Question 1

When construction costs exceed the amount of the construction loan,a developer may seek to cover the gap using mezzanine financing.All of the following statements regarding mezzanine debt are true EXCEPT:

Accepted Answer

A) Mezzanine debt use is less expensive than normal construction financing 
B) Mezzanine debt use avoids dilution of equity returns 
C) Mezzanine debt use is less expensive than equity financing 
D) Mezzanine debt use avoids the foreclosure process in the case of default

Question 2

While uncertainties involving the multitude of players and stages in the development process provide a great deal of risk,market cycles tend to compound these risks.Out of the four phases of a market cycle,which would be the most desirable point for a developer to enter the market?

Accepted Answer

A) Trough 
B) Expansion 
C) Peak 
D) Decline

Question 3

While the risks of construction lending may be less in a number of respects than those associated with land acquisition,banks still require a premium in their lending rate as compensation for the risks involved.For construction loans,banks typically require a premium above LIBOR that ranges from:

Accepted Answer

A) 0-50 basis points 
B) 50-150 basis points 
C) 150-250 basis points 
D) 250-350 basis points

Question 4

The expertise of several types of engineers must be coordinated by the architect in bringing together the final structure design.Which of the following types of engineers is responsible for specifications to achieve safety and stability for a structure's foundation?

Accepted Answer

A) Soils engineer 
B) Structural engineer 
C) Mechanical engineer 
D) Civil engineer

Question 5

A developer's selection of an architect is a vital step in the development process as the architect fulfills a number of important roles throughout the life of the project.As compensation for contributions in the design phase,the architect is often given a percentage of the construction cost.For moderately complex designs,the average compensation will be:

Accepted Answer

A) 1 to 2% 
B) 3 to 7% 
C) 7 to 10% 
D) greater than 10%

Exam 23: Development: The Dynamics of Creating Value

When construction costs exceed the amount of the construction loan,a developer may seek to cover the gap using mezzanine financing.All of the following statements regarding mezzanine debt are true EXCEPT:

While uncertainties involving the multitude of players and stages in the development process provide a great deal of risk,market cycles tend to compound these risks.Out of the four phases of a market cycle,which would be the most desirable point for a developer to enter the market?

While the risks of construction lending may be less in a number of respects than those associated with land acquisition,banks still require a premium in their lending rate as compensation for the risks involved.For construction loans,banks typically require a premium above LIBOR that ranges from:

The expertise of several types of engineers must be coordinated by the architect in bringing together the final structure design.Which of the following types of engineers is responsible for specifications to achieve safety and stability for a structure's foundation?