Real Estate Asset Market Quiz

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What are the three options the landlord offers for paying the lease?

Option A: Pay yearly market rent for the first 3 years, Option B: Pay fixed yearly rent for 6 years, Option C: Pay lumpsum premium at the start of the 6-year lease

What is the Direct Income Capitalization Method used for?

Capitalize a single year income using an overall cap rate.

How is the Capital Value calculated using the Direct Income Capitalization Methodology?

Capital Value = Stabilised NOI Price x 100% / Cap Rate

What is the valuation approach used in the Income Approach to Valuation?

Discounted Cash Flow Method (DCF) Signup and view all the answers

How did the covid pandemic affect the demand for retail properties?

Decreased demand due to lockdowns and restrictions on businesses. Signup and view all the answers

What does NOI stand for in the context of valuation?

Net Operating Income Signup and view all the answers

How did the covid pandemic affect the demand for office properties?

Decreased demand due to remote work and office space downsizing. Signup and view all the answers

In the illustration provided, what was the market NOI of Factory C?

$48,000 Signup and view all the answers

How did the covid pandemic affect the demand for hotels?

Decreased demand due to travel restrictions and reduced tourism. Signup and view all the answers

How did the covid pandemic affect the demand for apartments?

Varied, with some markets experiencing decreased demand due to economic downturn, while others saw increased demand for more space. Signup and view all the answers

Why do some investors prefer direct investment in real estate?

They value control over property management and potential for higher returns. Signup and view all the answers

How do real estate investments compare with investments in bonds, equities, gold, and bitcoin?

Real estate offers tangible assets, steady income, and potential for appreciation, while bonds offer fixed income, equities offer ownership in companies, gold is a store of value, and bitcoin is a digital asset with high volatility. Signup and view all the answers

What are some pros of direct real estate investment?

Security of income, capital appreciation, security of capital, hedge against inflation, financial leverage, diversification of risk, pride of ownership Signup and view all the answers

What are some global influences on the real estate market?

State of economy in major economies or major trading partner nations, currency exchange rates, geopolitical events, cross-border comparisons Signup and view all the answers

Why is forecasting and projections necessary in real estate investment?

Necessity of Forecasting and Projections, Inevitable since real estate is a long-term asset Signup and view all the answers

What are some key motivations in the development industry?

Feasibility Analysis, Development profits Signup and view all the answers

What are some uncertainties in real estate development?

Economic conditions Signup and view all the answers

What are the key considerations in the development industry?

Political and legal analysis, Demand cannot be met by existing supply, Physical and design analysis, Anticipated demand due to changing technology or new trends, Financial analysis, Cost of Land, Cost of Construction, Competition from other developers Signup and view all the answers

What is the monthly gross rent for shops with similar conditions in the immediate vicinity of shop B?

$5.50 psf Signup and view all the answers

If shop B had been leased to a tenant with a 5-year lease expiring in 3 years at a monthly gross rent of $4.50 psf, would the valuation be different?

Yes Signup and view all the answers

How is the value of the owner's interest in shop B affected by the tenant-occupied lease?

Lower Signup and view all the answers

How is the value of the lessee's leasehold interest in shop B affected by the tenant-occupied lease?

Higher Signup and view all the answers

If a potential buyer requires shop B to be delivered with vacant possession, what is the maximum amount the owner is prepared to buy over the tenant's leasehold interest?

Difference in value Signup and view all the answers

What principle underlies the Comparison Method of Valuation?

Principle of Substitution Signup and view all the answers

What is the fair hurdle rate of return from the theme park investment given the risk-free return from the SG government bond is 3%?

8.80% Signup and view all the answers

What is the exit cap rate also known as?

Going-out Cap Rate or Terminal Cap Rate Signup and view all the answers

What is the key to improving accuracy in valuation methods like DCF?

The quantity, quality, and reliability of data used in forecasting; and the thoroughness, competence, skill, and experience of the valuer Signup and view all the answers

What issues can arise with the DCF Valuation Method?

Unrealistic or biased numbers/inputs, mistakes in the numerators and denominators Signup and view all the answers

What is the purpose of the exit cap rate in investment valuation?

To estimate the terminal value by capitalizing the projected NOI immediately after the holding period Signup and view all the answers

What does DCF stand for in investment analysis?

Discounted Cash Flow Signup and view all the answers

How is the terminal value estimated in the DCF method?

By capitalizing the projected NOI using an exit cap rate Signup and view all the answers

Why is the exit cap rate highly sensitive in determining the terminal value?

It depends largely on the exit cap rate selected Signup and view all the answers

What is the Weighted Average Cost of Capital (WACC) formula?

WACC = (E/V) * Re + (D/V) * Rd * (1 - Tc) Signup and view all the answers

What does LTV ratio stand for in investment analysis?

Loan-to-Value ratio Signup and view all the answers