Commercial Real Estate Review Questions and Answers Rated A+

Commercial Real Estate Review Questions and Answers Rated A+ Leasing Commissions - Answers - Owners engage leasing agents or "brokers" to provide marketing, property tours and identify and sign potential tenants. Cost is usually based on the value of the lease income stream, around 5%. Apartments - Answers - 1 year leases, no capital costs, it is a basic human need (shelter). Asset Classes - Answers - Stocks (.45-.55), Bonds (.35-.45), Alternative Investments (high yield .10-.20) Hard Assets - Answers - Real estate, timber, agriculture, energy, etc. Property Types - Answers - Office, Retail, Warehouse, Apartments Commercial Properties - Answers - Office, Retail and Warehouse 2 leasing terms - Answers - It's locked and must have capital Tenant Improvements - Answers - Owners negotiate a financial allowance with tenants toward cost of making space ready for occupancy (lighting, flooring) Class A Risk Segment - Answers - Low risk, stable cash flow, high quality property and location, low leverage (50%), 7-9% IRR) Class B Risk Segment - Answers - Moderate risk, enhances existing cash flow, good quality with renovation strategy, high leverage (75%-80%), 10-14% IRR Class C Risk Segment - Answers - High risk, very risky cash flow, new development or deep physical renovation, high leverage (75%-80%), 15%-20% IRR. Debt and Public Capital Markets - Answers - Commercial Mortgage Backed Securities Debt and Private Capital Markets - Answers - Insurance companies, FNMA, FLMC, Banks, and private equity funds. Equity and Public Capital Markets - Answers - REIT's Real Estate Investment Trusts Equity and Private Capital Markets - Answers - Private equity funds and high net worth investors. Cost of Capital (the Cap Rate) - Answers - The rate of return required by the buyer of a particular property given the risks of that property. Net Operating Income of the property/Purchase Price Band of Investment Theory - Answers - supply and demand determine the price of a particular property. Wholly Owned - Answers - This structure is vested in an individual party / entity without shared ownership Joint Venture - Answers - This structure is a partnership sharing ownership between a real-estate specialist and a capital-providing partner. IRR Lookback - Answers - Provides the limited partner a minimum return before a sharing of investment cash proceeds is made to the managing partner.