Q&A Hero

Q: The $6.5 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 currently accounts for the largest proportion of market value? A. Public equity B. Privately held equity C. Publicly traded mortgage debt D. Privately held mortgage debt

Q: Barney takes his wife Betty to a Porsche dealership and tells her to pick out whichever car she wants as a birthday present. She chooses a red Boxter. Barney negotiates a price with the dealership and signs a contract paying cash for the car. Barney repeatedly tells the dealer that the car is a gift for his wife. The car is to be serviced and picked up at 10:00 a.m. the next morning. Barney dies that night. When Betty arrives at the dealership to get the car, they refuse to give it to her because only Barney signed the contract. A.Betty is entitled to the car as a creditor beneficiary. B.Betty is entitled to the car as a donee beneficiary. C.Betty is entitled to the car as an incidental beneficiary. D.Betty is not entitled to the car but can get the money back.

Q: The estimated market value of investible commercial real estate in the United States at the end of 2011 was approximately $6.5 trillion. In terms of market size, which of the following asset categories is most closely related to commercial real estate? A. Owner-occupied housing B. Corporate equities C. U.S. Treasury securities D. Municipal securities

Q: Josh's dog, Ginger, has run away so Josh places reward posters throughout the neighborhood offering $500 for Ginger's safe return. Amanda, Josh's best friend sees Ginger and brings her back to Josh without ever seeing a poster. After returning the Ginger, Amanda then sees one of the reward posters and returns to claim the money. A.Amanda is not entitled to the money because the offer was not communicated to her. B.Amanda is not entitled to the money because $500 is an outrageous amount for the return of a dog. C.Amanda is entitled to the money because the reward poster constituted an offer and is effective whether read or not. D.Amanda is entitled to the money because unilateral contracts don't require communication regarding the offer or acceptance.

Q: The deposited acceptance rule is also known as the _________ rule. A.Mirror image. B.Mailbox. C.Unilateral. D.Bilateral.

Q: Given the following information, calculate the price-FFO multiple for the following REIT. 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 (real property): $2,675,000. Stock Price: $40; Market Capitalization: $40,000,000A. 0.10B. 4.07C. 9.83D. 393.12

Q: Acceptance of a bilateral contract is by: A.Making a return promise. B.An act. C.Oral response only. D.Not rejecting it.

Q: Larry offers to sell his car to Moe for $10,000. Moe responds that he will pay $9,000 for the car. Larry refuses Moe's $9,000 offer. Moe then says that he will pay the $10,000. There is: A.A contract for $10,000. B.No contract because there is no offer to accept. C.A contract for $9,000. D.No contract due to a revocation by the offeror.

Q: 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 (real property): $2,675,000. A. $195,000 B. $1,395,000 C. $2,870,000 D. $4,070,000

Q: All of the following terminate an offer except: A.A counteroffer. B.Revocation by the offeror. C.The contractual performance becoming legal. D.The offeror's death or insanity.

Q: 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 C. Funds from operations D. Effective gross income

Q: Which of the following is most likely an assignable duty? A.An auto mechanic delegating to another mechanic in the shop the duty to do an oil change on your car without your consent. B.A partner in a law firm delegating to an associate the duty to handle your murder trial without your consent. C.Your professor deciding to take a semester off and delegating to a brother or sister, with the same degree, the duty to teach without the consent of the administration. D.None of the above would be valid delegations of duties.

Q: 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

Q: The UCC governs: A.The sale of land. B.The sale of goods. C.Service contracts. D.All of the above.

Q: 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 depreciation and amortization expenses, more commonly referred to as: A. Net income B. Net asset value C. Funds from operations D. Effective gross income

Q: Robert is about to graduate from his university and his parents tell him that because he is the first member of the family to graduate college, they want to buy him a new but inexpensive car. They have the money to buy the car and Robert is excited to get his gift. In fact, Robert has never owned a car so this will be his first. On graduation day, his parents tell him that they have decided to use the car money for a vacation and there will be no car. A.Robert can successfully sue based on promissory estoppel. B.Robert can successfully sue based on the promise of a gift. C.Robert cannot successfully sue because the promise was not reasonable and would not support promissory estoppel. D.Robert cannot successfully sue because he did not rely to his detriment on the promise.

Q: 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 REIT market value? A. Apartments B. Office C. Industrial D. Retail

Q: A NASA engineer is wrongfully terminated from her job. She can mitigate her damages by: A.Sending out resumes. B.Looking for another engineering job. C.Contacting a head-hunter or employment agency. D.All of the above.

Q: 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 as: A. market capitalization B. capitalization rate C. price-earnings ratio D. earnings-per-share ratio

Q: In Douglas v. Talk America, Inc., Douglas's contract terms were altered by posting a notice of contractual changes on the Talk America website. Douglas sued when he discovered the changes after a number of years and the court said: A.Douglas's continued use of the site constituted an acceptance of the changes. B.Douglas cannot actually assent to an offer unless he knows of its existence. C.If notice is placed on a website and you visit the site frequently, you have been provided notice whether you open the link to read the changes or not. D.Because Douglas waited four years to complain and bring suit, he was deemed to have waited too long and he forfeited his right to sue.

Q: Real estate private equity funds can focus investment on anything from "Class A" real estate to redevelopment in the urban center. On the risk-return spectrum, which of the following private equity fund categories tends to have a heavier development component and often involves investment in riskier property types and locations? A. Core B. Value Added C. Opportunistic D. Full platform

Q: Specific performance can be a remedy in all of the following contracts except for which one: A.Sale of the Empire State Building. B.Sale of a 2008 Hyundai Sonata. C.Sale of Da Vinci's portrait; "Mona Lisa". D.Sale of Rodan's sculpture; "The Thinker".

Q: When investing in commercial real estate through an intermediary, it is important to consider whether the fund has a finite or infinite life. By having a finite life, the fund manager is forced to eventually dispose of the assets and return the investors' capital. With which of the following fund structures do you expect the issues associated with finite life to be least prevalent? A. Closed-end commingled real estate fund B. Open-end commingled real estate fund C. Real estate private equity fund D. Public, non-traded REIT

Q: Which of the following is not a remedy for breach of contract: A.Damages. B.Rescission. C.Mitigation. D.Specific performance.

Q: Direct investment in private commercial real estate markets is a preferred means of ownership for the largest institutional market participants. Which of the following types of institutions rely on stable income from commercial real estate properties to pay out retirement benefits? A. Pension funds B. Life insurance companies C. Commercial Banks D. Investment Banks

Q: Duress uses ________ to get a person to enter a contract. A.Physical force. B.Economic force. C.Threats of force. D.All of the above.

Q: There are a number of ways in which individual and institutional investors can hold investments in commercial real estate as a part of their portfolio. One way is to purchase and hold the title to the actual commercial property, which gives the owner complete control of the asset. This type of transaction would be considered which of the following? A. Direct investment in private commercial real estate equity B. Indirect investment in private commercial real estate equity C. Direct investment in private commercial real estate debt D. Indirect investment in private commercial real estate debt

Q: In Northeast Fence & Iron Works, Inc. v. Murphy Quigley Co., Inc., the court concluded that: A.If the final price or contract cost is left out of the contract, the contract is void. B.The relationship between the parties was one of a quasi-contract intended to remedy unjust enrichment. C.The relationship between the parties was one of an express contract despite the missing terms. D.The relationship between the parties was one of an implied contract despite the missing terms.

Q: In recent years, which of the following pooled ownership structures are used by private funds that are trying to attract capital from very high net worth and institutional investors? A. General partnership B. Limited partnership C. C corporation D. Limited liability company

Q: Madison promises Grace $10 if Grace will pick-up her dry cleaning for her. This is an example of a ________ contract. A.Bilateral. B.Unilateral. C.Trilateral. D.Void.

Q: A/an ________ contract is one that the essential terms of the contract have been discussed by the parties. A.Express. B.Executory. C.Implied. D.Bilateral.

Q: In recent years, a number of pooled ownership structures have emerged that have changed the analysis of ownership form selection for many investors. Which of the following ownership structures is generally used for small, local investments that are marketed to accredited, but non-institutional investors? A. General partnership B. Limited partnership C. C corporation D. Limited liability company

Q: An _________ contract is one that is partially or completely unperformed. A.Executed. B.Executory. C.Express. D.Exculpatory.

Q: In most pooled ownership forms a single partner is empowered to act on behalf of the investors in terms of making property investment decisions. Based on your understanding of the different types of pooled ownership which of the following structures would we expect this issue to be the least prevalent? A. General partnership B. Limited partnership C. C corporation D. Subchapter S corporation

Q: 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 the agent's best interest, not in the best interests of the principal. This issue is more commonly referred to as: A. adverse selection B. moral hazard C. dual agency D. signaling

Q: Aimee is a 19 year old college student. Her parents are worried about her being away from home so they tell her that if she goes both the Fall and Spring semesters without drinking alcohol, they will buy her a new car. Aimee, does in fact go both semesters without drinking: A.Aimee gets the car because she performed exactly as required under her parents offer. B.Aimee gets the car because a quasi contract is formed due to her parents unjust enrichment. C.Aimee is not entitled to the car because her benefit far outweighed her detriment. D.Aimee is not entitled to the car because she suffered no detriment.

Q: All of the following are responsibilities of the syndicator in the origination phase of a syndicate's life EXCEPT: A. Develop the concept for the syndication B. Organize the legal entity C. Acquire or obtain control of the real estate D. Raise additional investment capital

Q: Oral contracts can never be: A.Executory contracts. B.Quasi contracts. C.Express contracts. D.Bilateral contracts.

Q: Fred takes Betty to dinner at a very expensive and exclusive restaurant. The place is so exclusive that the menu doesn't have prices printed. The server takes their order and both Fred and Betty enjoyed the meal immensely When the bill comes, Fred refuses to pay because the menu had no prices and because he and the server never engaged in language indicating an offer and acceptance. The server said, "A you ready to order" and when Fred said "yes", the server merely, "What may I get you tonight"? A.Fred must pay based on an implied contract theory. B.Fred must pay based on a promissory estoppel theory. C.Fred must pay based on an express contract theory. D.Fred is correct because no contract was formed.

Q: 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 phase of a syndicate's life EXCEPT: A. Manage the syndication B. Manage properties C. Raise additional investment capital if required D. Prepare the properties for sale

Q: Assume you have taken out a balloon mortgage loan for $2,500,000 to finance the purchase of a commercial property. The loan has a term of 5 years, but amortizes over 25 years. Calculate the balloon payment at maturity (Year 5) if the interest rate on this loan is 4.5%.A. $5,637.99B. $13, 895.82C. $2,196,447.59D. $2,495,479.19

Q: Goods are defined as: A.Tangible property. B.Movable personal property. C.Not land or services. D.All of the above.

Q: The first step in negotiating a contract is: A.Consideration. B.Legality. C.Offer. D.Acceptance.

Q: Suppose you are considering the purchase of an apartment building that has 12 units that can be rented out at $1,050 per month. You have estimated operating expenses and expected vacancy and collection losses for the first year to be $35,700 and $30,240, respectively. You also have estimated that you will be able to generate an additional $3,840 in the first year from garage rentals on the property. If the expected purchase price of the property is $1,100,000 and you are planning on making a 10% down payment, calculate the debt yield ratio. A. 8.10% B. 8.61% C. 9.00% D. 12.05%

Q: In Mobil Oil Exploration and Producing Southeast, Inc v. United States, a lease contract was entered into by the parties but a new law made it impossible for the U.S. to abide by the contract terms. Mobil Oil was entitled to a return of their $158 million paid to the U.S. based on: The court said: A.Repudiation of the contract. B.Rescission of the contract. C.A decree of specific performance being enforced. D.Consequential damages.

Q: Given the following information, calculate the loan-to-value ratio of this commercial loan. Estimated net operating income in the first year: $150,000, Debt service in the first year: $100,000, Loan amount: $1,000,000, Purchase price: $1,300,000 A. 0.08 B. 0.77 C. 1.30 D. 1.75

Q: Contracts are: A.Legally enforceable promises. B.Always required to be written. C.Not legally enforceable. D.Identical to agreements.

Q: Given the following information, calculate the debt coverage ratio of this commercial loan. Estimated net operating income (NOI) in the first year: $150,000, Debt service in the first year: $100,000, Loan amount: $1,000,000, Purchase price: $1,300,000 A. 0.15 B. 0.67 C. 1.30 D. 1.50

Q: Mitigation is the responsibility of the breaching party.

Q: A person can never recover compensation in an illegal contract using a quasi-contract theory.

Q: If the mortgage loan is going to be packaged with similar loans and then resold to investors as part of a commercial mortgage-backed security, the originating lender may rely more heavily on examining which of the following ratios in order to determine the maximum amount they are willing to lend to the borrower? (Note: This ratio indicates the cash-on-cash return the lender would earn on its invested capital if it had to foreclose on the property immediately after originating the loan) A. Debt coverage ratio B. Debt yield ratio C. Debt service ratio D. Equity dividend ratio

Q: The contracts of a person adjudged incompetent are voidable.

Q: Under the UCC, all contracts and contract offers must have consideration.

Q: Land acquisition, development, and construction loans used by developers differ significantly from the "permanent" mortgages that traditionally are used to finance the purchase of commercial properties. All of the statements listed below are true regarding land acquisition, development, and construction loans EXCEPT: A. Developers can never be held personally liable for such loans B. These loans have floating interest rates tied to short-term interest rate indices C. These loans are interest-only loans. D. These loans can be prepaid at any time without penalty.

Q: Bilateral contracts are always express.

Q: Different financing requirements usually are involved in the various phases of a property's life. Which of the following types of loans is used to finance improvements to the land, such as sewers, streets and utilities? A. Land acquisition loans B. Land development loans C. Construction loans D. Bridge loans

Q: Promises to make a gift are not binding because there is no bargained for exchange.

Q: Which of the following terms refers to a written agreement that binds the lender to make a loan to the borrower provided the borrower satisfies the terms and conditions of the agreement? A. Loan application B. Loan commitment C. Loan underwriting D. Loan document

Q: Once a loan application is signed, the lender begins a process that typically includes ordering the fee appraisal, the title report, and a number of third party inspection, compliance, and engineering reports in an attempt to make sure the potential borrower did not misrepresent the property in any way in the original loan submission package. This process is more commonly referred to as: A. Due diligence B. Loan submission C. Loan development D. Defeasance

Q: The mirror image rule is the same under common law rules and the UCC.

Q: Prospective borrowers often submit loan requests directly to lenders. However, commercial loan requests can also be submitted through another channel in which a permanent lender agrees to purchase loans or consider loan requests from a mortgage banker or broker. This type of business relationship is more commonly referred to as a(n): A. installment sale B. joint venture C. correspondent relationship D. sale-leaseback

Q: A deposited acceptance creates a binding contract even if there is a revocation in the mail.

Q: An offer of a reward is an offer to enter into a bilateral contract.

Q: Relative to residential loans, the underwriting process for commercial loans is more complicated. The commercial loan underwriting process focuses first on which of the following? A. Individual borrower's credit quality B. Income producing potential of the collateral property C. Individual borrower's wages D. Individual borrower's personal assets

Q: According to the UCC, a contract for the sale of goods can be valid even when the acceptance proposes new or different terms.

Q: Although nonrecourse loans dominate the commercial mortgage lending practices of pension funds, life insurance companies, and commercial mortgage-backed security (CMBS) originators, banks are likely to require some form of a guarantee by the organizer/sponsor of the investment opportunity to make the lender whole in the event the lender suffers a loss on the loan. This protection to the lender is more commonly referred to as a: A. Credit enhancement B. Property externality C. Joint venture D. Mezzanine loan

Q: A victim of a contract breach should mitigate her damages, but she is not required to do so.

Q: The use of financial leverage by real estate investors can be a double-edged sword. All of the following statements regarding the use of financial leverage by real estate investors are true EXCEPT: A. The use of financial leverage by real estate investors mitigates the impact that limited financial resources would otherwise have on their pursuit of investment opportunities. B. The use of financial leverage by real estate investors will increase the internal rate of return (IRR) on equity as long as the cost of borrowing is less than the unlevered IRR. C. The use of financial leverage reduces the real estate investor's exposure to default risk. D. The use of financial leverage by real estate investors makes the realized return on equity more sensitive to changes in rental rates and resale values.

Q: Duties in a contract may be assigned as long as they do not depend on the character, skill or training of that party.

Q: In order to better understand a borrower's probability of default, lenders have a number of tools at their disposal. The ratio that measures the percentage of the price (or value) of a property that is encumbered by the first mortgage is referred to as the: A. debt coverage ratio (DCR) B. loan-to-value ratio (LTV) C. break-even ratio (BER) D. price-earnings ratio (PE)

Q: Contractual consideration is the thought process a party uses to decide whether or not to accept the offer and enter into a contract.

Q: An interest-only balloon mortgage loan is commonly referred to as a(n): A. Mini-perm loan B. Mezzanine loan C. Land acquisition loan D. Bullet loan

Q: Specific performance is a contract remedy available in all breach of contract cases.

Q: There are a number of alternatives when it comes to the capital structure for acquisitions of commercial real estate. Through which of the following lending relationships does the lender have the right to foreclose on the equity of the borrower's company in the case of default? A. Second mortgage loan B. Mezzanine loan C. Mini-perm loan D. Construction loan

Q: A teacher's promise to pay $5.00 if a student goes to her office to get her some chalk is an example of a unilateral contract.

Q: The yields on commercial mortgages have been approximately 2 percent higher, on average, than the yields on comparable maturity treasury securities over the past 15 years. Often considered the signature risk of commercial mortgage lending, this spread primarily represents: A. Default risk B. Interest rate risk C. Pipeline risk D. Fallout risk

Q: While floating rate mortgage loans may offer lower interest rates to borrowers than comparable fixed-payment mortgages, floating-rate loans may increase a lender's exposure to which of the following risks since borrowers may not be able to continue to service the debt if payments on the loan increase significantly? A. Default risk B. Interest rate risk C. Liquidity risk D. Pipeline risk

Q: Your professor has offered to sell a car to you for $1,000.00 and you have agreed. You've both signed a contract fully detailing the transaction which will be executed in 24 hours and you've shaken hands. The two of you have a firm offer for the purchase of the car.

Q: If mortgage rates decline significantly, borrowers may decide to prepay the principal on their loan even if they face prepayment penalties. One way that lenders protect themselves from prepayments in such circumstances is by requiring the borrower who prepays to purchase for the lender a set of U.S. Treasury securities whose coupon payments replicate the cash flows the lender will lose as a result of the early retirement of the mortgage. This process is referred to as: A. Lockout B. Yield-maintenance C. Defeasance D. Curtailment

Q: An executed contract is one that is fully performed.