REE 3043 Exam 4 Curcio Questions And
Complete Answers
With respect to bearing the risk of future property price fluctuations, which of the
following lending relationships is viewed as the most risky from the borrower's
perspective? - answer Straight debt
A loan which provides financing for the construction period, the lease-up period, and for
several years beyond the lease-up stage is called _______________________. - answer
Mini-perm loan
Which of the following terms refers to a written agreement that binds the lender to make
a loan to the borrower provided the borrower satisfies the terms and conditions of the
agreement? - answer Loan commitment
When comparing Commercial Loans versus Home Loans, which of the following
statements is least correct? - answer Similar to Home Loans, the legal borrower in a
Commercial loan is often a single asset corporation.
If mortgage rates decline significantly, borrowers may decide to prepay the principal on
their loan even if they face prepayment penalties. One way that lenders protect
themselves from prepayments in such circumstances is by requiring the borrower who
prepays to purchase for the lender a set of U.S. Treasury securities whose coupon
payments replicate the cash flows the lender will lose as a result of the early retirement
of the mortgage. This process is referred to as: - answer Defeasance
While floating rate mortgage loans may offer lower interest rates to borrowers than
comparable fixed-payment mortgages, floating-rate loans may increase a lender's
exposure to which of the following risks since borrowers may not be able to continue to
service the debt if payments on the loan increase significantly? - answer Default risk
Which of the following statements is(are) correct? - answer In a LP (Limited
Partnership), the general partner(s) is(are) subject to unlimited liability.
--------All of these statements are correct.
In a LP (Limited Partnership), the general partner(s) manage(s) the operations of the
limited partnership.
In contrast to LPs (Limited Partnerships), LLCs (Limited Liability Companies) permit all
owners to participate in management.
In contrast to LPs (Limited Partnerships), LLCs (Limited Liability Companies) permit all
owners to have limited liability.
, Significant tax benefits can be gained by using an alternative financing arrangement for
commercial property transactions. When the seller allows the buyer to pay the purchase
price over a number of years, recognition of the taxable gain can be spread over several
years, thereby reducing the present value of the tax payments. This type of financing
arrangement is commonly referred to as a(n): - answer Installment sale
Which of the following statements regarding U.S. commercial real estate equity and
debt ownership and other U.S. assets, as of 2011, is least correct? - answer The total
value of all Commercial Real Estate was approximately $24 Trillion.
Which of the following statements is not correct? - answer In a tax-deferred exchange,
real property can be exchanged for a partnership interest.
Some commercial property loans are written in such a way that the lender may take
over the mortgaged property if the borrower defaults on the loan. However, if the lender
cannot lay claim to the personal assets of the defaulted borrower, this type of loan is
known as a: - answer nonrecourse loan.
Which of the following statements regarding UPREITs and related REIT structures is
least correct? - answer REITs can acquire (as "like-kind tax-deferred exchanges) LP or
LLC interests from property owners in exchange for cash or stock (or even RE).
A company sells its real estate to a long-term investor, such as a pension fund, trust or
life insurance company, and then leases the property back from the investor and
occupies it under a long-term net lease. This is called: - answer sale-leaseback.
With a mezzanine loan: - answer The borrower's promise to pay is secured by the equity
interest in the borrower's limited partnership or limited liability company.
Double taxation is most likely to occur if the commercial properties are held in the form
of a(n) - answer C Corporation.
Which statement is false concerning the limited partnership form of ownership? -
answer The partnership is a taxable entity.
Which of these lenders is most likely to provide a construction loan? - answer
Commercial bank
Complete Answers
With respect to bearing the risk of future property price fluctuations, which of the
following lending relationships is viewed as the most risky from the borrower's
perspective? - answer Straight debt
A loan which provides financing for the construction period, the lease-up period, and for
several years beyond the lease-up stage is called _______________________. - answer
Mini-perm loan
Which of the following terms refers to a written agreement that binds the lender to make
a loan to the borrower provided the borrower satisfies the terms and conditions of the
agreement? - answer Loan commitment
When comparing Commercial Loans versus Home Loans, which of the following
statements is least correct? - answer Similar to Home Loans, the legal borrower in a
Commercial loan is often a single asset corporation.
If mortgage rates decline significantly, borrowers may decide to prepay the principal on
their loan even if they face prepayment penalties. One way that lenders protect
themselves from prepayments in such circumstances is by requiring the borrower who
prepays to purchase for the lender a set of U.S. Treasury securities whose coupon
payments replicate the cash flows the lender will lose as a result of the early retirement
of the mortgage. This process is referred to as: - answer Defeasance
While floating rate mortgage loans may offer lower interest rates to borrowers than
comparable fixed-payment mortgages, floating-rate loans may increase a lender's
exposure to which of the following risks since borrowers may not be able to continue to
service the debt if payments on the loan increase significantly? - answer Default risk
Which of the following statements is(are) correct? - answer In a LP (Limited
Partnership), the general partner(s) is(are) subject to unlimited liability.
--------All of these statements are correct.
In a LP (Limited Partnership), the general partner(s) manage(s) the operations of the
limited partnership.
In contrast to LPs (Limited Partnerships), LLCs (Limited Liability Companies) permit all
owners to participate in management.
In contrast to LPs (Limited Partnerships), LLCs (Limited Liability Companies) permit all
owners to have limited liability.
, Significant tax benefits can be gained by using an alternative financing arrangement for
commercial property transactions. When the seller allows the buyer to pay the purchase
price over a number of years, recognition of the taxable gain can be spread over several
years, thereby reducing the present value of the tax payments. This type of financing
arrangement is commonly referred to as a(n): - answer Installment sale
Which of the following statements regarding U.S. commercial real estate equity and
debt ownership and other U.S. assets, as of 2011, is least correct? - answer The total
value of all Commercial Real Estate was approximately $24 Trillion.
Which of the following statements is not correct? - answer In a tax-deferred exchange,
real property can be exchanged for a partnership interest.
Some commercial property loans are written in such a way that the lender may take
over the mortgaged property if the borrower defaults on the loan. However, if the lender
cannot lay claim to the personal assets of the defaulted borrower, this type of loan is
known as a: - answer nonrecourse loan.
Which of the following statements regarding UPREITs and related REIT structures is
least correct? - answer REITs can acquire (as "like-kind tax-deferred exchanges) LP or
LLC interests from property owners in exchange for cash or stock (or even RE).
A company sells its real estate to a long-term investor, such as a pension fund, trust or
life insurance company, and then leases the property back from the investor and
occupies it under a long-term net lease. This is called: - answer sale-leaseback.
With a mezzanine loan: - answer The borrower's promise to pay is secured by the equity
interest in the borrower's limited partnership or limited liability company.
Double taxation is most likely to occur if the commercial properties are held in the form
of a(n) - answer C Corporation.
Which statement is false concerning the limited partnership form of ownership? -
answer The partnership is a taxable entity.
Which of these lenders is most likely to provide a construction loan? - answer
Commercial bank
