Question 1

A group of persons or legal entities who come together to carry out a particular activity are more commonly referred to as a:

Accepted Answer

A)  Syndicate 
B)  Security 
C)  Trust 
D)  Broker

Question 2

The $8.8 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?

Accepted Answer

A)  Public equity 
B)  Privately held equity 
C)  Publicly traded mortgage debt 
D)  Privately held mortgage debt

Question 3

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:

Accepted Answer

A)  High transaction costs and high liquidity 
B)  High transaction costs and low liquidity 
C)  Low transaction costs and high liquidity 
D)  Low transaction costs and low liquidity

Question 4

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?

Accepted Answer

A)  Real estate investment trusts (REITs) 
B)  Commercial mortgage backed securities (CMBS) 
C)  Construction loans 
D)  Residential mortgage backed securities (MBS)

Question 5

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?

Accepted Answer

A)  C Corporation 
B)  Subchapter S Corporation 
C)  General Partnership 
D)  Limited Liability Company

Question 6

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?

Accepted Answer

A)  General partnership 
B)  Limited partnership 
C)  C corporation 
D)  Subchapter S corporation

Question 7

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:

Accepted Answer

A)  par value 
B)  a discount 
C)  a premium 
D)  an auction

Question 8

Investors in commercial real estate can hold ownership positions either directly or indirectly. An entity that invests in real estate and sells claims on those investments to the ultimate investors is more commonly referred to as a(n):

Accepted Answer

A)  Syndicate 
B)  Intermediary 
C)  Sole proprietorship 
D)  Tenant

Question 9

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?

Accepted Answer

A)  Net income 
B)  Net asset value 
C)  Funds from operations 
D)  Effective gross income

Question 10

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:

Accepted Answer

A)  At least 100 investors must own a REIT's shares 
B)  No five investors can own more than 50 percent of a REIT's shares 
C)  At least 75 percent of the value of a REIT's assets must consist of real estate assets 
D)  A REIT must distribute at least 75% of its taxable income to shareholders in the form of dividends.

Question 11

Real estate private equity funds have been used to facilitate investment across the risk-return spectrum. All of the following are characteristics of investments by core funds EXCEPT:

Accepted Answer

A)  High quality property 
B)  Properties located in large metropolitan areas 
C)  Strong leases 
D)  High expected returns

Question 12

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:

Accepted Answer

A)  Net income 
B)  Net asset value 
C)  Funds from operations 
D)  Effective gross income

Question 13

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?

Accepted Answer

A)  Core 
B)  Value Added 
C)  Opportunistic 
D)  Full platform

Question 14

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?

Accepted Answer

A)  General partnership 
B)  Limited partnership 
C)  C corporation 
D)  Limited liability company

Question 15

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:

Accepted Answer

A)  Manage the syndication 
B)  Manage properties 
C)  Raise additional investment capital if required 
D)  Prepare the properties for sale

Question 16

All of the following constitute indirect ownership of real estate private equity EXCEPT:

Accepted Answer

A)  limited partnership 
B)  limited liability company 
C)  tenancy in common 
D)  real estate investment trust

Question 17

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?

Accepted Answer

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

Question 18

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 for approximately one-half of their investments in real estate?

Accepted Answer

A)  Investment banks 
B)  Life insurance companies 
C)  Real estate advisory firms 
D)  Pension funds

Exam 17: Sources of Commercial Debt and Equity Capital