Introduction to Real Estate Pt II

Question 1

Describe a low build specification level office.

Answer 1

Utilizes existing landlord builds for fittings like ceiling arrangements, coupled with basic furnishings. Ideal for clients with lower CAPEX or those looking for a simple refresh.

Question 2

Describe a medium build specification level office.

Answer 2

Offers a budget-conscious upgrade, incorporating bespoke design elements while retaining much of the existing layout. Suitable for standard office spaces.

Question 3

Describe a high build specification level office.

Answer 3

Features the highest quality in furnishings and bespoke design details. This level is particularly suited for HQs or client-facing offices, where impression and functionality are paramount.

Question 4

What does take-up refer to?

Answer 4

“Take-up” refers to the amount of space that is newly occupied or leased over a specific period, with “gross take-up” representing the total space occupied regardless of any relocations or vacated spaces, while “net take-up” accounts for the net change in occupied space after considering movements from one space to another; for example, if you move from a 5,000 m² space to a new 5,000 m² space, your gross take-up is 5,000 m² and your net take-up is 0 m².

Question 5

What is considered a healthy vacancy rate?

Answer 5

Around 10%. Above that suggests oversupply. Below that suggests too little supply for the current demand.

Question 6

What is a warehouse?

Answer 6

A logistics warehouse is a type of commercial real estate property that is used for storage and distribution of goods.
Logistics warehouses are typically large, industrial buildings with a high ceiling and a large, open floor plan. They are designed to store and organize large quantities of goods and products and may have loading docks and other facilities for loading and unloading vehicles.

Question 7

What are the 3 characteristics that a warehouse must have?

Answer 7

Free interior height, loading docks, and sufficient yard depth.

Question 8

What are the 5 types of warehouses?

Answer 8

1) Public warehouses: open to anyone to rent storage space.
2) Refrigerated warehouses: special cooled-down warehouses for medical/pharma/perishable product storage.
3) Automated warehouses: use automated systems such as conveyor belts, to move and store goods.
4) Cross-dock warehouses: designed for the efficient transfer of goods from one mode of transportation to
another, such as from a truck to a train or from a ship to a truck.
5)Bonded warehouses: are approved by customs authorities for the storage of goods that are being imported or exported.

Question 9

Describe a retail real estate property.

Answer 9

Retail real estate assets are commercial properties that are leased to retailers or other businesses that sell goods or services directly to consumers.
These properties can include standalone retail stores, shopping centers, and malls. Retail real estate assets can be owned by individuals, companies, or organizations, and they generate income through the leasing of space to tenants.

Question 10

Describe a hospitality real estate property.

Answer 10

Properties that are used for the accommodation of travelers and tourists, such as hotels, resorts, and bed and breakfast establishments.
They generate income through the rental of rooms and other amenities to guests.
Hospitality real estate assets can also include restaurants, bars, and other food and beverage outlets that serve travelers and tourists.

Question 11

List the 6 types of hospitality properties.

Answer 11

1) Hotel, 2) Motel, 3) F&B, 4) Resorts, 5) Camping, 6) Branded Residence

Question 12

Describe a hotel property.

Answer 12

A hotel is an establishment whose primary business is to provide lodging facilities to a genuine traveler along with food, beverage, and sometimes recreational facilities too on a chargeable basis. Generally, for short-term rentals.

Question 13

What are the 8 categories by which we can categorize hotels?

Answer 13

1) Star rating,
2) Size,
3) Type of clientele,
4) Level of services,
5) Heritage,
6) Location,
7) Duration of stay,
8) Ownership.

Question 14

What are branded residences?

Answer 14

Branded residences are residential development products available for purchase and rent that are affiliated, usually by design and servicing, to a well-known hotel brand.

Question 15

What are the 2 types of services provided in branded residences? Describe both.

Answer 15

Base services, such as security, parking, SPA, restaurants, wake-up calls, travel experiences…
On-demand services, such as pet services, personal trainers, childcare, housekeeping, laundry services…

Question 16

Define a recreational property.

Answer 16

Recreational are very specialized uses, usually associated with retail space that complements the recreational activity (e.g., golf shops, stadiums, etc.).

Question 17

Define an institutional property.

Answer 17

Institutional is a general category for property that is used by a special institution such as a government agency, a hospital, or a university.

Question 18

What are the 6 phases of real estate development and how long do they approximately take?

Answer 18

1) Pre-purchase (15-30 days) - teaser, exclusivity period then NBO/LOI.
2) Negotiation and purchase. DD and then SPA. (2-4 months).
3)Town planning/ development approval (12-18 months).
4) Pre-construction (3-4 months).
5) Construction (6-48 months).
6) Sales and marketing (3-12 months).

Question 19

What are the 4 risk categorizations of real estate assets? List them from lowest to highest risk/return.

Answer 19

Core, core plus, value-ad, and opportunistic.

Question 20

What is the relationship between yields and prices? Explain.

Answer 20

Yields and price are inversely related. The higher the yield the lower the price you are willing to pay. Low yields are for low-risk investors that pay a higher price for less risk.

Question 21

Define core risk investments.

Answer 21

Stabilized, 90% leased properties, located in primary markets with no need for significant upgrades. Population and average rents are expected to rise. Less risk and generally yield lower investment returns.

Question 22

Define core plus risk investments.

Answer 22

75-90% leased, primary or secondary markets, need of some moderate capital expenditure. With expiring leases and upgrades, rent can be increased moderately, presenting an upside for investors with limited business plan risk.

Question 23

Define value-ad risk investments.

Answer 23

Located in primary, secondary, or tertiary markets, major upgrades are needed. Much like value stocks, these assets are underpriced for their potential and therefore produce low initial returns but can deliver substantial upside if upgrades are effective.

Question 24

Define opportunistic investments.

Answer 24

Opportunistic is the riskiest of all real estate investment strategies. It is also synonymous with
‘growth’ in the stock market, like ‘value-add,’ but it is even riskier. It also includes ground-up developments. As such, these project types can carry both significant upsides and downsides.