Question 1

A bullet loan is a construction loan that,in effect,becomes permanent financing when construction is complete.

Accepted Answer

A) True 
 B)False  True

Question 2

When commercial banks consider construction loans their analysis is generally based on which of the following:

Accepted Answer

A) Hard costs,soft costs 
B) Hard costs,soft costs,site location 
C) Hard costs,soft costs,appraised value 
D) Hard costs,site location 
A) Hard costs,soft costs 
B) Hard costs,soft costs,site location 
C) Hard costs,soft costs,appraised value 
D) Hard costs,site location C

Question 3

Permanent financing commitments usually allow the lender to approve major leases.

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following is NOT one of the development strategies that may be used by developers?

Accepted Answer

A) Selling and leasing back the land for the development 
B) Owning and managing the real estate after sale 
C) Selling the real estate after lease-up phase 
D) Developing the real estate for lease in master-planned development 
A) Selling and leasing back the land for the development 
B) Owning and managing the real estate after sale 
C) Selling the real estate after lease-up phase 
D) Developing the real estate for lease in master-planned development

Question 5

Holdbacks are used by construction lenders to be sure that a developer has met all of his or her obligations before all of the funds from the construction loan are given to the developer.

Accepted Answer

A) True 
 B)False

Question 6

In general,developers must get a construction loan before they can line up permanent (long-term)financing that will be used once the project is complete and being operated with tenants.

Accepted Answer

A) True 
 B)False

Question 7

Generally,as the cost of a site increases,so do the quality and the density of the improvements constructed on it.

Accepted Answer

A) True 
 B)False

Question 8

In the context of a lease,percentage rents generally indicate that:

Accepted Answer

A) The tenant will pay a proportionate amount of rent for his space in comparison to the total net rentable area 
B) In addition to a base rent,the lessor will receive a percentage of the tenant's cash flow above some break even point 
C) The tenant will pay a rent that is a certain percentage of the national average 
D) None of the above 
A) The tenant will pay a proportionate amount of rent for his space in comparison to the total net rentable area 
B) In addition to a base rent,the lessor will receive a percentage of the tenant's cash flow above some break even point 
C) The tenant will pay a rent that is a certain percentage of the national average 
D) None of the above

Question 9

Consider the table above.An investor-developer demands a return of at least 9 percent on cost.Which of the following statements is TRUE based on the information above?

Accepted Answer

A) Neither project produces a sufficient expected return 
B) The 275 unit project produces a sufficient return,but the 300 unit project does not 
C) The 300 unit project produces a sufficient return,but the 275 unit project does not 
D) Both projects produce sufficient return,but the 275 unit project produces a higher return than the 300 unit project 
A) Neither project produces a sufficient expected return 
B) The 275 unit project produces a sufficient return,but the 300 unit project does not 
C) The 300 unit project produces a sufficient return,but the 275 unit project does not 
D) Both projects produce sufficient return,but the 275 unit project produces a higher return than the 300 unit project

Question 10

Mini-perm loans usually refer to financing:

Accepted Answer

A) At local coffers 
B) For the lease-up period 
C) For construction and all subsequent periods 
D) For construction,lease-up,and one or two subsequent years 
A) At local coffers 
B) For the lease-up period 
C) For construction and all subsequent periods 
D) For construction,lease-up,and one or two subsequent years

Question 11

Which of the following is FALSE regarding a construction loan?

Accepted Answer

A) It usually has a lower rate than does permanent financing 
B) It is also known as an interim 
C) Hard costs can usually be financed 
D) The entire land cost cannot usually be financed 
A) It usually has a lower rate than does permanent financing 
B) It is also known as an interim 
C) Hard costs can usually be financed 
D) The entire land cost cannot usually be financed

Question 12

What term applies to third-party financing that is used between funds advanced by the permanent lender and funds needed to repay the construction loan?

Accepted Answer

A) Interim loan 
B) Mini-perm financing 
C) Gap financing 
D) Partial financing 
A) Interim loan 
B) Mini-perm financing 
C) Gap financing 
D) Partial financing

Question 13

Commitments for construction financing are usually contingent on commitments for permanent financing.

Accepted Answer

A) True 
 B)False

Question 14

Loans made under the assumption that markets will turn around are referred to as spec loans.

Accepted Answer

A) True 
 B)False

Question 15

Lenders typically finance the development of a project as a percentage of completed appraised value,including the price of the site.

Accepted Answer

A) True 
 B)False

Question 16

The MOST common method of distributing funds provided by a construction loan is a:

Accepted Answer

A) Single lump sum of money at the closing of the loan 
B) Single lump sum of money at the end of the construction project to reimburse the developer for the project's expenses and profit 
C) Series of payments throughout the construction project to reimburse the developer for costs incurred since the previous payment 
D) Series of payments throughout the construction project to reimburse the developer for anticipated expenses in the upcoming period 
A) Single lump sum of money at the closing of the loan 
B) Single lump sum of money at the end of the construction project to reimburse the developer for the project's expenses and profit 
C) Series of payments throughout the construction project to reimburse the developer for costs incurred since the previous payment 
D) Series of payments throughout the construction project to reimburse the developer for anticipated expenses in the upcoming period

Question 17

Besides an estimate of costs,a construction loan submission package includes many other components.Which of the following is NOT one of those components?

Accepted Answer

A) Two years of prior tax returns 
B) Current financial statements 
C) Pro Forma Operating Statements 
D) Ratio and Sensitivity Analysis 
A) Two years of prior tax returns 
B) Current financial statements 
C) Pro Forma Operating Statements 
D) Ratio and Sensitivity Analysis

Question 18

A standby commitment differs from a permanent take-out commitment in that neither party really expects the standby commitment to be used by the developer.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following common contingencies is NOT usually included with a permanent financing agreement?

Accepted Answer

A) Completion date for construction phase 
B) Minimum rent-up requirements 
C) Materials used in construction phase 
D) Cleanliness of work area 
A) Completion date for construction phase 
B) Minimum rent-up requirements 
C) Materials used in construction phase 
D) Cleanliness of work area

Question 20

Which of the following is the usual progression for a real estate development project?

Accepted Answer

A) Land acquisition,completion,management,sale,construction 
B) Land acquisition,construction,completion,management,sale 
C) Land acquisition,construction,completion,sale,management 
D) Land acquisition,management,construction,completion,sale 
A) Land acquisition,completion,management,sale,construction 
B) Land acquisition,construction,completion,management,sale 
C) Land acquisition,construction,completion,sale,management 
D) Land acquisition,management,construction,completion,sale

Exam 16: Financing Project Development

A bullet loan is a construction loan that,in effect,becomes permanent financing when construction is complete.

When commercial banks consider construction loans their analysis is generally based on which of the following:

Permanent financing commitments usually allow the lender to approve major leases.

Which of the following is NOT one of the development strategies that may be used by developers?

Holdbacks are used by construction lenders to be sure that a developer has met all of his or her obligations before all of the funds from the construction loan are given to the developer.

In general,developers must get a construction loan before they can line up permanent (long-term)financing that will be used once the project is complete and being operated with tenants.

Generally,as the cost of a site increases,so do the quality and the density of the improvements constructed on it.

In the context of a lease,percentage rents generally indicate that:

Consider the table above.An investor-developer demands a return of at least 9 percent on cost.Which of the following statements is TRUE based on the information above?

Mini-perm loans usually refer to financing:

Which of the following is FALSE regarding a construction loan?

What term applies to third-party financing that is used between funds advanced by the permanent lender and funds needed to repay the construction loan?

Commitments for construction financing are usually contingent on commitments for permanent financing.

Loans made under the assumption that markets will turn around are referred to as spec loans.

Lenders typically finance the development of a project as a percentage of completed appraised value,including the price of the site.

The MOST common method of distributing funds provided by a construction loan is a:

Besides an estimate of costs,a construction loan submission package includes many other components.Which of the following is NOT one of those components?

A standby commitment differs from a permanent take-out commitment in that neither party really expects the standby commitment to be used by the developer.

Which of the following common contingencies is NOT usually included with a permanent financing agreement?

Which of the following is the usual progression for a real estate development project?

Real Estate Investment: Basic Legal Concepts

Real Estate Financing: Notes and Mortgages

Mortgage Loan Foundations: The Time Value of Money

Fixed Interest Rate Mortgage Loans

Adjustable and Floating Rate Mortgage Loans

Mortgages: Additional Concepts, analysis, and Applications

Single-Family Housing: Pricing, investment, and Tax Considerations

Underwriting and Financing Residential Properties

Income-Producing Properties: Leases, rents, and the Market for Space

Valuation of Income Properties: Appraisal and the Market for Capital

Investment Analysis and Taxation of Income Properties

Financial Leverage and Financing Alternatives

Risk Analysis

Disposition and Renovation of Income Properties

Financing Corporate Real Estate

Financing Land Development Projects

Structuring Real Estate Investments: Organizational Forms and Joint Ventures

The Secondary Mortgage Market: Pass-Through Securities

The Secondary Mortgage Market: Cmos and Derivative Securities

Real Estate Investment Trusts Reits

Real Estate Investment Performance and Portfolio Considerations

Real Estate Investment Funds: Structure, performance, benchmarking, and Attribution Analysis

Filters