improvements: $250,000, Square feet: 34,000.
A. Gain of $54,500
B. Loss of $54,500
C. Gain of $195,500
D. Loss of $195,500
Q:
Property managers may choose at times not to perform ordinary maintenance at the time a problem is detected in order to boost short-run NOI. This type of maintenance is more commonly referred to as:
A. Custodial maintenance
B. Corrective maintenance
C. Preventive maintenance
D. Deferred maintenance
Q:
Despite the magnitude of their real estate holdings, many non-real estate corporations have historically expended little effort to manage these assets effectively. Recently, the development of which of the following markets has helped to quell concerns related to this issue?
A. Commercial mortgage backed securities (CMBS)
B. Sale-leaseback
C. Tenancy-in-common (TIC)
D. Installment sale
Q:
In contrast to maintenance and repair expenditures, which are operating expenses, the improvement decision generally involves a capital expenditure meant to increase the value of the structure. Which of the following classifications of improvements calls for the restoration of a property to satisfactory condition without changing the floor plan, form, or style of the structure?
A. Rehabilitation
B. Remodeling
C. Adaptive reuse
D. Conversion
Q:
Real estate asset managers perform certain functions that would not be expected of asset managers who deal with stock and bond portfolios. Which of the following functions would you expect both asset managers in real estate as well as stocks / bonds to perform?
A. Find specific assets in which the owners/client can invest
B. Monitor asset performance
C. Negotiate the acquisition price of assets
D. Oversee due diligence and closing
Q:
While college-level courses are not widely available, a number of professional and trade organizations exist in the field of property management. Which of the following certifications awarded by the Institute of Real Estate Management is aimed at individuals who manage larger, residential, office, industrial, or retail properties?
A. Certified Property Manager (CPM)
B. Accredited Resident Manager (ARM)
C. Real Property Administrator (RPA)
D. Member of Appraisal Institute (MAI)
Q:
An owner whose property is in a strong market position, where fewer services can be offered to tenants for the same dollar of rental income and where the owner will not lose tenants if the property is under-maintained, is said to participate in a market that has:
A. a relatively elastic demand for space
B. a relatively inelastic demand for space
C. economies of scale
D. diseconomies of scale
Q:
Given the following information, calculate the net income multiplier for this property. First-year NOI: $18,750, Acquisition price: $150,000, Equity Investment: 20%.
A. 0.1
B. 1.6
C. 8.0
D. 12.5
Q:
Given the following information, calculate the operating expense ratio for this property. Potential gross income: $120,000, Vacancy rate: 9%, Net operating income: $57,900, Operating expenses: $51,300.
A. 34%
B. 43%
C. 47%
D. 53%
Q:
Given the following information, calculate the effective gross income multiplier for the specific investment. Effective gross income: $49,500, First-year NOI: $18,750, Acquisition price: $520,000, Equity Investment: 20%.
A. 0.036
B. 0.095
C. 10.5
D. 27.7