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Quiz: Can you pass the real estate quiz designed by Wharton grads?

National
National
August 18, 2016 Alec Berkman, Bisnow

Do you eat, sleep and breathe commercial real estate? Do all your colleagues seek your advice on how to structure a deal? Does your professional network look to you for expert market analysis and insights? And do friends defer to you with their burning CRE questions?

Take our quiz to see if you’re qualified to be doling out wisdom, and refer to our suite of educational videos to accumulate some more to become a certified CRE guru! We partnered with esteemed Wharton professor of real estate, finance and public policy Peter Linneman to bring you these 11 engaging videos, which collectively provide a comprehensive overview of the industry. 

1

Which of the following concerning unsubordinated ground leases is false?

Which of the following concerning unsubordinated ground leases is false?

In the case of default, ground and property reverts to ground lease holder and any extra proceeds are distributed among lenders and equity holders.
Ground leases are often 99 years in duration with rates adjusted to market.
Borrowing power is attenuated compared to land and building ownership scenarios.
One cannot put a mortgage in place superior to the ground.
Their cash streams aren’t as safe as first mortgages, but yields are relatively high.

YOU'RE CORRECT!

Brush up on a number of CRE topics with our broad, all-encompassing Everything You Wanted To Know About Real Estate But Were Too Afraid To Ask video.

YOU'RE WRONG!

Brush up on a number of CRE topics with our broad, all-encompassing Everything You Wanted To Know About Real Estate But Were Too Afraid To Ask video.

2

Which assertion regarding fixed and floating interest rates is false?

Which assertion regarding fixed and floating interest rates is false?

A swap can convert a floating obligation to a fixed obligation.
Interest rates tripled from 6% to 18% in 1981.
Floating rates often take the form of LIBOR, which is variable, plus some fixed number of basis points.
All lenders are required to offer both floating and fixed interest rates.
The yield curve is generally positively sloped.

YOU'RE CORRECT!

Watch our Real Estate Finance video to learn more.

YOU'RE WRONG!

Watch our Real Estate Finance video to learn more.

3

All of the following are true EXCEPT:

All of the following are true EXCEPT:

Wealthy families and REITs more successfully weathered the financial crisis because they use less debt.
Failing anchors can sink a shopping center.
Entrepreneurs typically use less debt in an attempt to take full advantage of the upside of a prospective deal.
Investors often choose bad partners because they feel they'll miss the opportunity to close a time-sensitive deal.

YOU'RE CORRECT!

Want to learn How To Invest Personally In Commercial Real Estate?

YOU'RE WRONG!

Want to learn How To Invest Personally In Commercial Real Estate?

4

Which statement about property valuation is true?

Which statement about property valuation is true?

Analyzing comparable buildings allows individuals to approximate their own property value, and is referred to as a relative valuation strategy.
Discounted cash flow is the most preferred intrinsic valuation method.
Land is typically considered the most volatile component of cost.
All the above

YOU'RE CORRECT!

For further insight into the intricacies of property valuation, click here.

YOU'RE WRONG!

For further insight into the intricacies of property valuation, click here.

5

Which of the following claims is false?

Which of the following claims is false?

Everyone agrees on what constitutes an A, B and C property, and the features and criteria are consistent across geographies and time.
Land, location, traffic flows, people flows, safety, neighborhood and amenities are all considerations in every asset class, and each contributes to property value. Values are subject to market forces and dependent on economic variables that impact each class differently.
Although new construction augments available supply, it’s often insufficient to check prices in an overheated market.
Areas characterized as industrial, dominated by warehouses, can evolve into hip and chic residential neighborhoods as buildings are repurposed.

YOU'RE CORRECT!

Every real estate professional should have a finger on the pulse of Real Estate Asset Classes And What Makes Them Special.

YOU'RE WRONG!

Every real estate professional should have a finger on the pulse of Real Estate Asset Classes And What Makes Them Special.

6

Which of the following is not a characteristic of mezzanine debt?

Which of the following is not a characteristic of mezzanine debt?

It can be structured as debt or preferred stock.
It is more frequently used by smaller companies and is typically accompanied by more leverage.
Lenders charge higher interest rates to compensate for added risk.
It’s superior to a first mortgage.

YOU'RE CORRECT!

Here's a video with a wealth of knowledge on How To Use Debt Correctly.

YOU'RE WRONG!

Here's a video with a wealth of knowledge on How To Use Debt Correctly.

7

What did not contribute to the rise of institutional money?

What did not contribute to the rise of institutional money?

ERISA (Employment Retirement Income Security Act)
Employers taking incremental amounts out of the paychecks of a lot of people
The financial crisis of 2007-08
The growth of pension funds
The advent of sovereign wealth funds

YOU'RE CORRECT!

Learn about harnessing it and other forms of capital by reviewing our guide to Entrepreneurial Real Estate Moves.

YOU'RE WRONG!

Learn about harnessing it and other forms of capital by reviewing our guide to Entrepreneurial Real Estate Moves.

8

Which of these acronym/word pairings is incorrect?

Which of these acronym/word pairings is incorrect?

LTV – Loan To Value
FAR – Floor Area Ratio
NOI – Net Operating Income
FFO – Funds From Overhead
PIK – Payment In Kind

YOU'RE CORRECT!

Become fluent with the Rosetta Stone of CRE, Real Estate Jargon Explained.

YOU'RE WRONG!

Become fluent with the Rosetta Stone of CRE, Real Estate Jargon Explained.

9

When firms consider whether they should buy or lease property, deploying the greater sum of money required to purchase property is only justified if the profit on the real estate is expected to exceed the core business’ rate of return, all else being equal.

When firms consider whether they should buy or lease property, deploying the greater sum of money required to purchase property is only justified if the profit on the real estate is expected to exceed the core business’ rate of return, all else being equal.

True
False

YOU'RE CORRECT!

You know you want to check out The Most Gripping, Compelling And Tantalizing Questions Of Real Estate.

YOU'RE WRONG!

You know you want to check out The Most Gripping, Compelling And Tantalizing Questions Of Real Estate.

10

A negotiation represents all of the following except:

A negotiation represents all of the following except:

A compromise, marking the inception of a relationship that necessitates each party feel comfortable with its partners.
War, with a clearly defined winner and loser, the winner being the party that knows how to employ negotiating strategies and skills to come out on top.
A final opportunity to vet, assess and even reconsider the partners one’s engaging in the deal.
A meeting of individuals often with varying negotiating experience levels and styles (the analytical, the passionate, the bullying, etc.) who all must convene to reconcile their conflicting goals.

YOU'RE CORRECT!

Our final video teaches The Delicate Art Of Negotiation.

YOU'RE WRONG!

Our final video teaches The Delicate Art Of Negotiation.

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CONGRATULATIONS

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Contact Alec Berkman at alec.berkman@bisnow.com
Related Topics: Education, Mezzanine Debt, Capital Markets, Peter Linneman, ground lease, Quiz, Bisnow Quiz, Floating Rate, Fixed Rate, Property Valuation, Institutional Money