RECA Commercial Exam (Actual)
Questions and Answers A+ Pass
1. Long-lasting, Durable Goods
2. Expensive, High-valued (left for well capitalized investors)
3. Transaction Costs: Due diligence and commissions alone comprise about three to
five percent of transaction costs.
4. Transaction Time Frame
5. Land
6. Heterogeneous: every parcel of land is unique so every commercial real estate asset
is unique. However, improvements are rarely identical as unique site characteristics,
land use regulations, and the market often require different solutions from developers.
7. Return Measures
8. Management Intensive
9. Long Production Cycle: it takes time to develop and construct new commercial real
estate assets to meet the needs of the expanding population. This results in the real
estate supply being relatively slow to respond to changes in demand (i.e. inelastic
supply).
10. Highly Regulated
Inelastic supply - Answers -✔✔ there is a limited supply. To illustrate, many cities are
geographically constrained and have a Land Use Bylaw that limits the ability to change
the use of a parcel of land. This results in a relatively inelastic supply of land for
commercial purposes. Inelastic supply means the supply cannot readily adjust to
changes in demand or price.
four major commercial real estate asset product types according to Real Capital
Analytics - Answers -✔✔ Office: Refers to real estate primarily used for office space
Commercial real estate assets have a number of attributes that make them unique
relative to other types of investments. These attributes include the following: (x10) -
Answers -✔✔ 1. They involve land
2.Transaction time frames are long
3. Transaction costs are high
4. they are expensive
5. They are long lasting
6. Highly regulated
7. have a long production cycle
8. are management intensive
9. are heterogeneous
10. Involve measuring return on investment
,Retail: Refers to retail properties, such as strip centres or neighbourhood, community,
regional and super-regional shopping malls
Industrial: Refers to real estate for industrial use, such as distribution, manufacturing, or
warehouse facilities and data centres
Apartment: Refers to multi-family rental properties.
Other miscellaneous product types include hotels, leisure (e.g golf courses), and special
use (e.g. casinos)
3 miscellaneous product types - Answers -✔✔ hotel, leisure (e.g. golf courses), and
special use (e.g. casinos).
Categorization by Building Class - Answers -✔✔ For example, office properties are
often categorized as Class A, B, or C.
Categorization by Number of Storeys - Answers -✔✔ For example, apartment properties
are classified as either garden complexes (one or more low-rise buildings consisting of
four storeys or less) or mid/high-rise projects (one or more buildings consisting of four
storeys or greater).
Categorization by building's Property Location - Answers -✔✔ For example, in addition
to building class, office properties are often categorized based on their location as either
central business district (CBD) or suburban.
Categorization by building's Type - Answers -✔✔ 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) - Answers -
✔✔ 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: -
Answers -✔✔ 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) - Answers -✔✔
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. - Answers -✔✔ 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. - Answers -✔✔ 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 - Answers -✔✔ 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 - Answers -✔✔ 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) - Answers -✔✔ 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) - Answers -✔✔ 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) - Answers -✔✔ 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
Questions and Answers A+ Pass
1. Long-lasting, Durable Goods
2. Expensive, High-valued (left for well capitalized investors)
3. Transaction Costs: Due diligence and commissions alone comprise about three to
five percent of transaction costs.
4. Transaction Time Frame
5. Land
6. Heterogeneous: every parcel of land is unique so every commercial real estate asset
is unique. However, improvements are rarely identical as unique site characteristics,
land use regulations, and the market often require different solutions from developers.
7. Return Measures
8. Management Intensive
9. Long Production Cycle: it takes time to develop and construct new commercial real
estate assets to meet the needs of the expanding population. This results in the real
estate supply being relatively slow to respond to changes in demand (i.e. inelastic
supply).
10. Highly Regulated
Inelastic supply - Answers -✔✔ there is a limited supply. To illustrate, many cities are
geographically constrained and have a Land Use Bylaw that limits the ability to change
the use of a parcel of land. This results in a relatively inelastic supply of land for
commercial purposes. Inelastic supply means the supply cannot readily adjust to
changes in demand or price.
four major commercial real estate asset product types according to Real Capital
Analytics - Answers -✔✔ Office: Refers to real estate primarily used for office space
Commercial real estate assets have a number of attributes that make them unique
relative to other types of investments. These attributes include the following: (x10) -
Answers -✔✔ 1. They involve land
2.Transaction time frames are long
3. Transaction costs are high
4. they are expensive
5. They are long lasting
6. Highly regulated
7. have a long production cycle
8. are management intensive
9. are heterogeneous
10. Involve measuring return on investment
,Retail: Refers to retail properties, such as strip centres or neighbourhood, community,
regional and super-regional shopping malls
Industrial: Refers to real estate for industrial use, such as distribution, manufacturing, or
warehouse facilities and data centres
Apartment: Refers to multi-family rental properties.
Other miscellaneous product types include hotels, leisure (e.g golf courses), and special
use (e.g. casinos)
3 miscellaneous product types - Answers -✔✔ hotel, leisure (e.g. golf courses), and
special use (e.g. casinos).
Categorization by Building Class - Answers -✔✔ For example, office properties are
often categorized as Class A, B, or C.
Categorization by Number of Storeys - Answers -✔✔ For example, apartment properties
are classified as either garden complexes (one or more low-rise buildings consisting of
four storeys or less) or mid/high-rise projects (one or more buildings consisting of four
storeys or greater).
Categorization by building's Property Location - Answers -✔✔ For example, in addition
to building class, office properties are often categorized based on their location as either
central business district (CBD) or suburban.
Categorization by building's Type - Answers -✔✔ 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) - Answers -
✔✔ 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: -
Answers -✔✔ 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) - Answers -✔✔
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. - Answers -✔✔ 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. - Answers -✔✔ 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 - Answers -✔✔ 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 - Answers -✔✔ 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) - Answers -✔✔ 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) - Answers -✔✔ 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) - Answers -✔✔ 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
