FIRE-305 Ch. 20-23

You are considering the purchase of a small apartment complex. Net operating income is estimated to be $116,000. Estimated capital expenditures of $2,000 were subtracted from effective gross income to calculate the $116,000 NOI. The annual mortgage payment will be $65,575, of which $56,000 will be interest. The allowable depreciation deduction is $27,273. Upfront financing costs on the 25-year loan will be $25,000. What is the taxable income from operations? Multiple choice question. $24,152 $9,724 $33,727 $31,727

$33,727

The management is typically a percentage of the property's Multiple choice question. Before-tax cash flow to the owner(s) net operating income (effective) gross income After-tax cash flow to the owner(s)

(effective) gross income

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. Multiple choice question. 4.00 1.25 0.25 0.80

1.25

Relevant federal and state laws are more focused on which of the following? Multiple choice question. Protecting the rights and interests of households that are leasing residential properties Protecting the rights and interests of owners of residential properties that are leasing space to to households Protecting the rights and interests of tenants who have leased space in office buildings

Protecting the rights and interests of households that are leasing residential properties

True or false: If the contract rental rate is flat over the lease term, the owner cannot require the tenant to also pay some or all of the operating expenses associated with operating the property.

false

True or false: Passive activity tax losses, if not taken in the year in which they occur, cannot be taken in later years.

false

The complex sequence of operations in a construction are coordinated and controlled by a _____ _____.

general contractor

The landscape architect in a development will be concerned with matters such as: Multiple select question. placement and footings of structures the soil and vegetation context of structures topography and grading fountains, benches, or other amenities

the soil and vegetation context of structures topography and grading fountains, benches, or other amenities

True or false: Taxpayers are not allowed to use accelerated depreciation for real property investments.

true

Which of the following about a property's tax basis are generally true? Multiple select question. $1 in personal property generates more depreciation benefits than $1 in real property Personal property is not part of the building's core structure Personal property is easily distinguished from real property

$1 in personal property generates more depreciation benefits than $1 in real property Personal property is not part of the building's core structure

You are considering the purchase of a small apartment complex. Net operating income is estimated to be $116,000. Estimated capital expenditures of $2,000 were subtracted from effective gross income to calculate the $116,000 NOI. The annual mortgage payment will be $65,575, of which $56,000 will be interest. The allowable depreciation deduction is $27,273. Upfront financing costs on the 25-year loan will be $25,000. Taxable income from operations is equal to $33,727 and is ______ less than the before-tax cash flow. Multiple choice question. $25,000 $2,000 $16,698 $27,273

$16,698

Assume an investor acquires an apartment property for $500,000, including all acquisition costs. A mortgage loan of $400,000 is obtained to help finance the acquisition. The mortgage has a loan term of 15 years and total up-front financing costs of $4,000. What is the allowable annual deduction for up-front financing costs (rounded to the nearest dollar)? Multiple choice question. $1450 $267 $145 $4,000

$267

Bill's shoe store pays base rental payments of $1,200 per month, plus 1.5% of gross show sales in excess of $18,000 each month. What will Bill's monthly rent payment be if sales this month total $26,000? Multiple choice question. $1,470 $1,200 $1,320 $1,590

1,320

From start to finish, order the first six stages of the development process.

1. Establish site control 2. Feasibility analysis, refinement and testing 3. Obtaining permits 4. Design 5. Financing 6. Construction

The market value of Class A building typically exceeds _____ million.

10

A graduated rent clause has scheduled rent payments of $10,000 per month for the first two years, with 6% annual increases at the beginning of years 3-5. What will be the monthly lease payment in year 4? Multiple choice question. $11,200 $11,800 $11,910 $11,236

11,236

Given the following information, calculate the taxes due on sale for the following fully taxable sale: Net sale proceeds: $1,500,000; Adjusted basis: $830,000; Depreciation recapture income: $150,000; Capital gain tax rate: 15%; Depreciation recapture tax rate: 25%. Multiple choice question. $100,500 $37,500 $78,000 $115,500

115,500

To qualify for the lower capital gain tax rate on the sale of "non-dealer" property, the property must have been held for more than _____ months.

12

The benefit of being classified as capital gain income is that the applicable tax rate may be below the tax rates associated with depreciation recapture income and ordinary income. In order to qualify for the lower capital gain tax rate, the property being sold must have been held for more than: Multiple choice question. 1 month 12 months 2 years 6 months

12 months

Michele is completing her 2019 federal income tax return. She is filing as a single taxpayer. After factoring in her salary income and allowable deductions, her taxable income is $82,000. Her 2019 federal tax liability (rounded to the nearest dollar) is: Multiple choice question. 18,040.00 13,898.50 4,543.00 9,355.50

13,898.50

A construction lender normally expects to be repaid within _____ to _____ years, when the _____ of _____ is finally issued.

2, 3, certificate, occupancy

The levered, before-tax IRR is 15%. The levered, after-tax IRR is 12%. The effective tax rate is _____%.

20

Assume you acquired an office building in year 1 with a real property depreciable basis of $1,000,000. Ignoring the mid-month convention, this generates an annual depreciation deduction of $25,641. In year 4, you spent $80,000 on a total roof replacement. Ignoring the mid-month convention, your total depreciation deduction in year 4 will be ______. Multiple choice question. $2,051 $27,692 $23,590 $25,641

27,692

Under 2019 federal income tax law, the allowable cost recovery period for residential income property acquired by investors is ______ years. Multiple choice question. 37.5 39.0 31.0 27.5

27.5

Jim and Tami are a married couple jointly filing their 2019 federal income tax return. After summing Tami's salary income and Jim's income from brokerage commissions, and subtracting allowable deductions, their joint taxable income is $190,000. Their 2019 federal tax liability (rounded to the nearest dollar) is: Multiple choice question. 45,600 5,184 28,765 33,949

33,949

Given the following information, calculate the depreciation deduction (to the nearest dollar) for the personal property for year 1: Total depreciable basis: $1,500,000; Depreciable basis of personal property: $200,000; Declining balance depreciation applicable to the personal property: 175%; Cost recovery period of the personal property: 10 years. Multiple choice question. $35,000 $20,000 $130,000 $3,704

35,000

Given the following information, calculate the tenant's rentable area: Tenant's usable area: 4,000 square feet; Total usable area in office building: 20,000 square feet; Total common area in office building: 4,000 sq. ft. Multiple choice question. 8,000 square feet 5,000 square feet 4,000 square feet 4,800 square feet

4,800 square feet

Assume you are able to generate an annual depreciation deduction of $34,000 that shelters rental income that would otherwise have been taxed at a 30% rate each year for 5 years. What is the present value of the annual tax savings (ignore the impact of depreciation recapture) using a 7.5% discount rate? Multiple choice question. $96,292 $137,560 $26,683 $41,268

41,268

If expenditures meet the specified criteria, a 20% credit may be taken for rehabilitation expenditures on certain rental properties. The 20% credit is allocated evenly over ________ years and the depreciable basis is _________ by the amount of the credit Multiple choice question. 20, increased 5, increased 20, decreased 5, not affected 5, reduced

5, reduced

A retail tenant signs a three-year lease with monthly payments of $5,000. If the commission rate is 3 percent, the leasing agent will be owed a $___________ commission. Multiple choice question. 150 1,800 9,000 5,400

5,400

Lease terms of _______ are most common for office leases. Multiple choice question. 5-10 years 1 year 3-5 years 25 years

5-10 years

In the example construction budget shown in Exhibit 23-7, the total hard costs make up _______ of the total construction cost. Multiple choice question. 66% 75% 20% 89%

66%

The intended present value of LIHTCs is _____ percent of the depreciable basis of new construction.

70

Given the following information, calculate the before-tax cash flow from operations for this property: Debt service: $45,000; First-year mortgage interest: $42,000; First-year NOI: $91,750; Operating expenses: $60,000. Multiple choice question. $49,750 $136,750 $46,750 $15,000

91750 - 45000 = 46750

Which of the following management compensation arrangements, all else equal, creates less of an agency issue between the property owner and the asset manager? Multiple choice question. Compensation that is a fixed percentage of the gross rental income of the managed properties Basing compensation, at least in part, on the return performance of the manager relative to an appropriate benchmark Compensation that is a fixed percentage of the value of the managed assets

Basing compensation, at least in part, on the return performance of the manager relative to an appropriate benchmark

Both a sublease and an assignment achieve which of the following? Multiple choice question. Both transfer all of the original tenant's rights and obligations to a second tenant Both maintain that the original tenant is liable for fulfilling the terms of the original lease unless relieved of doing so by the owner Both grant the original tenant the right to cancel the lease at any time Both transfer only a subset of rights and obligations to another party

Both maintain that the original tenant is liable for fulfilling the terms of the original lease unless relieved of doing so by the owner

Components of development cost typically are broken down by: Multiple select question. Developer's fee Financing costs Operating management cost Hard costs Land costs Soft costs Marketing costs

Developer's fee Financing costs Hard costs Land costs Soft costs Marketing costs

Which of the following transactions would qualify for a like-kind exchange? Multiple select question. Exchanging an office building for an apartment building. Exchanging raw land for an apartment building Exchanging raw land for jewelry. Exchanging an office building for another office building.

Exchanging an office building for an apartment building. Exchanging raw land for an apartment building Exchanging an office building for another office building.

For investors with multiple Section 1231 properties, which of the following are true? Multiple choice question. Taxes due on sale are calculated separately for each property A net Section 1231 loss on disposed properties cannot be used to offset active income Gains and loses from sale on all Section 1231 properties are first netted

Gains and loses from sale on all Section 1231 properties are first netted

_____ may increase in real (inflation-adjusted) value over time even if ____ experiencing wear and tear. Multiple choice question. Land; building improvements are Building improvements; older improvements are Land; value of the surrounding neighborhood is

Land; building improvements are

When a tenant is delinquent with her rent payments which of the following is likely to occur? Multiple choice question. Late fees will charged by the property manager. Landlord terminates the lease without providing notice to the tenant in advance. The property manager permits a tenant to recover any prepaid rent and security deposit. The property manager immediately initiates eviction proceedings.

Late fees will charged by the property manager.

Leases are important as they significantly impact property values. However, leases are also perishable and property managers need to maintain a pool of prospect tenants. What promotional tools are usually adopted by managers to attract tenants? Multiple select question. Road shows Press releases Social media Financial statements

Press releases Social media

The majority of space in commercial properties is leased to tenants with credit ratings below "investment grade." When the prospect's credit rating is is not available, which of the following details should be investigated thoroughly to ensure the prospect's creditworthiness? Multiple select question. Previous operations Sources of income Education attainment Existing bank accounts

Previous operations Sources of income Existing bank accounts

Unlike publicly traded financial securities (i.e., stocks and bonds), on-going management is important for commercial real estate because the: Multiple select question. Rate of returns on real estate investments are dependent on ongoing management. Majority of real estate investment returns generally come from appreciation in the value of the property. Investment horizon of commercial real estate is usually long. Transaction costs are high for real estate investments.

Rate of returns on real estate investments are dependent on ongoing management. Investment horizon of commercial real estate is usually long. Transaction costs are high for real estate investments.

Lease lengths for commercial property can vary considerably. All else equal, owners prefer longer leases for which of the following reasons? Multiple select question. Stability of operating income Increased flexibility Delay of tenant improvement allowances Delay of releasing costs

Stability of operating income Delay of tenant improvement allowances Delay of releasing costs

An owner of an apartment complex needs to compute taxable income (TI) from operations for the preceding year. The effective gross income (EGI) was $55,000; operating expenses were $19,000; there were no capital expenditures; debt service was $16,662, of which $15,000 was interest; and the deprecation deduction was $17,000. Compute the taxable income from operations: Multiple choice question. $2,338 $19,338 $4,000 $19,000

Taxable Income Formula = Gross Sales - Cost of Goods Sold - Operating Expense - Interest Expense - Tax Deduction/ Credit 55000-19000-15000-17000 = 4000

All else equal, which of the following circumstances will maximize the net present value of a maintenance program? Multiple choice question. The PV of the increased rents equals to the PV of cash outlay for the maintenance program. The PV of the increased rents is less than the PV of cash outlay for the maintenance program. The PV of the increased rents is greater than the PV of cash outlay for the maintenance program.

The PV of the increased rents is greater than the PV of cash outlay for the maintenance program.

When an income-producing property is owned by two investors in a flowthrough ownership form, what additional information is required to estimate the annual tax liability from operations of each investor? Multiple select question. The percentage of the annual before-tax cash flow generated by the property that is allocated to each investor The percentage of the annual taxable income generated by the property that is allocated to each investor The ordinary income tax rate of each investor The percentage of the mortgage payment paid by each investor

The percentage of the annual taxable income generated by the property that is allocated to each investor The ordinary income tax rate of each investor

Which of the following statements about in-house leasing agents are generally correct? Multiple select question. They may not have sufficient expertise to negotiate complex leases. They are employees of the property owner. They are typically paid based on a percentage of the face value of a signed lease. They are generally paid a salary and a performance bonus.

They are employees of the property owner. They are generally paid a salary and a performance bonus.

Which of the following statements about asset managers are true? Multiple select question. They are typically responsible for advising the owner on decisions regarding divestitures or even abandonment of a property. They may work for institutional investors such as pension funds and REITs. Their decisions typically affect the day-to-day operations of the property. They typically occupies a lower position in the decision-making hierarchy than property managers.

They are typically responsible for advising the owner on decisions regarding divestitures or even abandonment of a property. They may work for institutional investors such as pension funds and REITs.

Reasons why a landlord may want to place restrictions on the use of a space include which of the following? Multiple select question. To maximize the potential rental income that could be collected from the space in question To limit potential legal liabilities To prevent damage to the building To prevent conflicts with other tenants

To limit potential legal liabilities To prevent damage to the building To prevent conflicts with other tenants

Suppose a taxpayer owns an office building. Under U.S. tax law, in what category would this property be classified? Multiple choice question. Personal residence Trade or business property Investment property Dealer property

Trade or business property

Which of the following have become popular investments in urban areas? Multiple select question. Warehouses Plants and factories Government services facilities Industrial parks

Warehouses Industrial parks

A Section 1231 property is: Multiple choice question. a property that combines real property and personal property a "trade or business" property that has been held as an investment for more than a year an "investment" property that has been held as an investment for more than a year

a "trade or business" property that has been held as an investment for more than a year

A rehabilitation expenditure is an example of: Multiple choice question. a capital expenditure an operating expense a decision to maximize current rental income

a capital expenditure

A lease clause, designed to protect the owner, by which lease payments increase over time according to a schedule specified in the lease agreement, is generally known as: Multiple choice question. a landlord protection clause a graduated rent clause a use clause a percentage rent clause

a graduated rent clause

With _____________, the original tenant remains liable for fulfilling the terms of the lease Multiple select question. a lease escalation a lease concession a sublease a lease assignment

a sublease a lease assignment

If preliminary financial feasibility analysis gives uncertain results, the developer must decide whether to go forward with _____ market research or abandon the project.

additional

Selling a property generates a taxable gain or loss equal to the difference between the sale price of the property (net of selling expenses) and the property's: Multiple choice question. adjusted depreciable value total depreciation initial tax basis adjusted basis

adjusted basis

In selecting an architect, communication and common values are very important because of the inherent tendency for architects to be _____ oriented wile developers must be _____ and _____ oriented.

aesthetically, cost, time

A co-tenancy clause: Multiple choice question. allows the landlord to cancel the lease if a key (anchor) tenant vacates the center allows the tenant to cancel the lease or pay reduced rent if a key (anchor) tenant vacates the center requires two tenants to share a common area

allows the tenant to cancel the lease or pay reduced rent if a key (anchor) tenant vacates the center

A property management agreement details the responsibilities of owners and property managers. Because a management agreement empowers the property managers to serve as the owners' fiduciary, it creates ______ Multiple choice question. an associate responsibility a financial responsibility an agency relationship a correspondent relationship

an agency relationship

Rent for U.S. commercial properties is typically quoted as: Multiple choice question. an annual dollar amount a monthly dollar amount per square foot an annual dollar amount per square foot a monthly dollar amount

an annual dollar amount per square foot

The large and generally well-known retailers who draw the majority of customers to a shopping center are more commonly referred to as: Multiple choice question. chains outlets strips anchors

anchors

Lease clauses that permit the owner to increase rental rates over the term of the lease are not typically found in: Multiple choice question. warehouse leases office property leases shopping center leases apartment leases

apartment leases

The underlying premise behind many of the state and local laws that govern the landlord-tenant relationship is that Multiple choice question. office buildings owners likely have the "upper hand" when negotiating and enforcing lease contracts with tenants apartment tenants likely have the "upper hand" when negotiating and enforcing lease contracts with owners apartment owners likely have the "upper-hand" when negotiating and enforcing lease contracts with tenants

apartment owners likely have the "upper-hand" when negotiating and enforcing lease contracts with tenants

Engineers usually work as subcontractors to the _____ with review of qualifications by the _____.

architect, developer

Upfront financing costs on a commercial property investment: Multiple choice question. are deducted in equal annual amounts over the term of the loan are deducted in equal annual amounts over the property's depreciable life can never be deducted but are added to the tax basis are deductible in full in the year in which they are paid

are deducted in equal annual amounts over the property's depreciable life

The size of annual tax depreciation deductions Multiple choice question. are increased by the use of mortgage financing are reduced by the use of mortgage financing are not affected by the use of mortgage financing

are not affected by the use of mortgage financing

The mortgage funds received by borrowers from lenders Multiple choice question. affect the magnitude of allowable depreciation deductions are taxable as income are not taxable as income

are not taxable as income

Real property capital expenditures made in a tax year after acquisition of the property: Multiple choice question. are treated as a separate building and depreciated separately from the original depreciable basis cannot be depreciated but can be immediately expensed cannot be depreciated

are treated as a separate building and depreciated separately from the original depreciable basis

Tenant improvement allowances granted to the tenant by the landlord: Multiple choice question. are not a heavily negotiated lease item are usually stated as a dollar amount are usually stated as a dollar per square foot amount

are usually stated as a dollar per square foot amount

Institutional investors who own commercial real estate usually prefer to hire ______ who then oversee the ______. Multiple choice question. asset managers, property managers tenant reps, asset manager managing equity investors, property managers property managers, asset manager

asset managers, property managers

As a tenant, you wish to turn over all the rights and responsibilities of your unexpired lease to a new tenant. If allowed to do so, you would be ______ your leasehold interest. Multiple choice question. subleasing relieving releasing assigning

assigning

Given the following information, calculate the before-tax cash flow from operations 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; Mortgage interest: $36,000. Multiple choice question. $76,000 $80,000 $17,900 $21,900

before tax cash flow = annual net operating income - annual debt service 57900 - 40000 = 17900

The broker selected by a developer to market a new project should meet several qualifications, including: Multiple select question. being genuinely excited about the property being from elsewhere so as to have fresh ideas having special knowledge about the particular market involved having no conflicts of interest with competing projects

being genuinely excited about the property having special knowledge about the particular market involved having no conflicts of interest with competing projects

When the term of the ground lease expires, the owner of the land ends up with ownership of Multiple choice question. the building only both the land and the building the land only

both the land and the building

When leases expire and tenants vacate the space, releasing costs are typically incurred by Multiple choice question. the owner of the property only both the tenant and the property owner the tenant only

both the tenant and the property owner

Which of the following forms of ownership is a group of investors LEAST likely to select if they intend to invest in commercial real estate? Multiple choice question. Limited liability company Limited partnership C corporation

c corporation

When taxable income is classified as passive activity income, investors are subject to passive activity loss restrictions. These restrictions imply that passive income that is negative Multiple choice question. can be used to offset positive taxable income from other passive activities can be used to offset positive taxable income from other passive activities and active activities can be used to offset positive taxable income from portfolio activities

can be used to offset positive taxable income from other passive activities

When an investment appreciates in value during the investment holding period, the price appreciation is generally taxed at which of the following rates? Multiple choice question. portfolio income tax rates capital gain tax rates active income tax rates ordinary tax rates

capital gain tax rates

The developer is severely limited in sources of capital to finance land acquisition because institutional lenders - banks, thrifts, or insurance companies - seldom lend on property that lacks _____ _____.

cash flow

In the year in which they are incurred, capital expenditures reduce _____________ more than they reduce _____________. Multiple choice question. taxable income, cash flow from operations cash flow from operations, taxable income cash flow from operations, depreciation deductions

cash flow from operations, taxable income

Post-construction, or "permanent", financing usually is funded only after the _____ of _____ is issued.

certificate, occupancy

The professional designation "CPM" stands for _____ _____ _____.

certified property manager

"CAM" stands for _____ _____ _____.

common area maintenance

Lease options granted the owner that may be exercised to the detriment of the tenant generally require some form of _____ lease from the owner.

concession

While a wide variety of occupational experience has facilitated entry to development, one that seems particularly conducive because of its "inside" view of the field is: Multiple choice question. investment sales construction lending retail management home lending

construction lending

To assure effective communication and to assure a voice in important decisions during the construction process, the developer often retains a _____ _____ to be the developer's representative.

construction manager

Compared to fully taxable sales, dispositions that allow tax deferral generally: Multiple choice question. create larger cash inflows in the year of the transaction create larger tax liabilities in the year of the transaction create tax saving by deferring the full recognition of accumulated taxable gains

create tax saving by deferring the full recognition of accumulated taxable gains

The class (for example, A, B, or C) of an office building generally _______ with age. Multiple choice question. increases is unaffected by age declines

declines

With an amortizing loan, the annual amount of deductible interest __________ over time Multiple choice question. does not change increases decreases

decreases

Depreciation deductions allow investors to: Multiple choice question. defer taxes on ordinary income and eliminate depreciation recapture income defer taxes on ordinary income and convert ordinary income into capital gain income defer taxes on ordinary income and convert ordinary income into depreciation recapture income defer taxes on ordinary and convert depreciation recapture income into ordinary income

defer taxes on ordinary income and convert ordinary income into depreciation recapture income

In the permitting process, the most costly threat for the developer is _____.

delay

For tax purposes, the total cost of acquiring an existing property is generally allocated on the basis of the respective values of the land and building improvements (assuming no personal property). The value allocated to the improvements is generally termed the: Multiple choice question. original cost basis deductible amount depreciable basis

depreciable basis

The primary reason taxable income from operations is typically less than the before-tax cash flow from operations is because: Multiple choice question. the total mortgage payment is greater than the interest portion depreciation is larger than principle amortization the amortization of upfront financing costs is a cash expense mortgage interest is a cash expense

depreciation is larger than principle amortization

Bringing the marketing broker into the development process as early as the _____ stage can be valuable both for ideas and to give the broker enthusiasm for the project.

design

To overcome the pervasive problem of disagreements and renegotiations between architect and contractor, sometimes a developer turns to a _____-_____ arrangement where the architect is also the general contractor.

design build

The landscape architect's role in land development is more _____ than the role of the land planner.

detailed

Landlords typically ________ tenants to alter or improve the leased premises without prior written approval. Multiple choice question. require do not allow do allow

do not allow

Historically, researchers have found that stock investors react positively to announcements of corporate real estate sale-leasebacks because, after selling the real estate and leasing it back, the firm: Multiple select question. enjoys 100% financing lessee will enjoy tax benefits from annual depreciation can focus on their core business and not worry about property management can use real estate as a collateral for debt financing

enjoys 100% financing can focus on their core business and not worry about property management

Allowable tax credits for qualified low-income housing are: Multiple choice question. taken in full in the year after acquisition or rehabilitation equal annual amounts taken every year over the cost recovery period equal annual amounts over 15 years equal annual amounts taken every year for 10 years

equal annual amounts taken every year for 10 years

Mezzanine financing often is not mortgage financing. Rather, as security for the mezzanine loan the equity partners pledge their _____ _____ to the "mezz" lender until the loan is repaid.

equity shares

The cost of mezzanine financing is much lower than the required return on _____ capital but significantly higher than the interest rate in _____ financing.

equity, construction

A graduated rent clause is also referred to as a(n) _____ _____.

escalation clause

True or False: By deferring maintenance, property managers can typically increase the long-run performance of the property.

false

True or False: Responsibilities of both parties to pay specific operating expenses are typically not included in a commercial lease.

false

True or false: A typical commercial real estate lease allows the tenant to use the space for any legal purpose.

false

True or false: Effective property managers should never offer their advice to the property owner (or the owner's asset manager) on the appropriate time to undertake significant rehab or renovation projects.

false

True or false: Homeowners are allowed to take tax depreciation deductions.

false

True or false: REnt concessions are reflected in the quoted rental rate.

false

True or false: Regular ("C") corporations are subject to passive activity loss restrictions

false

True or false: The lease need not specify who pays maintenance expenses.

false

True or false: The street address of larger multitenant properties are typically adequate as property descriptions.

false

As an agent for the owner, brokerage firms have a ______ responsibility to the owner. Multiple choice question. fiduciary financial short-term legal

fiduciary

This chapter focuses on the taxation of real estate held: Multiple choice question. by non-real estate corporations for investment by flowthrough ownership forms for investment by C corporations

for investment by flowthrough ownership forms

Although there are a few exceptions, real estate investors are only able to use negative taxable income from a passive real estate investment to offset positive taxable income Multiple choice question. from long term investments that produce capital gain income from another passive activity from portfolio investments such as stocks and bonds

from another passive activity

For a real estate limited partnership, it is usually the ______ who performs the asset management functions. Multiple choice question. asset manager limited partner tenant rep general partner

general partner

An "exclusive": Multiple choice question. gives the tenant the right to avoid paying percentage rent gives the landlord the right to restrict the size of a tenant's GLA gives the tenant the right to be the only tenant in the center that sells or provides a certain kind of good or service

gives the tenant the right to be the only tenant in the center that sells or provides a certain kind of good or service

A tenant has the option to renew a five-year lease at lease maturity for an additional five years at the rate the tenant is paying in year five. To obtain this option, the tenant likely had to pay rental rates in years 1-5 that are ______ the rents the tenant would have had to pay if the renewal option was not included in the lease. Multiple choice question. greater than less than equal to

greater than

All else equal, the effective rent of a lease that requires the tenant to pay for a portion of the property's operating expenses, in addition to base rent, has an effective rent that is ______ what the effective rent would be without paying for operating expenses. Multiple choice question. less than greater than equal to

greater than

The rate of tax savings on annual depreciation deductions is typically _________ the depreciation recapture rate. Multiple choice question. less than greater than equal to

greater than

The sponsor/organizer of a limited liability company that owns an office property typically receives a percentage of the available cash flows generated by the property that is ______ the percentage received by the passive investors. Multiple choice question. greater than equal to less than

greater than

In retail property types, rents are typically quoted on the basis of which of the following? Multiple choice question. gross leasable area usable area rentable area gross floor area

gross leasable area

Hotel leases can be characterized as: Multiple choice question. net leases gross leases percentage rent leases triple-net leases

gross leases

Which of the following type of lease generally has the longest lease term? Multiple choice question. Ground lease Office lease Retail lease Warehouse lease

ground lease

"Empire building" describes the scenario where an asset manager increases the value of the assets under management above its optimal level in order to maximize ______. Multiple choice question. the number of property investments with positive NPVs. her own compensation her client's investment rate of return

her own compensation

Maintenance and repairs should be performed Multiple choice question. if they increase rental rates that can be charged tenants if the PV of the expenditures < the PV of lost future income that is avoided because of the expenditure if they increased the future sale price of the property

if the PV of the expenditures < the PV of lost future income that is avoided because of the expenditure

A cash multiple is computed as the sum of all net _____ over the life of the project divided by the sum of all cash _____ into the project.

income, paid

Architects often are compensated on the basis of some percentage of the project cost, ranging from 1 to 2 percent for very simple or repetitive design work to perhaps 10 percent for innovative or complex work. The main criticism of this approach is that their fee _____ along with project _____, which may be a perverse incentive.

increases, cost

"IREM" stands for the _____ of _____ _____ _____.

institute, real estate management

Construction lending is natural for banks because underwriting the construction process is not unlike underwriting the _____ and _____ of an operating business.

inventory, management

A credit tenant is defined as a tenant whose general debt obligations are rated as ______ by one or more rating agencies. Multiple choice question. too risky "junk" grade investment grade

investment grade

A significant advantage of a "flowthrough" ownership form for real estate investors, such as a limited liability company, relative to the corporate form of ownership is that Multiple choice question. investors can defer some portion of their taxes until sale of the property investors can avoid depreciation recapture income investors can avoid double taxation of the property's income

investors can avoid double taxation of the property's income

The commission typically paid to leasing agents brokers who bring a tenant to an owner Multiple choice question. is a predetermined percentage of the value of the property is equal to the rent in the first month is a predetermined percentage of the face value of the lease is negotiated after the lease is signed

is a predetermined percentage of the face value of the lease

Relative to asset management, property management is the core function of real estate management because: Multiple select question. property managers typically occupy a higher position in the decision-making hierarchy than asset managers. it affects property value. it impacts net operating income (NOI). it typically includes divestiture and abandonment decisions.

it affects property value. it impacts net operating income (NOI).

An important aspect of the annual depreciation deduction on real property investments is that: Multiple choice question. it can help create a situation in which taxable income is less than before-tax cash flow the tax shelter it generates can never exceed the cash flow from the property it is an out-of pocket (cash) expense that reduces both cash flow and taxable income

it can help create a situation in which taxable income is less than before-tax cash flow

The option granted a tenant to renew the lease at the end of the original lease term at the original contract rental rate is said to have a one-sided (asymmetric) payoff to the tenant because Multiple choice question. it will only be exercised by the tenant if market rental rates decrease it will only be exercised by the tenant if market rental rates increase the owner will "win" regardless of whether the option is exercised or not.

it will only be exercised by the tenant if market rental rates increase

Common methods that a developer may use to "finance" land up to the start of construction include: Multiple select question. land joint venture contract for deed ground lease loan from a land bank

land joint venture contract for deed ground lease

In a land development the key design role usually is given to a _____ _____.

land planner

Expense stops limit the "pain" of increases in property-level operating expenses for the: Multiple choice question. landlord lender developer tenant

landlord

The transfer of rights and obligations between parties is more complete with a Multiple choice question. lease assignment concession negotiated lease settlement sublease

lease assignment

All else equal, the appropriate levered, after-tax discount rate is generally ______ the levered, before-tax discount rate. Multiple choice question. less than greater than equal to

less than

All else equal, the effective rent of a lease that provides a period of free rent to the tenant has an effective rent that is ______ what the effective rent would be without the concession. Multiple choice question. greater than less than equal to

less than

Generally, the taxable income generated by a fully-taxable sale is ______ the before-tax cash flow from the sale. Multiple choice question. less than greater than equal to

less than

The taxable income generated by a fully taxable sale is generally _______________ the before-tax cash flow from sale. Multiple choice question. less than greater than equal to

less than

Anchor tenants typically sign leases with term lengths that are ______ the typical term length of leases signed by non-anchor tenants. Multiple choice question. longer than shorter than equal to

longer than

All else the same, the first-year contract rent on a five-year graduated lease for a particular space will generally be _____________ the first-year contract rate on a five-year flat rate lease for the same space Multiple choice question. greater than lower than about the same as

lower than

Managers of residential properties prefer prospect tenants with "permanence potential" because: Multiple choice question. the creditworthiness of tenants with permanence potential is typically high such tenants help to create an optimal tenant mix managers are less likely to incur the cost of releasing the property

managers are less likely to incur the cost of releasing the property

While a superficial assessment of development may suggest that the work is for risk seekers, a more careful assessment is that it is for risk _____ and even _____ _____.

managers, crisis managers

The objective of maintenance and repair work should be to: Multiple choice question. maximize the value of the property minimize vacancies maximize the manager's compensation maximize rental income

maximize the value of the property

Portfolio income generated by a stock investment: Multiple choice question. is always taxed at capital gain tax rates is never eligible for favorable capital gain tax treatment may be treated as ordinary income or capital gain income depending in the nature of the income is always taxed at ordinary tax rates

may be treated as ordinary income or capital gain income depending in the nature of the income

Apartment properties comprised of eight-story buildings would typically be classified as: Multiple choice question. garden style apartments urban apartments mid-rise apartments high-rise apartments

mid-rise apartments

The effective rent calculation captures the effects of: Multiple choice question. interlease risk releasing costs nonmonetary lease clauses monetary lease clauses

monetary lease clauses

A wise observer of development, James Graaskamp, observed that, in addition to the right personal qualities, to enter development one must control at least one of four essential ingredients: _____, _____, _____, or _____.

money, land, knowledge, tenants

The success of hospitality property investments is typically ______ dependent on the quality of management than office buildings. Multiple choice question. equally more not less

more

As the number of rental properties owned by a real estate investor increases, the Multiple choice question. more likely it is that the investor will serve as both the property manager and asset manager for her portfolio less likely it is that the investor will hire an asset manager to oversee multiple properties more likely it is that the investor will hire an asset manager to oversee multiple properties

more likely it is that the investor will hire an asset manager to oversee multiple properties

Homeowners are allowed to deduct some or all of which of the following expenditures when calculating their annual federal taxable income? Multiple select question. capital expenditures cost of an appraisal mortgage interest property taxes

mortgage interest property taxes

Asset managers, or real estate investment managers, often perform a variety of functions, including: Multiple select question. negotiating a refinancing of an existing mortgage continuously monitoring local market rental conditions lining up mortgage financing performing regularly scheduled maintenance

negotiating a refinancing of an existing mortgage continuously monitoring local market rental conditions lining up mortgage financing

A shopping center, typically anchored by a large grocery store, and that often includes many service-orientated business, is commonly termed a: Multiple choice question. community center power center neighborhood center specialty center

neighborhood center

Virtually all the problems a developer must solve are in conjunction with other persons over whom they have _____ control. This means the developer must gain the confidence and good will of these persons such that they are friendly toward _____ solutions to the developer's needs.

no, negotiating

Most owners of commercial real estate invested primarily because Multiple choice question. they wanted to contribute to their local community of a profit motive they wanted to be in a business that services tenants

of a profit motive

The use of in-house leasing agents is more common in the marketing Multiple choice question. of industrial warehouses of newly constructed shopping centers and multi tenant office buildings of existing shopping centers of existing apartment properties

of newly constructed shopping centers and multi tenant office buildings

Among the following property types, tenant mix is typically less important in Multiple choice question. shopping centers apartment buildings office buildings

office buildings

Office building owners usually recover a larger portion of the property's operating expenses from: Multiple choice question. newer leases with higher per square foot expense stops newer leases with lower per square foot expense stops older leases with higher per square foot expense stops older leases with lower per square foot expense stops

older leases with lower per square foot expense stops

Under the Opportunity Zone Program, tax deferral is potentially available Multiple choice question. on the sale of commercial real estate, stocks, and bonds only on the sale of commercial real estate only on the sale of commercial real estate located in a designated opportunity zone

on the sale of commercial real estate, stocks, and bonds

Typically, investors prefer to have cash expenditures classified for tax purposes as Multiple choice question. amortized financing expenses passive activity expenditures capital expenditures operating expenses

operating expenses

An important tool for a developer to establish site control without the full cost of immediate purchase is an _____.

option

"Short-term" gains from the sale of an investment property are taxed at the taxpayer's: Multiple choice question. ordinary income tax rate depreciation recapture rate capital gain tax rate passive activity tax rate

ordinary income tax rate

Salary income is taxed at: Multiple choice question. capital gain tax rates portfolio income tax rates noncorporate tax rates ordinary tax rates

ordinary tax rates

When the compensation of a property manager is tied up to the rental income collected, he or she is more likely to: Multiple select question. over maintain the property maximize rental income maximize the value of the property defer maintenance and repair

over maintain the property maximize rental income defer maintenance and repair

There are three main types of income subject to federal taxation. Which of the following types of income includes income generated from rental real estate investments? Multiple choice question. residual income passive activity income portfolio income active income

passive activity income

During a credit check, a credit bureau needs to verify aspects of residential prospects' rent-paying ability including: Multiple select question. past payment record, sources sex age amount of income education attainment

past payment record, sources amount of income

Generally, the number of stories (floors) in a residential building is __________ related to the price of land in a market. Multiple choice question. positively negatively not related

positively

A comprehensive maintenance program has many benefits, primarily including: Multiple select question. creating synergism for tenants reducing financing costs producing tenant satisfaction producing cost savings

producing tenant satisfaction producing cost savings

Common area maintenance (CAM) charges are usually Multiple choice question. divided equally among tenants paid by the shopping center's owner prorated among tenants based on the percentage of the center's total GLA that they occupy

prorated among tenants based on the percentage of the center's total GLA that they occupy

In a like-kind exchange, taxable gains from the disposition of the property are: Multiple choice question. either totally deferred or there is no deferral at all recognized by the taxpayer in the year of the exchange transaction recognized to the extent of any non-like-kind property (boot) received by the taxpayer

recognized to the extent of any non-like-kind property (boot) received by the taxpayer

A definition of development is "the continual _____ of the built environment to meet society's _____."

reconfiguring, needs

All else equal, a lease option granted to the tenant by the landlord: Multiple choice question. does not impact the expected present value of lease cash flows to the owner reduces the expected present value of lease cash flows to the owner increases the expected present value of lease cash flows to the owner causes the expected present value of lease cash flows to equal zero

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

Which of the following typically does not change the floor plan or form of the structure? Multiple choice question. Remodeling Adaptive reuse Rehabilitation

rehabilitation

Under a lease contract, the lessor (owner) exchanges exclusive use and possession of the space with the lessee (tenant) for ______ or other consideration. Multiple choice question. rent management fees mortgage payments operating expenses

rent

Clauses that regulated the hours that a tenant's business is open are most common in Multiple choice question. hotel properties office properties retail properties warehouse properties

retail properties

Clauses that regulated the hours that a tenant's business is open are most common in Multiple choice question. warehouse properties office properties hotel properties retail properties

retail properties

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 if becomes available. This lease option is generally referred to as a: Multiple choice question. consideration right of first refusal renewal option relocation option

right of first refusal

The central and visible role of developers makes them both a lightening _____ for social anxieties and a glamorous form of _____.

rod, entrepreneurship

If initial financial feasibility appears favorable, the developer will want to do at least preliminary tests of the site for "bombshells" that could destroy the project financially, including: Multiple select question. seismic issues anthropological or historical sensitivities environmental concerns local tax burden ecological issues hydrological concerns

seismic issues anthropological or historical sensitivities environmental concerns ecological issues hydrological concerns

Cost segregation is used to: Multiple choice question. determine the property's total depreciable basis determine the property's original cost basis determine the value of the land separate the vale of personal property from the value of the building improvements

separate the vale of personal property from the value of the building improvements

Office tenants generally: Multiple choice question. share (with owners) in the payment of operating expenses pay all of the property's operating expenses in addition to base rent pay none of the property's operating expenses

share (with owners) in the payment of operating expenses

In multi-tenant industrial parks, common area maintenance is handled in a manner similar to _________________; that is ______________ maintains the common area and tenants reimburses the owner for CAM costs. Multiple choice question. office buildings, owners shopping centers, owners apartment properties, owner shopping centers, tenants

shopping centers, owners

The cost recovery periods for personal property are ______________ those allowed on real property Multiple choice question. shorter than longer than the same as

shorter than

When contemplating signing a new lease, the more uncertain a tenant is about its business prospects, the more appealing are Multiple choice question. shorter-term leases leases that require more up-front costs in exchange for a lower rental rate longer-term leases

shorter-term leases

All else equal, if a retail tenant agrees to the inclusion of a percentage rent clause in the lease, the negotiated base rent Multiple choice question. is typically not affected by the inclusion of a percentage rent clause should be higher should be lower

should be lower

All else the same, if the owner negotiates to include a clause in the lease contract that allows the landlord to cancel the lease with 90 days notice, the tenant Multiple choice question. should expect to pay a higher rental rate should expect to receive some form of a concession, perhaps a lower rental rate should expect to be relocated to a different space in the property

should expect to receive some form of a concession, perhaps a lower rental rate

A critical and often dangerous event for the developer is the unavoidable regulatory public hearing called the _____ _____ _____. Here, both government authorities and local citizens can, and do, strongly assert their objections to a proposed development.

site plan review

Select the sphere of development responsibility for each type of engineer

soils engineer = requirements for safety and stability of building foundations structural engineer = requisite "skeleton" of structures mechanical engineer = HVAC system, elevators and other systems electrical engineer = power sources and power distribution systems civil engineers = on-site water, sewer, streets, parking and site grading

The architect's initial work is predesign or schematics, relating needed building functions to each other and to _____. This leads to preliminary or basic building design.

space

Under current law, real property depreciation deductions over the cost recovery period are: Multiple choice question. accelerated not subject to the mid-month convention applied to both land and improvements straight-line

straight-line

Lenders may request that property owners include a clause in their lease agreement that gives the lender the right to terminate the lease and evict the tenant, even if the tenant has fulfilled all of its responsibilities under the lease, in the case that the owner of the property defaults on her mortgage. This is more commonly referred to as a: Multiple choice question. expansion option relocation option subordination clause disturbance clause

subordination clause

Another way that a developer can solve the problem of site control is to prelease a site to a financially strong tenant and build to their specifications. This arrangement is called build-to-_____.

suit

If a bank regards the post-construction future of a project as especially uncertain, the bank may require a commitment by a subsequent lender to pay off the construction loan when construction is complete. This is called a _____ _____ commitment.

take out

Depreciation deductions affect: Multiple select question. before-tax cash flow taxable income after-tax cash flow net operating income

taxable income after-tax cash flow

A renewal option generally benefits the: Multiple choice question. lender landlord tenant property manager

tenant

Maintaining the right mix of tenants requires ongoing management. For instance, the management team of Kimco Realty, a well-known retail REIT, maintains a huge database of prospect tenants. Therefore, they can upgrade the ______ by replacing underperforming tenants with attractive new ones, boosting a property's revenue. Multiple choice question. tenant mix creditworthiness of tenants tenant reps fiduciary relationship

tenant mix

Use clauses are more important in retail than office because _______ more important in retail properties than office properties. Multiple choice question. percentage rent is tenant mix is anchor tenants are expense stops are

tenant mix is

A statement of condition is signed by the ___________ at the ___________ of the residential lease term. Multiple choice question. property manager; end tenant; end tenant; beginning property manager; beginning

tenant; beginning

A "real" (as opposed to a taxable) loss from annual rental operations occurs when: Multiple choice question. taxable income from rental operations is negative the before-tax cash flow from rental operations is negative the property is actively managed the tax loss from rental operations exceeds $25,000

the before-tax cash flow from rental operations is negative

Which of the following is treated for income tax purposes as though it is expected to decrease in value in real (inflation-adjusted) terms? Multiple choice question. The land The building Improvements to the land such as sidewalks and landscaping

the building

The more inelastic the demand by tenants is for space in a property Multiple choice question. the harder it is for the owner to delay maintenance and repair expenditures the easier it is for the owner to delay maintenance and repair expenditures the more likely it is that a delay in maintenance and repair expenditures will increase vacancies

the easier it is for the owner to delay maintenance and repair expenditures

Generally, returns on investments in existing commercial real estate are primarily generated by: Multiple choice question. the property's net operating income (NOI) property's effective gross income (EGI) appreciation in property value miscellaneous income

the property's net operating income (NOI)

Flat contract rental rates are more likely to be observed Multiple choice question. the more uncertain the owner is about future market rental rates the longer is the lease term the shorter is the lease term

the shorter is the lease term

Owners are more likely to serve as managers themselves when: Multiple select question. the size of the rental property is large the size of the rental property is small the owner occupies a portion of the space

the size of the rental property is small the owner occupies a portion of the space

With a flowthrough ownership form: Multiple choice question. the tax liabilities associated with the properties owned by the entity are paid by the entity the tax liabilities associated with the properties owned by the entity are paid by the entity and by the investors the cash flows generated by the properties owned by the entity are paid to investors in the form of stock dividends the tax liabilities associated with the properties owned by the entity are paid by the investors

the tax liabilities associated with the properties owned by the entity are paid by the investors

_______ typically responsible for the payment of utilities in residential rental properties. Multiple choice question. The tenant is The landlord is The renter's association is Both the tenant and landlord are

the tenant is

The location of a tenant's name on a shopping center sign is often heavily negotiated because Multiple choice question. the tenant wants its business to be as visible to shoppers as possible tenants are required per the lease to advertise their business tenants can place signs advertising their business wherever they like

the tenant wants its business to be as visible to shoppers as possible

The gross floor area of a shopping center is equal to: Multiple choice question. the total usable area the total GLA, plus the square footage of the common area the total GLA, minus the square footage of the common area

the total GLA, plus the square footage of the common area

Agency issues generally arise from the separation of ownership and control. In the case of property managers, owners should be concerned that managers will seek to maximize ______. Multiple choice question. the value the property investment the owner's rate of return on the property investment their management fees

their management fees

Under the Opportunity Zone (OZ) Program, if taxpayers follow certain rules, Multiple choice question. they are able to defer depreciation recapture income until the OZ property is sold they can enjoy tax benefits on the OZ property sale but they cannot defer taxes on the sale of the property that was sold to purchase the OZ property they are able to defer capital gains on the sale of an appreciated asset until the OZ property is sold, or until 2026, whichever comes first

they are able to defer capital gains on the sale of an appreciated asset until the OZ property is sold, or until 2026, whichever comes first

Property managers can generate significantly higher rates of return for owners because: Multiple select question. they are familiar with the market segment in which the property competes they are often well-trained in college and/or postgraduate education relative to asset managers they have a thorough knowledge of the property they are financially motivated to maximize the value of the property being managed

they are familiar with the market segment in which the property competes they have a thorough knowledge of the property

Real estate asset managers differ fundamentally from managers of publicly-listed financial securities, i.e., stocks and bonds, because: Multiple select question. they often need to negotiate the acquisition price. typically, they are not responsible for lining up the financing. they are searching for real estate securities which are listed on the public exchanges. they need to find specific assets in which their client can invest.

they often need to negotiate the acquisition price. they need to find specific assets in which their client can invest.

Reuse of an urban site with improvements will generally not occur until the value of the anticipated new structure is expected: Multiple choice question. to exceed the cost of constructing the new building to be less than the cost of demolishing the existing building and constructing the new building to exceed the cost of acquiring the existing property plus the cost of demolishing the existing building and preparing the site for new construction

to exceed the cost of acquiring the existing property plus the cost of demolishing the existing building and preparing the site for new construction

The adjusted basis at any point in time is equal to the: Multiple choice question. total acquisition cost, minus all income received during the holding period total acquisition cost, adjusted for capital improvements made after acquisition and depreciation deductions total acquisition cost, plus all income received during the holding period

total acquisition cost, adjusted for capital improvements made after acquisition and depreciation deductions

Depreciation recapture income at the time of sale is equal to Multiple choice question. total depreciation deductions taken prior to the sale of the property total depreciation deductions taken on personal property prior to the sale of the property the adjusted basis total capital expenditures made since acquisition

total depreciation deductions taken prior to the sale of the property

If the net sale proceeds are equal to the original cost basis plus total tax expenditures incurred over the holding period, the taxable income from sale will equal Multiple choice question. zero the adjusted basis the undepreciated cost basis total tax depreciation taken over the holding period

total tax depreciation taken over the holding period

The lease must be clear about the circumstances and the extent to which the tenant is permitted to alter the leased premises. The lease must also be clear about the ownership of such improvements once completed. Which of the following terms refers to items of personal property that may be removed by the tenant at the termination of the lease? Multiple choice question. Trade fixtures Concessions Anchors

trade fixtures

In developing a site plan for a large land development, the land planner will be concerned with: Multiple select question. traffic flows optimal use and preservation of the site utility systems drainage systems flowerbeds, ground covers and sign character aesthetics

traffic flows optimal use and preservation of the site utility systems drainage systems aesthetics

Many warehouse properties are leased to single tenants on a Multiple choice question. triple net lease basis net-net basis net basis long term (greater than 5-year) basis

triple net lease basis

A lease in which the tenant pays local property taxes, hazard insurance, and all utility and maintenance expenses is typically termed a(n): Multiple choice question. pay-back lease net lease triple-net lease lease enhancement

triple-net lease

True or false: A co-tenancy clause is generally intended to provide protection for one of the smaller tenants in a shopping center.

true

True or false: An apartment complex held as an investment is classified under current law as trade or business property.

true

True or false: If adaptive reuse seems warranted, the current use must not be the highest and best use.

true

True or false: In contrast to apartment owners, office property owners usually find a leasing broker or an in-house leasing agent to search for potential tenants and negotiate leases because of the complexity of leasing.

true

True or false: Net taxable losses from the sale of Section 1231 assets are deductible without limit against other sources of income, including wage and salary income.

true

True or false: Owners of commercial real estate must understand they are involved in a service business.

true

True or false: Part of effective communication requires the property manager to try and determine the frequency with which she should communicate with the property owner (or the owner's asset manager)

true

True or false: Per the property management agreement, renovation, and modernization decisions typically require the owner's approval.

true

True or false: Shopping center leases typically regulate the business hours of tenants.

true

True or false: Tax shelter is derived primarily from depreciation deductions.

true

True or false: The primary tax credit opportunity available to real estate investors in nonresidential buildings is for rehabilitation of older historic structures.

true

True or false: Valid and enforceable lease agreements must be in writing.

true

True or false: With a fully-taxable sale, the full amount of the calculated taxable gain is recognized for tax purposes in the year of the sale.

true

We can identify eight steps in the development process once a specific _____ has been chosen for a specific _____.

use, site

The allocation of the original cost basis to land may be done by: Multiple select question. using the allocation estimated by an independent appraiser using the allocation estimated by the local property tax assessor assuming 100% debt financing assuming land does not depreciate

using the allocation estimated by an independent appraiser using the allocation estimated by the local property tax assessor

_______________ generally require less management effort than other types of commercial property. Multiple choice question. shopping centers Warehouses Hotels Office properties

warehouses

When calculating taxable income from operations, capital expenditures must be added back to NOI Multiple choice question. when tax depreciation is greater than interest expense when an above-line treatment of capital expenditures was used to calculate NOI when a below-line treatment of capital expenditures was used to calculate NOI when capital expenditures were added to EGI in the calculation of NOI

when an above-line treatment of capital expenditures was used to calculate NOI

The annual depreciation rate for office buildings is 0.02564 (1/39). However, the allowable depreciation rate in the first year of operations Multiple choice question. will be less than 0.02564 will be greater than 0.02564 will be equal to 0.02564

will be less than 0.02564

A neighborhood shopping center's trade area is typically Multiple choice question. within a 2-3 mile radius of the center within a 3-6 mile radius of the center determined by the popularity of the anchor tenant within a 20 radius of the center

within a 2-3 mile radius of the center

In economics, the term "Pareto Improvement" is defined as an action done in an economy that harms no one and helps at least one person. Sale-leasebacks are likely to be a Pareto improvement for the current owner because, as a tenant the firm: Multiple select question. would enjoy tax benefits from annual depreciation deductions. would enjoy 100% financing. can use the real estate as a collateral for debt financing. can focus entirely on their core business.

would enjoy 100% financing. can focus entirely on their core business.