Please see the attached

QUESTION 1

time	cash flows	discount rate
0	-$400,000.00	10%
1	$75,000
2	$75,000
3	$75,000
4	$75,000
5	$75,000
6	$75,000
7	$75,000
8	$75,000
9	$75,000
10	$525,000

You are working for a real estate investment firm. The rule is the following: Invest in properties that have a positive net present value based on ten-year cash flow projections. Should you invest in this project?

		Yes
		No

3.33333 points

QUESTION 2

Base your answers to the following question on the property for sale described in the following link:

http://www.bouldergroup.com/media/pdf/Starbucks%20-%20Savage,%20MN%20-%20OM.pdf

The lease on the property is a triple net lease.

True

False

3.33333 points

QUESTION 3

Net leases on commercial properties require the lessee to explicitly pay for certain costs associated with using and operating the building. For example, the lease payment would cover the rent but not the insurance or electricity.

True

False

3.33333 points

QUESTION 4

The risk associated with a property’s net income will affect its cap rate.

True

False

3.33333 points

QUESTION 5

You are trying to decide between an investment in one of two properties. Property A has the same Net Operating Income as property B. Both properties are identical in all aspects in all dimensions physical and financial except property A has a higher Cap Rate than property B. Property A is undervalued relative to Property B.

True

False

3.33333 points

QUESTION 6

If you use the cap rate of a property to discount the NOI of the property when it is badly managed and underutilized, then you risk overvaluing the property.

True

False

3.33333 points

QUESTION 7

Base your answers to the following question on the property for sale described in the following link:

http://www.bouldergroup.com/media/pdf/Starbucks%20-%20Savage,%20MN%20-%20OM.pdf

The lease that Starbucks has on the property expires on July 31st, 2026.

True

False

3.33333 points

QUESTION 8

Based on the following data the investment has a positive net present value.

time	cash flows from investment in a leased property	discount rate
0	-1,000,000	7%
1	$240,000
2	$240,000
3	$240,000
4	$240,000
5	$240,000
6	$240,000
7	$240,000
8	$240,000
9	$240,000
10	$240,000

True
False

3.33333 points

QUESTION 9

You are searching for a commercial property to buy in Brooklyn. You have narrowed your search down to three properties. Property (1) has a cap rate of 7, property (2) has a cap rate of 8, and (property (3) has a cap rate of 6. Property (3) must be the better choice because the cap rate implies that property (3) has the highest net operating income of the three properties.

True

False

3.33333 points

QUESTION 10

When the lessee signs a full-service lease he/she is generally not going to have to pay additional charges on top of the rent for building maintenance and taxes.

True

False

3.33333 points

QUESTION 11

You are considering a purchase of two practically identical properties. Both properties have and are expected to generate the same net income. Property (1) has a cap rate of 9 while property (2) has a cap rate of 7. It is reasonable to assume that property (1) is overvalued relative to property (2).

True

False

3.33333 points

QUESTION 12

As interest rates increase this should create downward pressure on property values since he discount rate in the NPV calculation represents an investor’s cost of capital.

True

False

3.33333 points

QUESTION 13

Net leases shift risks associated with the increasing costs of operating a building from the lessor to the lessee.

True

False

3.33333 points

QUESTION 14

You have found a commercial property that you believe is being underutilized. It is for sale. The cap rate based on the current net operating income and the asking price for the property is 10%. Since you are fairly certain that you can increase NOI by at least 20% per year. It does not make sense to use the cap rate as the discount rate since the discount rate must reflect the investors cost of capital.

True

False

3.33333 points

QUESTION 15

As a lessee, you should be very specific about what charges your rent actually covers. This is true even when you sign a full-service lease. For example, while janitorial services are generally included in the rent it would make sense to specify that these services include snow removal.

True

False

3.33333 points

QUESTION 16

If you sign a single net lease with a lessor you will be responsible for rent plus a portion of the buildings taxes and for the utilities you use and for the janitorial services associated with your space.

True

False

3.33333 points

QUESTION 17

If you sign a double net lease with the lessor you will be responsible for paying two times the rent on a single net lease plus a portion of the building’s taxes and for the utilities you use and for the janitorial services associated with your space.

True

False

3.33333 points

QUESTION 18

Net leases are always preferred by lessees than gross leases.

True

False

3.33333 points

QUESTION 19

Base your answers on the Loopnet listing for the property 44 Fort Greene Pl , Brooklyn, NY 11217.

Assume if I pay the current asking price and then must invest another $1 million dollars to renovate this property into 8 marketable condominiums that can be sold for $750,000 each. The project will take three years to complete. At the end of three years I will sell each unit for $750,000. My cash flows in year 1 and 2 will be minus $200,000. Would you advise me to make the investment? I have told you that I will am only interested in the development of this property if the net present value of the project is positive when a discount rate of 20 percent is used.

time	cashflow
	-3,390,000.00
	-200,000
	-200,000
	6,000,000.00	8 units x $750,000

Choose True if you advise to invest

Choose False if you advise not to invest

True

False

3.33333 points

QUESTION 20

If you were to use the average property cap rate for a neighborhood as the discount rate when trying to find the present value of a specific property’s net operating income, then properties in the neighborhood with higher net operating incomes would have lower valuations.

True

False

3.33333 points

QUESTION 21

When the lessee signs a gross lease he/she is generally not going to have to pay additional charges on top of the rent for building maintenance and taxes.

True

False

3.33333 points

QUESTION 22

If the lessee signs a triple net lease then he/she will be charged in addition to rent the costs associated with common area maintenance, property taxes, property insurance and for utilities and janitorial services.

True

False

3.33333 points

QUESTION 23

The difference between a single net lease and a triple net lease is that a single net lease does not require the lessee to pay for common area maintenance or property insurance.

True

False

3.33333 points

QUESTION 24

You should never buy an income producing property that has a cap rate that is low relative to other properties in the neighborhood.

True

False

3.33333 points

QUESTION 25

Property managers can do nothing to increase property cap rates since cap rates are determined by market forces.

True

False

3.33333 points

QUESTION 26

Based on the following data the investment has a positive net present value.

time	cash flows from investment in a leased property	discount rate
0	-1,000,000	7%
1	$240,000
2	$240,000
3	$240,000
4	$240,000
5	$240,000
6	$240,000
7	$240,000
8	$240,000
9	$240,000
10	$240,000

True
False

3.33333 points

QUESTION 27

The base rent for a space that is leased with a triple net lease NNN is should be less than if the lease were a single net lease.

True

False

3.33333 points

QUESTION 28

time	cash flows	discount rate
0	minus $400,000.00	25%
1	$75,000
2	$75,000
3	$75,000
4	$75,000
5	$75,000
6	$75,000
7	$75,000
8	$75,000
9	$75,000
10	$525,000

You are working for a real estate investment firm. The rule is the following: Invest in properties that have a positive net present value based on ten-year cash flow projections. Should you invest in this project?

		Yes
		No

3.33333 points

QUESTION 29

If you sign a fixed gross fixed lease then your lease payments should be insulated from the effects of inflation.

True

False

3.33333 points

QUESTION 30

Based on the following data Investors would certainly prefer an investment in a property that is leased by Dunkin Donuts than by Starbucks’.

Dunkin' Donuts

Average Property & Lease

Average Sale Price

$1,400,000

CAP Rate (12mo avg)

5.77%

NOI

$100,875

$/Square Foot

$339.82

Building Size

2,000 - 5,000 sf

Lot Size

0.52 acres

Lease Term

10 - 15 Years

Escalations

In Option Periods

CREDIT RATING

B2
Moody's

B+
S&P

Starbucks

Average Property & Lease

Average Sale Price

$1,817,235

CAP Rate (12mo avg)

5.74%

NOI

$123,000

$/Square Foot

$500 - $1,000

Building Size

1,700 - 2,700 sf

Lot Size

0.50 - 1.00 acres

Lease Term

20 yrs (10 yr cancel opt.)

Escalations

10% every five years

CREDIT RATING

A2
Moody's

A-
S&P

True

False