HW 8 (test 3)

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The choice of ownership form for pooled equity investments depends heavily on federal tax considerations. Which of the following ownership structures suffers from the major disadvantage of double taxation?

C Corporation

There are a number of ways in which individual and institutional investors can hold investments in commercial real estate as a part of their portfolio. One way is to purchase and hold the title to the actual commercial property, which gives the owner complete control of the asset. This type of transaction would be considered which of the following?

Direct investment in private commercial real estate equity

An organizational structure in which a REIT is a managing partner and typically majority owner in an operating partnership, which in turn, owns all or part of individual property partnerships is more commonly referred to as a(n):

UPREIT

There are a set of restrictive conditions that REITs must satisfy on an ongoing basis in order to maintain their special tax status. All of the following statements regarding the main restrictions are true EXCEPT:

a REIT must distribute at least 75% of its taxable income to shareholders in the form of dividends.

If the per share stock price of a REIT is greater than its per share net asset value (NAV), the REIT is said to be selling at:

a premium

When measuring REIT income, the REIT industry recommends the use of which of the following earnings metrics?

funds from operations (FFO)

The choice of ownership form for pooled equity investments can also depend on the desire to avoid personal liability. Which of the following ownership structures suffers from the major disadvantage of unlimited liability for all investors?

general partnership

In contrast to public markets, private markets are characterized by individually negotiated transactions that take place without the aid of a centralized market. Therefore, private markets will generally have:

high transaction costs and low liquidity.

There are two major types of REITs: Equity REITs and Mortgage REITs. Each differs in terms of what they invest in. Which of the following choices best describes the investment focus of an Equity REIT?

invests primarily in and operates commercial properties

In recent years, a number of pooled ownership structures have emerged that have changed the analysis of ownership form selection for many investors. Which of the following ownership structures has become the preferred ownership form for many private real estate investors?

limited liability company

Commercial mortgage backed securities (CMBS) backed by government-sponsored enterprises (GSEs) consist entirely of mortgages from which of the following property types?

multifamily

Which of the following measures, equal to the estimated total market value of a REITs underlying assets, allows investors to compare the value of a publicly traded security to the value of the properties that it holds in the private market?

net asset value

In most small to medium private real estate deals, syndicators play important roles within the origination, operation, and completion phases of a real estate syndicate's life. All of the following are responsibilities of the syndicator in the operation phase of a syndicate's life EXCEPT:

prepare the properties for sale

Commercial mortgage backed securities (CMBS) can be classified based on whether or not they are issued or backed by a government agency. CMBS that are not issued or backed by a government agency or more commonly referred to as:

private label

The $14.3 trillion total market value of investible commercial real estate can be broken into four quadrants. Which of the following sectors of the commercial real estate market currently accounts for the largest proportion of market value?

privately held equity

When an investment manager acts on behalf of multiple clients, but handles each investor's assets independently, it is more commonly referred to as:

separate accounts

Ownership forms for pooled equity investment can differ in terms of how the entity's cash flows are distributed to its investors. Which of the following ownership structures requires cash flows to be allocated to each shareholder in proportion to his or her ownership of the entity, thereby preventing special allocations to multiple classes of investors?

subchapter S Corporation

Which of the following types of real estate private equity funds would you expect to invest in properties that have some lease-up risk and/or the need for moderate renovation or repositioning?

value added


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