RECA COMMERCIAL UNIT2 EXAM
QUESTIONS AND ANSWERS
Categorization by building's Type - Answer-For example, the International Council of
Shopping Centres (ICSC) defines different types of shopping centres according to size
(gross leasable area and land area), types of tenants, and trade area.
The length of time for the Commercial Real Estate Asset Life Cycle process varies
considerably depending on a number of factors, including the following: (x5) - Answer-
The real estate asset's product type
The size and complexity of the project
The regulatory environment
The need for related infrastructure
The financial and operational capability of the investor(s)
A typical commercial real estate asset undergoes three phases during its life cycle: -
Answer-Phase I: Land Acquisition and Development
Phase II: Building Construction
Phase III: Operations and Asset Management
Phase I: Land Acquisition and Development
During Phase I, the developer acquires the land and undertakes the necessary
development and pre-construction work. This involves the following: (x3) - Answer-
Completing a feasibility analysis
Enlisting the professional services of planning specialists, architects, engineers and
contractors, and marketing experts
Soliciting capital providers (e.g. investors, lenders)
True or False - With the exception of a multi-family project, usually some pre-leasing
must be in place. - Answer-True - Capital providers often require pre-leasing, which
involves obtaining lease commitments in advance of construction. In fact, a construction
lender may not commit construction funds until there are leasing commitments for a
certain percentage of the space. With the exception of a multi-family project, usually
some pre-leasing must be in place. Once lease up of the rest of the asset is complete
(i.e. full occupancy), most of the risk associated with the development is eliminated.
,Four professional organizations that represent both property management and asset
management professionals. - Answer-Building Owners and Managers Association
(BOMA)
Institute of Real Estate Management (IREM)
National Council of Real Estate Investment Fiduciaries (NCREIF)
Real Property Association of Canada (REALpac)
True or False - In the process of operating and maintaining a real estate asset, the
property manager is responsible first to the tenant - Answer-False - In the process of
operating and maintaining a real estate asset, the property manager is responsible first
to the investor and second to the tenants. The property manager is expected to follow
the investor's lawful instructions.
Asset Management - Answer-The property manager typically reports to the asset
manager. Asset management involves maximizing the value of a real estate asset or a
portfolio of real estate assets according to the objectives defined by the investor.
Different investors have different objectives and maximizing value may only be one of
them.
The property manager provides the following reporting: monthly (x3) , Annually (x3), for
the purpose of (x3) - Answer-Monthly:
Accounting
Operations
Leasing performance
Annually:
Operating expenses
Capital Budget
Cash flow
For:
Fianancial Control
Performance measurement
Trends detection and pre-emptive actions
The Asset manager provides the following reporting: monthly (x3) , Annually (x2), for the
purpose of (x2) - Answer-Monthly:
Strategic Issues
Cash Flow
Debt
Annually:
Budget
,Long-Term Planning
For:
Performance Measurement
Financial Planning
Property Manager must hold a license in order to: (x8) - Answer-Soliciting a property
owner to lease their premises
Marketing properties for lease
Soliciting a tenant to lease a premises
Negotiating or re-negotiating a lease between a tenant and landlord (landlord includes
the owner or a person who controls the right of disposition for the property)
Approving real estate leases
Holding money in relation to a lease agreement
Collecting, offering, or attempting to collect money payable as rent
Any activity furthering these activities directly or indirectly
The asset market - Answer-The asset market is the market for real estate assets.
Sometimes known as the property market, this is the market where investors purchase
and sell real estate assets.
The space market - Answer-The space market is the market for the real estate uses.
The term space denotes the physicality of real estate in that it ultimately provides a
physical location and/or shelter for the activities that take place within that space. Since
the characteristics of the space market are often tied to the use of the real estate within
that market, space markets are typically delineated by their functionality. Thus, the term
office space market refers to the use of real estate to provide shelter to firms for their
employees to conduct business. Similarly, the residential space market refers to the use
of real estate in providing shelter from the natural elements for individuals or
households.
supply relationship - Answer-The correlation between price and how much of a good or
service is supplied to the market is known as the supply relationship
The key non-price determinants of supply include the following: (x5) - Answer-Cost of
production
, State of technology
Expectations of producers
Number of suppliers in the market
Government taxes and subsidies
Movements (Movements vs. Shifts in Supply) - Answer-Movements: Movements along
the supply line occur when a change in quantity supplied is caused only by a change in
the price.
As the price increases, the quantity supplied increases as displayed by movement along
the supply line from point B to point C. Conversely, as the price decreases, the quantity
supplied decreases as displayed by the movement along the supply line from point B to
point A.
Shifts (Movements vs. Shifts in Supply) - Answer-While changes in the price of a
product or service result in movements along the supply line, shifts in the supply line
occur when there are changes in an influencing factor other than the price.
Some of the influencing factors other than price that can cause a shift in supply include
the following changes in: (x5) - Answer-Costs of production
State of technology
Producer expectations
Number of suppliers in the market
Government taxes and subsidies
Note: same as "The key non-price determinants of supply"
The theory of demand - Answer-The theory of demand states that, the price and
quantity demanded in a given market are inversely related. That is, the higher the price
of a product, the less of it people are prepared to buy (assuming other factors are
unchanged).
demand relationship - Answer-The correlation between price and how much of a good
or service is demanded in the market is known as the demand relationship
price is not the only determinant that affects demand. The key non-price determinants of
demand include the following: (x6) - Answer-Market size
Consumer's expectations
QUESTIONS AND ANSWERS
Categorization by building's Type - Answer-For example, the International Council of
Shopping Centres (ICSC) defines different types of shopping centres according to size
(gross leasable area and land area), types of tenants, and trade area.
The length of time for the Commercial Real Estate Asset Life Cycle process varies
considerably depending on a number of factors, including the following: (x5) - Answer-
The real estate asset's product type
The size and complexity of the project
The regulatory environment
The need for related infrastructure
The financial and operational capability of the investor(s)
A typical commercial real estate asset undergoes three phases during its life cycle: -
Answer-Phase I: Land Acquisition and Development
Phase II: Building Construction
Phase III: Operations and Asset Management
Phase I: Land Acquisition and Development
During Phase I, the developer acquires the land and undertakes the necessary
development and pre-construction work. This involves the following: (x3) - Answer-
Completing a feasibility analysis
Enlisting the professional services of planning specialists, architects, engineers and
contractors, and marketing experts
Soliciting capital providers (e.g. investors, lenders)
True or False - With the exception of a multi-family project, usually some pre-leasing
must be in place. - Answer-True - Capital providers often require pre-leasing, which
involves obtaining lease commitments in advance of construction. In fact, a construction
lender may not commit construction funds until there are leasing commitments for a
certain percentage of the space. With the exception of a multi-family project, usually
some pre-leasing must be in place. Once lease up of the rest of the asset is complete
(i.e. full occupancy), most of the risk associated with the development is eliminated.
,Four professional organizations that represent both property management and asset
management professionals. - Answer-Building Owners and Managers Association
(BOMA)
Institute of Real Estate Management (IREM)
National Council of Real Estate Investment Fiduciaries (NCREIF)
Real Property Association of Canada (REALpac)
True or False - In the process of operating and maintaining a real estate asset, the
property manager is responsible first to the tenant - Answer-False - In the process of
operating and maintaining a real estate asset, the property manager is responsible first
to the investor and second to the tenants. The property manager is expected to follow
the investor's lawful instructions.
Asset Management - Answer-The property manager typically reports to the asset
manager. Asset management involves maximizing the value of a real estate asset or a
portfolio of real estate assets according to the objectives defined by the investor.
Different investors have different objectives and maximizing value may only be one of
them.
The property manager provides the following reporting: monthly (x3) , Annually (x3), for
the purpose of (x3) - Answer-Monthly:
Accounting
Operations
Leasing performance
Annually:
Operating expenses
Capital Budget
Cash flow
For:
Fianancial Control
Performance measurement
Trends detection and pre-emptive actions
The Asset manager provides the following reporting: monthly (x3) , Annually (x2), for the
purpose of (x2) - Answer-Monthly:
Strategic Issues
Cash Flow
Debt
Annually:
Budget
,Long-Term Planning
For:
Performance Measurement
Financial Planning
Property Manager must hold a license in order to: (x8) - Answer-Soliciting a property
owner to lease their premises
Marketing properties for lease
Soliciting a tenant to lease a premises
Negotiating or re-negotiating a lease between a tenant and landlord (landlord includes
the owner or a person who controls the right of disposition for the property)
Approving real estate leases
Holding money in relation to a lease agreement
Collecting, offering, or attempting to collect money payable as rent
Any activity furthering these activities directly or indirectly
The asset market - Answer-The asset market is the market for real estate assets.
Sometimes known as the property market, this is the market where investors purchase
and sell real estate assets.
The space market - Answer-The space market is the market for the real estate uses.
The term space denotes the physicality of real estate in that it ultimately provides a
physical location and/or shelter for the activities that take place within that space. Since
the characteristics of the space market are often tied to the use of the real estate within
that market, space markets are typically delineated by their functionality. Thus, the term
office space market refers to the use of real estate to provide shelter to firms for their
employees to conduct business. Similarly, the residential space market refers to the use
of real estate in providing shelter from the natural elements for individuals or
households.
supply relationship - Answer-The correlation between price and how much of a good or
service is supplied to the market is known as the supply relationship
The key non-price determinants of supply include the following: (x5) - Answer-Cost of
production
, State of technology
Expectations of producers
Number of suppliers in the market
Government taxes and subsidies
Movements (Movements vs. Shifts in Supply) - Answer-Movements: Movements along
the supply line occur when a change in quantity supplied is caused only by a change in
the price.
As the price increases, the quantity supplied increases as displayed by movement along
the supply line from point B to point C. Conversely, as the price decreases, the quantity
supplied decreases as displayed by the movement along the supply line from point B to
point A.
Shifts (Movements vs. Shifts in Supply) - Answer-While changes in the price of a
product or service result in movements along the supply line, shifts in the supply line
occur when there are changes in an influencing factor other than the price.
Some of the influencing factors other than price that can cause a shift in supply include
the following changes in: (x5) - Answer-Costs of production
State of technology
Producer expectations
Number of suppliers in the market
Government taxes and subsidies
Note: same as "The key non-price determinants of supply"
The theory of demand - Answer-The theory of demand states that, the price and
quantity demanded in a given market are inversely related. That is, the higher the price
of a product, the less of it people are prepared to buy (assuming other factors are
unchanged).
demand relationship - Answer-The correlation between price and how much of a good
or service is demanded in the market is known as the demand relationship
price is not the only determinant that affects demand. The key non-price determinants of
demand include the following: (x6) - Answer-Market size
Consumer's expectations
