Question 1

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 A

Question 2

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 A

Question 3

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)  B

Question 4

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:

Accepted Answer

A)  market capitalization
B)  capitalization rate
C)  price-earnings ratio
D)  earnings-per-share ratio

Question 5

There are two major types of REITs: Equity REITs and Mortgage REITs.Each differs in terms of what they invest in.Which of the following choices best describes the investment focus of an Equity REIT?

Accepted Answer

A)  Invests a significant percentage of their assets in both properties and mortgages
B)  Invests primarily in and operates commercial properties
C)  Purchases mortgage obligations
D)  Purchases ownership interests in shares of pension funds and life insurance companies

Question 6

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.

Accepted Answer

A)  $195,000
B)  $1,395,000
C)  $2,870,000
D)  $4,070,000

Question 7

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 8

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 9

Though difficult to accurately measure,the market value of U.S.real estate held by non-real estate corporations is estimated to exceed $10 trillion.All of the following are examples of noninvestible commercial real estate EXCEPT:

Accepted Answer

A)  Medical office buildings owned by the hospital
B)  Branch offices owned by the bank
C)  Plant and equipment owned by steel corporations
D)  Assembly plant building owned by a group of investors as part of an LLC

Question 10

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?

Accepted Answer

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

Question 11

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?

Accepted Answer

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

Question 12

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 13

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 14

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?

Accepted Answer

A)  Apartments
B)  Office
C)  Industrial
D)  Retail

Question 15

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:

Accepted Answer

A)  adverse selection
B)  moral hazard
C)  dual agency
D)  signaling

Question 16

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?

Accepted Answer

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

Question 17

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 18

Of the $3.2 trillion in outstanding mortgage debt in the U.S. ,approximately 714% is privately held by institutional and individual investors.Which of the following institutions is the largest single source of private mortgage funds?

Accepted Answer

A)  Savings institutions
B)  Life insurance companies
C)  Government Sponsored Enterprises
D)  Commercial banks

Question 19

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?

Accepted Answer

A)  Owner-occupied housing
B)  Corporate equities
C)  U.S.Treasury securities
D)  Municipal securities

Question 20

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