Chapter 12 Site and Building Analysis of the Real Estate Investment

Question 1

List the four stages, in order, of a property life cycle.

Answer 1

development
routine administration
modernization/rehabilitation/conversion
demolition

Question 2

What are some examples of special-use properties

Answer 2

airport facilities
banks
bowling alleys
parking garages
gas stations
hospitals

Question 3

During a building’s life cycle, what is a characteristic of the routine administration phase?

Answer 3

It is typically the longest phase and one of stabilized investment. If properly managed during this life cycle phase, the investment will operate at maximum efficiency.

Question 4

When looking at economic feasibility, which growth trend has the strongest impact and is the most predictable?

Answer 4

Local trends

Question 5

What are the five criteria involved in physical analysis and feasibility?

Answer 5

marketability
functionality
age
renovation
appropriateness

Question 6

List the four categories (or forces that create them) that are part of the physical analysis.

Answer 6

legal/regulatory factors
base building factors
tenant space factors
organizational characteristics of tenants or occupants

Question 7

Define absorption rate.

Answer 7

The rate at which properties for sale or lease can be marketed within any given market.

Question 8

Stages of a property life cycle include all of the following EXCEPT:

a. development
b. routine administration
c. modernization/rehabilitation/conversion
d. marketing

Answer 8

d. marketing

Question 9

Long-term interest rate loans and heavy front-end investments can be expected for a company that:

a. occupies the building it owns
b. leases to many small tenants
c. leases several smaller buildings
d. handles general use property

Answer 9

a. occupies the building it owns

Question 10

A type of improvement that generally fails to contribute to a property’s market value is:

a. landscaping
b. a drainage system
c. curbing and walkways
d. tenant improvements

Answer 10

a. landscaping

Question 11

In leasing, physical and spatial flexibility become more important as:

a. utility rates increase
b. churn rates decrease
c. space holding decrease
d. space holdings increase

Answer 11

d. space holdings increase

Question 12

Briefly describe the organizational posture of a landlord renting space to others.

Answer 12

A landlord is more likely to invest heavily in base building system such as HVAC, electrical, and communications. A landlord is more likely to finance those purchases which cannot be passed on to tenants.

Question 13

The factor that tends to have the GREATEST impact on improved real property:

a. current economic trends
b. the political climate
c. local trends
d. national trends

Answer 13

c. local trends

Question 14

Briefly describe the organizational posture of an owner/occupant.

Answer 14

It depends on where a company is in its overall business cycle and the durability of its market presence. We invest more in a building that we intend to occupy for a long time.

Question 15

What does a title search show in regard to a property’s physical feasibility?

Answer 15

It can show whether there are any restrictions on what the property can be used for.

Question 16

In studying a property’s physical feasibility, the BEST way to confirm the existence of easements and rights-of-way is to consult the:

a. scaled survey as-built drawing
b. feasibility consultant’s report
c. landscaping plan
d. title search

Answer 16

d. title search

Question 17

What should be kept in mind during the improvement analysis process?

Answer 17

regulations and code compliance
the quality of materials
workmanship
design of the improvement

Question 18

What is one of the most helpful items when inspecting a property’s site and improvements (site survey) for feasibility?

Answer 18

A civil engineer’s or a land surveyor’s scaled drawing survey as-built drawing of the site and improvements. The drawings should indicate where the land and improvements are and what they should include, easements, ingress and egress points, drainage catch basins, etc.

Question 19

An example of a special-use property is a(n):

a. office warehouse
b. apartment building
c. shopping center
d. parking garage

Answer 19

d. parking garage

Question 20

During physical feasibility, a building is examined room by room to determine:

a. interior functions
b. project relationships
c. design drawings
d. improvement size

Answer 20

a. interior functions

Question 21

Name some properties that might be considered in the general use category.

Answer 21

apartment buildings
freestanding retail stores
shopping centers
multi-tenant industrial buildings
multi-tenant office buildings
warehouses

Question 22

How is physical feasibility determined?

Answer 22

By systematically evaluating the site and improvements of any property being acquired, developed, or renovated.