power point class 3

Question 1

Property taxes

Answer 1

levied by local governments on privately held real estate on an “ad valorem” (according to value) basis

Largest source of local government revenue

Reliable and countercyclical

Many taxing authorities

Question 2

taxing authorities

Answer 2

▪ City
▪ Improvement districts
▪ County
▪ Transportation authorities
▪ Schools
▪ Water management districts

Question 3

Can property taxes reduce property value?

Answer 3

yeeee

Question 4

Can a well-used property tax increase property values?

Answer 4

???

Question 5

determination of property tax rates in Montreal for residential properties containing 5 housing units or less

Answer 5

%1.1252

Question 6

determination of property tax rates in Montreal for apartment buildings with 6 or more units

Answer 6

%1.2713

Question 7

How large is the Commercial Real Estate market?

Answer 7

$12.6 trillion

Question 8

Forms of Ownership for Pooled Equity

Investments

Answer 8

▪ General partnership
▪ Limited partnership
▪ C corporation
▪ S corporation
▪ Limited liability company
▪ REIT

Question 9

why do investors almost always pool their equity capita?

Answer 9

Due to large size of typical RE investments

Question 10

Advantages of Pooling Equity

Answer 10

▪ Allows investors to purchase an interest in larger properties

▪ Diversification of portfolio

▪ Economies of scale in acquisitions, management and disposition

▪ Access to cheaper debt capital

▪ Expertise of management team hired by syndicator/organizer

Question 11

Disadvantages of Pooling Equity

Answer 11

Usually must relinquish management control to active sponsor/organizer

Must compensate sponsor/organizer with fees, salary &/or disproportionate share of equity ownership

–> lower return on equity, holding CFs constant

Question 12

Commercial Real Estate (CRE)

Answer 12

▪ Properties that have potentials to generate income.

▪ Making profit by renting it out (rental income) or holding it for reselling (price appreciation).

▪ Residential real estate purchase with the intent to generate income is usually considered as the commercial real estate property.

▪ Value varies a lot for properties in different locations.

▪ Management attention.

Question 13

Commercial Real Estate Types

Answer 13

▪ Office
▪ Industrial
▪ Retail
▪ Multi-family (Residential)
▪ Hospitality (Hotel)
▪ Others

Question 14

Office

Answer 14

▪ Demand heavily depends on the job growth (e.g., finance companies and insurance companies)

▪ Single-tenant or multi-tenants

▪ Gross lease or net lease

▪ Low to intermediate management attention level

▪ Understand how leases are structured is important (Lecture 4).

Question 15

Industrial

Answer 15

▪ Demand heavily depends on the overall economy.
▪ Import and export activities also impact the demand.
▪ Net leases are common.
▪ Low management attention level

Question 16

types of industrial

Answer 16

▪ Manufacturing (e.g., heavy manufacturing and light assembly)

▪ Storage and distribution (e.g., warehouse)

▪ Flex space (flexibility in usage)

Question 17

Retail

Answer 17

▪ Demand heavily depends on consumer spending (overall economy, job growth, population growth, and saving rates).

▪ Percentage lease or percentage rent.
(e.g., minimum rent of $35 per sqft + 4% of sales over $500 per sqft)

▪ Intermediate management attention level

▪ Multi-tenant (retailers and restaurants)

▪ Anchor stores (e.g., Walmart)

Question 18

why do anchor stores pay less percentage of total rent in malls?

Answer 18

to attract more people to the mall

Question 19

Multi-family

Answer 19

▪ Demand depends on population growth. (age demographic: students, starters, and seniors)

▪ Cost of buying (e.g., prices and interest rates) also impact the demand. (Ratio of home prices to rents)

▪ Intermediate management attention level

Question 20

Hotel and Motel

Answer 20

▪ Demand depends on overall economy and consumer spending.

▪ Political policy and exchange rate also impact the demand

▪ High level of management attention (Day-to-day).

▪ Highest operating expenses.

Question 21

others (commercial RE types)

Answer 21

▪ Parking facilities

▪ amusement parks