Final Exam finance 4500 Chap 18-22

In an analogy to the stock market, the net operating income of a property can be viewed as which of the following? A. Annual dividend expected to be produced by the property B. Annual return on the value of the property C. Market value of the property D. Price-earnings ratio of the property

A. Annual dividend expected to be produced by the property

The use of financial leverage in purchasing an income-producing property can affect the amount of cash required at acquisition, the net cash flows from rental operations, the net cash flows from the eventual sale of the property, and the ultimate return on invested equity. Assuming the going-in IRR is greater than the effective borrowing cost, if an investor increases his leverage rate, say from 75% to 80%, we would expect which of the following to occur? A. Both NPV and going-in IRR to increase B. NPV to decrease, while going-in IRR increases C. NPV to increase, while going-in IRR decreases D. Both NPV and going-in IRR to decrease

A. Both NPV and going-in IRR to increase

Profitability ratios, income multipliers, and financial risk ratios can be used to provide a quick assessment of a property's relative value. Which of the following ratios measures the overall income-producing ability of the property? A. Capitalization rate B. Equity dividend rate C. Debt coverage ratio D. Operating expense ratio

A. Capitalization rate

While college-level courses are not widely available, a number of professional and trade organizations exist in the field of property management. Which of the following certifications awarded by the Institute of Real Estate Management is aimed at individuals who manage larger, residential, office, industrial, or retail properties? A. Certified Property Manager (CPM) B. Accredited Resident Manager (ARM) C. Real Property Administrator (RPA) D. Member of Appraisal Institute (MAI)

A. Certified Property Manager (CPM)

The choice of which method to use in constructing the contracted rental rate can be impacted by the term of the lease. With a shorter lease term, which of the following methods is most likely to be observed? A. Flat rent B. Graduated rent C. Indexed rent D. Percentage rent

A. Flat rent

Retail establishments are found in a variety of forms, the simplest of which is: (Hint: fast-food franchise) A. Freestanding retail outlet B. Strip center C. Power center D. Regional mall

A. Freestanding retail outlet

Which of the following property subtypes is often considered the least vulnerable to functional obsolescence because of its relatively simple structure and long economic life? A. Industrial warehouse B. Hotel C. Retail strip centers D. Suburban office

A. Industrial warehouse

While the general concepts of investment value and market value are very similar, there is an important distinction between the two. All of the following statements regarding investment value are true EXCEPT: A. Investment value is based on the expectations of a typical, or average, investor. B. Investment value is a function of estimated cash flows from annual operations. C. Investment value takes into consideration estimated proceeds from the sale of the property. D. Investment value applies a discount rate to future cash flows.

A. Investment value is based on the expectations of a typical, or average, investor.

It is common for investors in real estate to use mortgage debt to help finance capital investment. The use of debt can have a profound impact on the expected cash flows for a particular property. Which of the following terms refers to cash flows that represent the property's income after subtracting any payments due to the lender? A. Levered cash flows B. Unlevered cash flows C. Discounted cash flows D. Compounded cash flows

A. Levered cash flows

Commercial real estate returns are determined in no small part by how well the ongoing management function is performed. Management decisions can be classified into two categories: property management and asset management. Which of the following functions would be considered a primary responsibility of an asset manager? A. Property acquisitions and dispositions B. Marketing a property to prospective tenants C. Maintaining the condition of the property D. Signing leases

A. Property acquisitions and dispositions

Once possession and control are conveyed in a lease agreement, the owner must provide the tenant with uninterrupted use of the property without any interference from any entity that may threaten to impose upon the tenant's leasehold interest in the property. In other words, the tenant is entitled to which of the following? A. Quiet enjoyment B. Tenant improvement C. Concession D. Expansion option

A. Quiet enjoyment

In contrast to maintenance and repair expenditures, which are operating expenses, the improvement decision generally involves a capital expenditure meant to increase the value of the structure. Which of the following classifications of improvements calls for the restoration of a property to satisfactory condition without changing the floor plan, form, or style of the structure? A. Rehabilitation B. Remodeling C. Adaptive reuse D. Conversion

A. Rehabilitation

Prior to determining the treatment of capital expenditures in the calculation of NOI, it is important to distinguish these costs from operating expenses. In contrast to operating expenses, capital expenditures: A. add to the market value of the property. B. are deductible for tax purposes in the year in which they are paid. C. are necessary to keep the property operating and competitive in its local market. D. may include minor repairs that do not add to the property's useful life.

A. add to the market value of the property.

While some property owners choose to perform both the property and asset manager functions themselves, many commercial property owners choose to employ professional property managers instead. The property manager works under a management contract in which the manager is empowered to serve as the owner's fiduciary. This type of relationship is more commonly referred to as a(n): A. agency relationship B. open listing relationship C. joint-venture D. correspondent relationship

A. agency relationship

Some tenants who are subject to long-term leases may desire to transfer all of their tenant rights and obligations to another party. This is commonly referred to as a(n): A. assignment B. sublease C. concession D. lease option

A. assignment

Changes in the discount rate used to complete net present value analysis can have a significant impact on the estimated value of the investment and therefore affect the overall investment decision. As the required internal rate of return (IRR) increases, the net present value will: A. decline B. increase C. remain the same D. become zero

A. decline

Net present value (NPV) is interpreted using the following decision rule: The investor will purchase the property as long as the NPV is: A. greater than zero B. equal to zero C. less than zero D. equal to the opportunity cost of investment

A. greater than zero

The lease is a contract between the owner and the tenant that transfers exclusive use and possession of the space to the tenant in return for rent or other consideration. In this arrangement, the owner is referred to as the: A. lessor B. lessee C. agent D. benchmark

A. lessor

A lease option is a clause that grants an option holder the right, but not the obligation, to renew the lease, cancel the agreement, relocate within a property, or even expand to adjacent space. The existence of these options in a leasing agreement: A. reduces the expected present value of lease cash flows to the owner B. increases the expected present value of lease cash flows to the owner C. does not impact the expected present value of lease cash flows to the owner D. causes the expected present value of lease cash flows to equal zero

A. reduces the expected present value of lease cash flows to the owner

Just as it is important for an investor to consider the impact of financial leverage on her return, it is also necessary to account for the effect of income taxes. How would the presence of income taxes impact the levered going-in IRR? A. Income taxes increase the levered going-in-IRR. B. Income taxes reduce the levered going-in-IRR. C. Income taxes do not affect the going-in-IRR. D. Income taxes cause the levered going-in-IRR to become invalid as a measure of return.

B. Income taxes reduce the levered going-in-IRR

In calculating the net operating income (NOI) of a property, the "above-line" treatment of capital expenditures implies: A. capital expenditures are excluded from the calculation of NOI. B. capital expenditures are included in the calculation of NOI. C. capital expenditures are set equal to NOI. D. capital expenditures are divided by NOI.

B. capital expenditures are included in the calculation of NOI.

When the supply of space exceeds the demand, it is common for owners to provide the tenant with a period of free or perhaps reduced rent. This is commonly referred to as a(n): A. tenant improvement allowance B. concession C. sublease D. expense stop

B. concession

When leasing nonresidential properties, owners would prefer to rent exclusively to high quality tenants. Such owners will tend to seek out companies whose general debt obligations are rated "investment grade" by one of more of the U.S. rating agencies. These potential tenants are more commonly referred to as: A. tenant reps B. credit tenants C. tenant mix D. in-house leasing agents

B. credit tenants

In discounted cash flow (DCF) analysis, the sale price of the property must be estimated at the end of the expected holding period. The most common method for determining the terminal value of the property is the: A. yield capitalization method B. direct capitalization method C. repeat-sales approach D. cost approach

B. direct capitalization method

The internal rate of return (IRR) on a proposed investment is the discount rate that makes the net present value of the investment: A. greater than zero B. equal to zero C. less than zero D. greater than the opportunity cost of not investing

B. equal to zero

In commercial leases, rents do not necessarily have to be kept constant over the life of the lease term. One option is for there to be prespecified increases in the contract rental rate over time, sometimes referred to as "step-ups" or "escalations." This type of rent treatment is commonly referred to as: A. flat rent B. graduated rent C. indexed rent D. percentage rent

B. graduated rent

An owner whose property is in a strong market position, where fewer services can be offered to tenants for the same dollar of rental income and where the owner will not lose tenants if the property is undermaintained, is said to participate in a market that has a relatively: A. elastic demand for space B. inelastic demand for space C. competitive demand for space D. liquid demand for space

B. inelastic demand for space

A tenant who expects her business to grow may wish to have a clause included in her lease that grants her the choice to lease adjacent space as soon as it becomes available. This lease option is more commonly referred to as a: A. relocation option B. right of first refusal C. renewal option D. consideration

B. right of first refusal

When property managers are looking to secure a mix of tenants for which "the whole is greater than the sum of its parts," or in other words a group of tenants that shares similar characteristics such that the experience of living together is mutually beneficial, they are seeking what is referred to as: A. permanence potential B. synergism C. rehabilitation D. adaptive reuse

B. synergism

Given the following information, calculate the going-out cap rate. Estimated holding period: 5 years, NOI for year 1: $120,000, NOI for year 5: $150,000, NOI for year 6: $155,250, Expected sale price: $1,350,000. A. 8.9% B. 11.1% C. 11.5% D. 11.9%

C. 11.5%

For residential properties, the ratio of prospective rent to gross monthly income is a valuable screening tool in judging a potential tenant's ability to fulfill rent obligations. Generally, this ratio should not exceed: A. 10% B. 20% C. 30% D. 40%

C. 30%

Given the following information, calculate the operating expense ratio for this property. Potential gross income: $120,000, Vacancy rate: 9%, Net operating income: $57,900, Operating expenses: $51,300. A. 34% B. 43% C. 47% D. 53%

C. 47%

Given the following information, calculate the net income multiplier for this property. First-year NOI: $18,750, Acquisition price: $150,000, Equity Investment: 20%. A. 0.1 B. 1.6 C. 8.0 D. 12.5

C. 8.0

The loan-to-value ratio measures the percentage of the acquisition price (or current market value) encumbered by debt. To protect their invested capital in the event that property values do fall, commercial mortgage lenders generally require that the senior mortgage not exceed approximately what percentage of the acquisition costs? A. 60% B. 70% C. 80% D. 90%

C. 80%

In determining a property's before-tax cash flow from operations (BTCF) and net operating income (NOI), it is important to understand how each accounts for the use of financial leverage in its calculation. Which of the following statements is true in regards to how these two measures account for the use of financial leverage? A. BTCF and NOI are both levered cash flows B. BTCF is an unlevered cash flow, while NOI is a levered cash flow C. BTCF is a levered cash flow, while NOI is an unlevered cash flow D. BTCF and NOI are both unlevered cash flows

C. BTCF is a levered cash flow, while NOI is an unlevered cash flow

The two most important determinants of the classification of an office property are age and obsolescence. Which of the following classes includes office buildings that are older and reasonably maintained, but are below current standards for one or more reasons? A. Class A office B. Class B office C. Class C office D. Investment grade property

C. Class C office

The going-in capitalization rate can vary significantly by property quality. Which of the following classes of properties within a particular property type would be expected to have the highest cap rates? A. Class A properties B. Class B properties C. Class C properties D. Cap rates would be equal across all classes within the same property type

C. Class C properties

Helpful in assessing the risk of lending to investors for particular projects, which of the following calculations measures the income-producing ability of the property to meet operating and financial obligations? A. Profitability ratios B. Income multipliers C. Financial risk ratios D. Income tax multipliers

C. Financial risk ratios

Newer industrial parks have begun to specialize in providing space that can be configured to suit the diverse needs of various tenants. This type of industrial space is more commonly referred to as: A. Warehouse B. Plant and Factory C. Flex space D. Research and Development

C. Flex space

For most commercial property types, lease lengths can vary considerably. Therefore, both parties must tradeoff between the advantages and disadvantages associated with particular leasing terms. Owners may prefer longer leases for all of the following reasons EXCEPT: A. Reduction of re-leasing costs B. Reduction of risk associated with declining interest rates C. Flexibility D. Stability of future cash flows

C. Flexibility

In retail property types, rents are quoted on the basis of which of the following? A. Usable area B. Gross floor area C. Gross leasable area D. Rentable area

C. Gross leasable area

With a performance-based management contract, an asset manager's fees are tied directly to the rate of return earned by investors on the portfolio of managed properties relative to a benchmark. In private commercial real estate, the choice of benchmarks for performance is limited in large part to return indices provided by which of the following organizations? A. Standard and Poor's B. National Association of Real Estate Investment Trusts C. National Council of Real Estate Investment Fiduciaries D. Wilshire Associates

C. National Council of Real Estate Investment Fiduciaries

As with any valid contract, enforceable leases must meet a number of requirements. One of these requirements is for each party to provide appropriate consideration. In a lease, which of the following constitutes the landlord's consideration? A. Promise to pay rent B. Passing on legal title to the property C. Permission to occupy the space or property D. Commission to the leasing agent

C. Permission to occupy the space or property

Given the following information, calculate the before-tax equity reversion (BTER). NOI: $89,100, Annual Debt Service: $58,444, Net Sale Proceeds: $974,700, Remaining Mortgage Balance: $631,026. A. $30,656 B. $343,674 C. $572,582 D. $885,600

B. $343,674

Given the following information, calculate the NPV for this property. Initial cash outflow: $200,000, Discount rate: 15%, CF for year 1: $25,876, CF for year 2: $23,998, CF for year 3: $23,013, CF for year 4: $22,105, CF for year 5: $144,670. A. -$51,875 B. -$59,657 C. $140,343 D. $295,951

B. -$59,657

Given the following information, calculate the loan-to-value ratio for this property. Loan amount: $450,000, Interest rate: 7.5%, Acquisition price: $550,000 A. 0.18 B. 0.82 C. 0.99 D. 1.22

B. 0.82

Given the following information, calculate the debt coverage ratio for this investment. Potential gross income: $120,000, Vacancy rate: 9%, Net operating income: $57,900, Operating expenses: $51,300, Acquisition Price: $520,000, Debt service: $40,000. A. 0.69 B. 1.45 C. 2.73 D. 8.29

B. 1.45

Given the following information, calculate the going-in capitalization rate for the specific property. First-year NOI: $18,750, Acquisition price: $150,000, Equity Investment: 20%. A. 2.5% B. 12.5% C. 15.6% D. 62.5%

B. 12.5%

Leases are considered the engines that drive property values. Therefore, it should not be surprising that owners of commercial property may seek an independent leasing broker to focus on finding tenants to lease space. In exchange for their services, leasing brokers are paid a commission based on what percentage of the face amount of the lease? A. 0.5 to 1.5% B. 3 to 5% C. 7 to 10% D. 15 to 20%

B. 3 to 5%

The large and generally well-known retailers who draw the majority of customers to a shopping center are more commonly referred to as: A. Outlets B. Anchors C. Strips D. Chains

B. Anchors

Maintenance and repair of a property is an ongoing process that can be divided into four principal categories. Which of the following classifications includes ordinary repairs to a building on a day-to-day basis (e.g. repairing a broken window, fixing a leaking roof)? A. Custodial maintenance B. Corrective maintenance C. Preventive maintenance D. Deferred maintenance

B. Corrective maintenance

The use of financial leverage when investing in real estate is a double-edged sword. While increased leverage may allow the investor to "purchase" higher expected returns, the "price" of doing so is an increase in which of the following risks? A. Liquidity risk B. Default risk C. Interest rate risk D. Pipeline risk

B. Default risk

The management agreement provides for a management fee that is usually in the range of 3 to 6% of which of the following measures of property income? A. Potential gross income B. Effective gross income C. Net operating income D. Income tax liability

B. Effective gross income

Given the following information, calculate the estimated terminal value of the property at the end of its holding period. Going-out cap rate: 9%, Estimated holding period: 5 years, NOI for year 5: $100,500, NOI for year 6: $102,000. A. $1,113,333 B. $1,116,667 C. $1,133,333 D. $1,166,667

C. $1,133,333

Given the following information, calculate the effective monthly rent payment. Lease Term: 10 years, Concession: 1 year free rent to be spread over the term of the lease, Rental Space: 5000 square feet, Rental Rate: $20 per square foot per year, Landlord's discount rate: 10%. A. $4,676 B. $5,901 C. $7,081 D. $10,122

C. $7,081

Given the following information, calculate the load factor for this office property. Total usable area: 20,000 sq ft, Tenant's prorated share of common area: 5,000 sq ft. A. 0.25 B. 0.80 C. 1.25 D. 4.00

C. 1.25

In discounted cash flow analysis, the industry standard for pro forma cash flow projections of investment properties is typically: A. 3 years B. 5 years C. 10 years D. 15 years

C. 10 years

Given the following information, calculate the effective gross income multiplier for the specific investment. Effective gross income: $49,500, First-year NOI: $18,750, Acquisition price: $520,000, Equity Investment: 20%. A. 0.036 B. 0.095 C. 10.5 D. 27.7

C. 10.5

Given the following information, calculate the cash down payment required to purchase the specific property. Purchase Price: $500,000, Loan Amount: 80% of purchase price, Up-front financing costs: 2.5% of loan amount. A. $90,000 B. $110,000 C. $136,250 D. $200,000

B. $110,000

Given the following information, calculate the total amount of annual operating expenses for this income-producing property. Lawn care: $10,000, Property taxes: $24,000, Maintenance: $35,000, Janitorial: $25,000, Security: $32,000, Debt service: $145,000. A. $102,000 B. $126,000 C. $247,000 D. $271,000

B. $126,000

The key to meaningful valuations in real estate is to use defensible cash flow estimates. All of the following statements are true in regards to generating accurate cash flow estimates EXCEPT: A. Investors should include only those sources of income and expenses that relate directly to the income producing ability of the property. B. Investors should only consider recent events, rather than long-term trends when evaluating revenue and expense items. C. Investors should obtain information about comparable properties whenever possible. D. Investors should take into consideration local zoning, land use, and environmental controls that may impact the future flow of funds.

B. Investors should only consider recent events, rather than long-term trends when evaluating revenue and expense items.

Both owners and managers must carefully designate their responsibilities in the management agreement. In a management agreement, all of the following would typically be responsibilities of the property manager EXCEPT: A. Maintenance of financial accounts for money collected from tenants B. Liability C. General property management D. Reports on property performance

B. Liability

Suppose an owner is trying to decide whether or not to make improvements to her property. Given the following information, what would be the value added or potential loss if the improvements are undertaken? Current rent per square foot: $8.75, Anticipated rent per square foot: $14.50, Cost of improvements: $250,000, Square feet: 34,000. A. Gain of $54,500 B. Loss of $54,500 C. Gain of $195,500 D. Loss of $195,500

B. Loss of $54,500

The majority of residential units in the U.S. are contained in multifamily structures, or apartment buildings that contain five or more housing units. Which of the following multifamily structures will range in height from four to nine stories and are typically found in both cities and suburbs? A. High-rise apartment buildings B. Midrise apartment buildings C. Garden apartments D. Condominiums

B. Midrise apartment buildings

Real estate asset managers perform certain functions that would not be expected of asset managers who deal with stock and bond portfolios. Which of the following functions would you expect both asset managers in real estate as well as stocks / bonds to perform? A. Find specific assets in which the owners/client can invest B. Monitor asset performance C. Negotiate the acquisition price of assets D. Oversee due diligence and closing

B. Monitor asset performance

Which of the following terms refers to the present value of the right to receive a lump sum payment of $1 at the end of a particular year, given a specified discount rate? A. Net present value B. Present value factor C. Future value D. Net operating income

B. Present value factor

The lease is a contract between a property owner and tenant that transfers exclusive use and possession of space to the tenant, but allows the owner to retake possession of the property at the expiration of the lease. Which type of interest allows the owner to retake possession at the end of a lease? A. Remainder interest B. Reversion interest C. Spousal interest D. Co-ownership interest

B. Reversion interest

Despite the magnitude of their real estate holdings, many non-real estate corporations have historically expended little effort to manage these assets effectively. Recently, the development of which of the following markets has helped to quell concerns related to this issue? A. Commercial mortgage backed securities (CMBS) B. Sale-leaseback C. Tenancy-in-common (TIC) D. Installment sale

B. Sale-leaseback

Given the following information, calculate the equity dividend rate for this investment. First-year NOI: $18,750, Before-tax cash flow: $11,440, Acquisition price: $520,000, Equity Investment: 20%. A. 2.2% B. 3.6% C. 11.0% D. 18.02%

C. 11.0%

While net present value (NPV) and internal rate of return (IRR) analysis both may be used as investment decision criteria, there are some limitations to the IRR method that make its use as an investment criterion problematic in certain situations. All of the following are limitations of the IRR method EXCEPT: A. IRR calculations assume that cash flows are reinvested at the IRR, rather than at the actual rate that investors expected to earn on reinvested cash flows. B. With the IRR decision criterion multiple solutions may exist for investments where the sign of the cash flows changes more than once over the expected holding period. C. The IRR methodology cannot be used to make comparisons across different investment opportunities. D. The use of IRR as a decision criterion will not necessarily result in wealth maximization for the investor.

C. The IRR methodology cannot be used to make comparisons across different investment opportunities.

In making single-asset real estate investment decisions, the first pass often involves calculating a series of returns, ratios, and multipliers. Which of the following is often cited as a limitation associated with this type of analysis? A. They are difficult to calculate B. They are complex to understand C. They fail to incorporate cash flows beyond the first year of the analysis D. They are rarely used by industry professionals

C. They fail to incorporate cash flows beyond the first year of the analysis

An important piece of criteria for investors to consider when deciding between real estate investment opportunities and investing in stocks or bonds is the effect of income taxes on their return. For most investors, the effective tax rate on commercial real estate is: A. greater than the effective tax rate on a stock or bond investment. B. equal to the effective tax rate on a stock or bond investment. C. less than the effective tax rate on a stock or bond investment. D. cannot be compared across asset classes.

C. less than the effective tax rate on a stock or bond investment.

Many investors use mortgage debt to help finance capital investment for income-producing real estate. In doing so, the owner will receive income as long as the property produces enough income to cover all operating and capital expenditures, the mortgage payment, and all state and federal income taxes. Therefore, the owner's claim is commonly referred to as a: A. primary claim B. joint claim C. residual claim D. superior claim

C. residual claim

Unlike many publicly traded stock and bond investments, commercial real estate investments: A. can be bought and sold in highly liquid markets. B. yield maximized returns when assets are held for short periods of time. C. yield returns generated mostly from the asset's net operating income, rather than price appreciation. D. have going-in and going-out transaction costs that are low (as a proportion of asset value).

C. yield returns generated mostly from the asset's net operating income, rather than price appreciation.

Given the following information, calculate the leasing agent's commission in dollar terms. Lease Term: 10 years, Monthly Rent: $5,000, Commission: 3%. A. $150 B. $1,500 C. $1,800 D. $18,000

D. $18,000

The measure of cash flow most relevant to investors in income-producing real estate is the after-tax cash flow (ATCF) from property operations. Therefore, it is important to know that the maximum federal income tax rate on individuals is currently: A. 25% B. 30% C. 33% D. 35%

D. 35%

Given the following information, calculate the appropriate after-tax discount rate. Tax rate on comparable risk investment: 35%, Investor's before-tax opportunity cost: 12%, Capitalization rate: 8%. A. 2.8% B. 4.2% C. 5.2% D. 7.8%

D. 7.8%

Concerned with a potential information asymmetry problem, state legislators have been proactive in passing legislation that protects the rights and interests of tenants within which of the following property types? A. Office B. Retail C. Industrial D. Apartment

D. Apartment

To overcome the potential shortcomings of single-year decision making metrics, many investors in real estate also perform multiyear discounted cash flow (DCF) valuation. DCF valuation differs from the single-year ratio analysis in all of the following ways EXCEPT: A. Only with DCF must the investor estimate an appropriate investment horizon accounting for how long she will hold the property. B. Only with DCF must the investor select the appropriate yield at which to discount all expected future cash flows. C. Only with DCF must the investor make explicit forecasts of the property's net operating income for each year in the expected holding period. D. Only with DCF must the investor use defensible cash flow estimates that incorporate appropriate measures of income and expenses, long-term trends, comparable properties, and social / legal environment conditions.

D. Only with DCF must the investor use defensible cash flow estimates that incorporate appropriate measures of income and expenses, long-term trends, comparable properties, and social / legal environment conditions.

The choice of which method to use in constructing the contracted rental rate can also be impacted by the type of property being leased. With which of the following property types would one expect to see a percentage rent method used? A. Apartment B. Office C. Industrial D. Retail

D. Retail

The rental income generated by a lease can depend significantly on the proportion of property-level operating expenses paid by the tenant. In which of the following types of leases is the tenant responsible for all operating expenses? A. Gross lease B. Net lease C. Net-net lease D. Triple net lease

D. Triple net lease

In contrast to rent for residential units, rent for U.S. commercial properties is typically quoted as: A. a dollar amount per month B. a dollar amount per year C. a monthly cost per square foot D. an annual cost per square foot

D. an annual cost per square foot

While a sublease and an assignment are two distinct choices for a tenant who wishes to transfer his rights during the term of a lease, both agreements: A. transfer all of a tenant's rights to another party B. transfer only a subset of rights to another party C. grant another party the right to cancel the original lease before expiration D. maintain that the original tenant be held liable for fulfilling the original lease unless otherwise specified

D. maintain that the original tenant be held liable for fulfilling the original lease unless otherwise specified

In an indexed lease, rents are dependent on a regularly reported index, most commonly the consumer price index (CPI). By using the CPI as an index rate, the risk of unexpected increases in general inflation is shifted to the _________, and therefore a _________ base rental rate will typically be required. A. owner; higher B. owner; lower C. tenant; higher D. tenant; lower

D. tenant; lower

The effective rent calculation is a common measure used to compare the true cost of one lease to another. While there are a number of limitations to this methodology, the effective rent calculation captures: A. interlease risk B. re-leasing costs C. the advantages associated with lease flexibility D. the time value of money

D. the time value of money