Term
| From 1985 to 2006 which security produced the highest returns? x |
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Definition
- Equity REIT
- S&P 500
- Corporate Bond
- NCREIF
- CPI
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Term
| Coefficient of Variation x |
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Definition
| the standard deviation of returns divided by the mean return....risk to reward ratio and it is intended to relate total risk, as represented by the standard deviation, to the mean return with the idea of determining how much return an investor could expect to earn relative to the total risk taken if the investment was made |
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Term
| What does a coefficient of variation of 1.5 mean? x |
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Definition
| this may be interpreted as taking 1.5 units of risk for every unit of return that is earned |
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Term
| What has a better risk adjusted return? EREIT or NCREIF?...and why? x |
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Definition
NCREIF.....
- does not include leverage
- appraised values thus smoothed
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Term
| Coefficient of correlation x |
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Definition
used to obtain this relative measure or extent to which one set of numbers moves in the same or opposite direction with another series
+1 to -1 |
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Term
| What statistical concept do many portfolio managers use to represent risk when considering investment performance? x |
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Definition
The standard deviation (square root of the variance) of returns is typically used as a measure of risk.
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Term
| What is the difference between covariance and correlation? Why are these concepts so important in portfolio analysis? x |
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Definition
Correlation is calculated by dividing the covariance of two returns by the product of the standard deviation of the two returns. Both measure the degree to which returns move together over time. The advantage of the correlation coefficient is that it always ranges from -1 to +1 which makes it easier to compare for different investment alternatives.
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Term
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Definition
| document executed by the director of planning authorizing the construction, restoration, alteration, repair etc. of a structure and acknowledging that it conforms to requirements under the applicable zoning ordinance |
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Term
| When a permanent lender makes a take out commitment....that lender x |
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Definition
| literally is taking out the construction lender and releasing that lender from any further lending responsibility |
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Term
| Standby commitments are used when.. x |
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Definition
- when the developer cannot or does not want to pay fees to obtain a perm
- the borrower expects to find a perm loan elsewhere after construction for better terms
- the developer is planning to sell the project upon completion
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Term
What contingencies are commonly found in permanent or take-out loan commitments? Why are they used? What happens if they are not met by the developer? x
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Definition
Contingencies commonly found in permanent or take-out loan commitments include:
1) a maximum amount of time to obtain a construction loan commitment
2) a date for completion of construction,
3) minimum rent-up (leasing) requirements and an approval of major leases
4) an expiration date of the permanent loan commitment and any provisions for extensions, and
5) an approval by the permanent lender of design changes and substitution of any building materials.
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Term
| What is the difference between the assignment of a take-out commitment to the construction lender and a triparty agreement? If neither device is used in project financing, what is the relationship between lenders in such a case? x |
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Definition
The tri-party buy-sell agreement goes beyond the assignment of the take-out commitment and provides that the permanent lender will notify the interim lender that the take-out commitment is in full effect, that the permanent lender will indicate whether all necessary plans and documents have been reviewed and approved prior to closing the construction loan, and that the permanent lender will provide the construction lender with notice of any violations in the terms of the loan commitment by the developer and the time available to cure such a violation.
In the absence of either assignment of the take-out commitment or a triparty buy-sell agreement, the construction lender has no way to force the developer to close on the permanent loan and repay the construction loan.
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Term
REITs pay taxes on their earnings
T/F x |
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Definition
| False...but the distributed earnings do represent dividend income to its shareholders and are taxed accordingly |
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Term
| Asset requirements of a REIT x |
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Definition
- 75% of assets must consist of real estate assets, cash, and government securities
- Not more than 5% of the value of the assets may consist of the securities of any one issuer if the securities are not includable under the 75% test
- A REIT may not hold more than 10% of the outstanding voting securities of any one issuer if those securities are not includable under the 75% test
- Not more than 20% of its assets can consist of stocks in taxable REIT subsidiaries
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Term
| Income Requirements of a REIT x |
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Definition
- At least 95% of the entity's gross income must be derived from dividends, interest, rents, or gains fro the sale of certain assets
- At least 75% of gross income must be derived from rents, interest on obligations secured by mortgages, gains from the sale of certain assets, or income attributable to investments in other REITs
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Term
| Stock and Ownership requirements of a REIT x |
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Definition
- Be taxable as a corporation
- Be managed by a board of directors or trustees
- Have shares that are fully transferable
- Shares in a REIT must be transferable and must be held by a minimum of 100 persons
- No more than 50% of REIT shares may be held by 5 or fewer individuals during the last half of the taxable year
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Term
| What was the main change that occurred from the 1986 tax reform? x |
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Definition
| REIT managers have the ability to internalize management/operations, creating a vertically integrated company |
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Term
| "signed leases scheduled to commence" x |
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Definition
| REIT is currently including the effect of leases not taking effect until a future date |
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Term
| Accounting issues to be wary of....x |
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Definition
- Tenant improvements that are capitalized and depreciated thus not accounted for in the FFO
- Leasing commissions depreciated over the life of the property thus not accounted for in the FFO
- Long term leases are averaged and in the event of a step up lease the FFO will be overstated early and understated late
- Third party management income is highly variable
- Interest rate risk on ARMs
- Advantages and disadvantages of ground leases
- Leased space vs Occupied space
- What is included in sales per square foot?
- Additional costs of going public
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Term
Explain how an investor in an equity REIT may receive a current dividend, part of which may be tax-deferred. x
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Definition
Part of the dividend paid by a REIT may represent “return of capital.” This can occur when the dividends per share exceeds earnings per share.
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