Chapter 14, Chapter 15, Chapter 16, Chapter 17, Chapter 18

CERCLA

(Comprehensive Environmental Response, Compensation, and Liability Act of 1980). Legislation adopted to provide partial funding for the cleanup of environmentally contaminated sites by requiring the party responsible for the contamination to undertake cleanup efforts or provide compensation for cleanup costs; also known as the Superfund law.

16.5 Describe the types of leases and what is included in each.

-Residential unit leases are usually for a year. These are shorter term and have a fixed rent. -Commercial leases often have longer terms, sometimes up to 20 years and may incorporate a variety of methods for increasing the rent over that period, such as escalation clauses. -Single Net Lease: the lessor passes the property taxes through to the lessee. -Double Net Lease: The lessee pays for property tax and building insurance. -Triple Net Lease: The lessee pays all of the operating expenses and bears all of the risk of increase in those expenses.

What are the four main elements of a strategic plan? Discuss each one.

-Staffing: The most important point of contact between the business and the customer is the front-line employee. The effectiveness of on-site staff is a function of their initial training and of their ongoing supervision by the home office of property management company. -Marketing Program: Designed both to attract new customers and to retain existing ones-is critical in implementing the strategy for a property. Ongoing marketing and leasing functions vary across property types. -Operating Budget: Once the strategic plan is adopted, the property's annual operating budget is formalized. Worked out by the major categories identified in the initial pro forma. -Capital Program: Most projects-even well-conceived new projects-require some additional capital input, either to remedy construction or design deficiencies not covered by warranties or to meet expanded tenant requirements. Upkeep of a commercial real estate building and its basic components is predictable.

Surety company

A company that guarantees the performance or debt of another in case of default.

Bonding

A guarantee of completion or performance, typically issued by an insurance company that will back up the bonded party in any lawsuit. In real estate, contractors, for example, are often bonded as assurance that they will complete the work.

Retainage

A portion of the amount due under a construction contract that the owner withholds until the job is completed in accordance with plans and specifications; usually a percentage of the total contract price.

Commitment letter

A written agreement by a lender to loan a specific amount of money at a specified interest rate within a particular period of time.

18.3. How do the lifestyles of baby boomers and Gen Y differ? How are they influencing trends in real estate?

Generation Y and Baby boomers exhibit distinct lifestyles as they age. While Generation Y is shifting to urban areas, Baby boomers are shifting from sub-urban family homes to urban multi-family homes in walkable, mixed-used settings while others are upsizing or downsizing in the communities of their residence. Baby boomers' implications for the real-estate industry relates to the availability of facilities necessary to accommodate those with dementia. Contrary to Baby boomers, Gen Y is interested in houses that feature walking and riding areas. Therefore, real estate agents should be apprised of the demographic dynamics to construct market-relevant products.

Describe the process of drawing down the construction loan.

In most cases, lenders finance a project once construction process is demonstrated. After contributing the funds, the contractors demand that the developer pays them before the work commences. Contractors are reluctant to work without money. Subsequently, contractors and developers agree that partial payment (90%) will be made as the project continues. Nevertheless, the contractors may request a loan from the lender to pay contractors or compensate for particular costs in the construction process. In the loan acquisition process, the developer requests the financial officer to produce a monthly draw request in light of the initially defined budget.

What is the role of the developer in managing the construction process? How does it differ from the role of the project manager?

In the construction process, the developer plays the role of a manager whereby he\she is responsible for making final decisions when tough judgments are needed. Nevertheless, stakeholders in the construction process must approve the developer's decision. Unlike project management role that entails controlling time, quality and budget, management in the construction process involves inspection duties that require knowledge in architecture, engineering, and construction

Triple net leases

Lessee agrees to pay all of the operating expenses and bears all of the risk of increases in those expenses. A triple net lease is a type of lease whereby the occupant pays all of the operating expenses and accepts responsibility to risks associated with increased operating expenditures

Repositioning

One approach to position the project. The process of turning an existing product into something new or different. Can result from rethinking how a property can maintain the same use and yet appeal to different markets. Reposition is a common marketing concept that refers to the process of transforming an existing product into something different.

General contractor

Person or firm that supervises a construction project under contract to the owner; also known as the "prime contractor.

vested right

Refers to when a developer/property owner has the right to develop a property - if they have a building permit, have relied on a public official, have made a substantial investment etc. The right of a developer to proceed with the development without concerns that some dynamics may negatively influence a project.

Gross lease

Tenant pays rents, landlord pays all expenses of property; most common form of residential lease. type of commercial lease where the tenant pays a flat rental amount, and the landlord pays for all property charges regularly incurred by the ownership, including taxes, utilities and water. Most apartment leases resemble gross leases

14.7 What are two primary ways in which a developer hires a general contractor?

The developer can hire a general contractor in different ways, including bid contract and negotiated contract.

Enterprise concept

The idea that encouraging private enterprise will facilitate economic revitalization or other socioeconomic goals. Encourages owners to look at real estate as another type of private enterprise.

Draw

The lender's release of construction loan funds in accordance with set procedures for providing portions of the total amount as each stage of construction is satisfactorily completed.

14.3 What is the difference between risks taken by a construction lender those taken by a permanent lender?

The permanent lender bears a larger risk than a construction lender. In this regard, the latter is not responsible for market or other long-term risks.

Lien

The right to hold property as security until the debt that it secures is paid. A mortgage is one type of lien.

Asset management

The term refers to a practice that involves ownership execution responsibility on behalf of the property investment company or individual.

Property Life Cycle

The three periods in the life of a building—the development period, the stabilization period, and the decline period.

Describe some of the risks inherent in stage six and some ways to avoid them.

Various forms of risks that occur in stage six are time-related risks, architectural risks, theft or fraud risks, and fiscal risks. Various techniques are used to control the risks inherent in stage six. Some of these ways are performance bonds that control construction risks, retainage that ensures work is completed as per the initial plans and specifications, architectural supervision, employment of sound internal controls, insurance, and employment of software programs to enhance time management.

Describe the differences between the property, asset, and portfolio management functions and how they are interrelated.

• Property management is a daily activity of maintaining the physical asset and taking in to account the directives of the owner of a property. • Asset Management: Execution of ownership responsibilities on behalf of the investment entity that owns the property, typically including, major lease decisions as well as larger capital expenditures for major renovations. -Portfolio Management: The design and execution of major investment decisions across a group of investments. -The Management Triad is interrelated and overlapping. The 3 functions should operate in a coordinated fashion to deliver the cash flows anticipated in the feasibility study and to maintain the physical structure and site so as to protect and enhance the project's long-term profitability.