Transactions Flashcards
(154 cards)
1
Q
Q: What is liquidity in real estate?
A
A: The ease and speed with which an asset can be bought or sold without affecting its price.
2
Q
Q: What are key dimensions of liquidity?
A
A: Turnover rate, time to transact, transaction costs, price impact, and return uncertainty.
3
Q
Q: Why is ‘time to transact’ important?
A
A: It increases uncertainty about when and how much cash will be received, increasing expected return volatility.
4
Q
Q: Why might a real estate asset be sold
A
A: Projected poor performance, strategic allocation, unsolicited offers, redemptions in open-ended funds.
5
Q
Q: What are “non-conforming” assets?
A
A: Assets that don’t fit an organization’s focus on region, sector, or lot size.
6
Q
Q: What are the phases in selling a property?
A
Phase 1 (Pre-marketing):
General decision to sell
Sub-sector decision
Specific asset decision
Instruction of agents and solicitors
7
Q
Q: What are the main stages in asset acquisition?
A
A: Search → Evaluation → Financial analysis → Bidding → Legal due diligence → Exchange → Completion.
8
Q
Q: Who is involved in the acquisition process?
A
A: Asset managers, agents, fund managers, researchers, clients.
9
Q
Front: Name five types of surveys included in due diligence.
A
back: Topographical, structural, contamination, air quality, and asbestos surveys.
10
Q
Front: What legal/title checks are part of due diligence?
A
Back: Ownership, boundary disputes, easements, planning permissions, and government restrictions.
11
Q
Front: What are key risks during real estate transactions?
A
Back: Market shifts, buyer funding issues, tenant insolvency, legal/title problems, or physical issues with the asset.
12
Q
Front: What are possible outcomes of transaction risk?
A
Back: Abortive transaction, delay, or price renegotiation.
13
Q
Front: What is the most common sale method for institutional-grade UK property?
A
Back: Non-binding informal tender (best bids).
14
Q
Front: What are the “three Rs” that help reduce broker misconduct?
A
Back: Repeat business, reputation, and risk of revelation.
15
Q
Front: What is ‘ramping’ in brokerage?
A
Back: Inflating the price to increase commission due to ad valorem fee structure.
16
Q
Front: What is meant by ‘last call’ in brokerage?
A
Back: Informing a buyer about other bids received, potentially limiting their bid.
17
Q
Front: Give an example of potentially unethical broker behavior.
A
Back: Providing private information about bids after the deadline.
18
Q
In the UK commercial real estate market, which of the following does not
seem to be a common practice among brokers representing the seller of a
real estate asset?
a) Providing early or not yet public information to one or more agents that
the asset that the selling agent has been instructed to sell will be on the
market imminently.
b) Providing ‘introductions’ to potential buyers about the availability of the
asset for purchase.
c) Providing private information to the agent of a potential buyer after the
bid deadline about the bids already received from other bidders.
d) Providing advice to the seller about potential execution risks associated
with potential buyers
A
B
19
Q
A purchaser’s legal due diligence on an acquisition tends to follow price agreement.
True/False
A
true
20
Q
Most institutional grade real estate assets in the UK are sold ‘off-market’.
A
false
21
Q
In the UK’s CRE market, typically only the seller is represented by an agent
A
false
22
Q
In the UK’s CRE market, there is often one month between exchange of contracts and
completion. True/False
A
true
23
Q
In most mature CRE markets, transactions typically and approximately take (please circle)
− 0-10 weeks
− 10-20 weeks
− 20-30 weeks
− 30-40 weeks
− 40-50 weeks
A
10-20
24
Q
In UK CRE markets, a bid made at an informal tender is usually binding True/False
A
false
25
In UK CRE markets, it is common for expert and experienced institutional investors to buy a
commercial property principal-to-principal without agents. True/False
False
25
Sale by auction is a common method of sale in many global commercial real estate markets.
True/False
False
26
Front: How do third-party property managers make money?
Fees per tenancy from landlords
Management fees via service charges
Additional landlord/tenant service fees
Cross-selling and supplier commissions
27
Front: What are controversial income sources for PM firms?
Back: Hidden profits like supplier commissions or admin fees not proportional to service provided.
28
Front: What are the three broad operational models for property management?
Fully insource PM, AM, and FM
Hybrid (outsourced PM, in-house AM/FM)
Fully outsource PM, AM, and FM
29
What is outsourcing in the context of property management?
Shifting internal functions to an external supplier via a long-term contract (Quelin & Duhamel, 2003).
30
Who are common third-party property management providers? (multi service, specalist, business processing outsource) example of each
Multi-service firms (e.g., CBRE, JLL)
Specialist PM firms (e.g., Mapp, Workman)
Business process outsourcing firms (e.g., Capita)
31
What type of tasks are most suitable for outsourcing?
Tasks that are routine, rule-based, commoditised, non-core, and easy to replicate.
32
What are the main motivations for outsourcing property management?
Flexibility and risk transfer
Accountability and quality control
Focus on core competencies
Economies of scale
33
What type of firms tend to outsource property management?
Back:
Multi-asset investors
Diversified portfolios
Organisations where PM is non-core
34
What are risks of outsourcing?
Loss of control and tenant relationships
Monitoring and principal-agent problems
Lock-in and supplier risk
Information leakage
35
What type of firms tend to insource property management?
Real estate location/sector specialists
REITs and traditional estates
Firms with stable, focused portfolios
36
What does property management influence in terms of performance?
Tenant satisfaction through cost and service quality; affects operational efficiency and alpha generation.
37
How do third party PM providers make money?
- cash fees
- management fees
- additional fees from tenants for processing licences
- additional fees from landlords for additional services eg health and saefty, lettings, rent reviews etc
- cross selling
commissions from suppliers
38
What are "conflicts and capture" risks in outsourcing?
Third-party goals may misalign with principal’s goals, leading to dependency, inefficiency, or higher costs.
38
Name five key considerations in the in/outsourcing decision.
Criticality of function
Internal competency and capability
Culture and coordination
Cost and flexibility
Control and competitive advantage
39
What are benefits of using a single PM supplier?
Streamlined communication
Cost efficiency
Single point of responsibility
Simpler system integration
40
What are the downsides of using one supplier?
Lock-in risk
Complacency or underperformance
Loss of market specialization
40
What are benefits of using multiple PM suppliers?
Competitive tension
Flexibility
Access to specialist expertise
Easier replacement of poor performers
41
Outsourcing tends to work better when
Asset are not specialised
– The tasks can be clearly defined
– The tasks are not sources of competitive advantage
– The functions being outsourced are relatively easy to
replicate
42
insources AM and FM but outsources PM examples
Insurance cos
Fund houses
Specialist real estate IM
Pension funds
Investment banks
Private equity
43
outsource all examples
SWFs
Family offices
Endowments
Foundations
Charities
44
is property managment a critical source of comp advantage?
basically yes for any REIT no for anything thats a global mutli asset investment managment firm, same applies with real estate investment managment eg La salle, aberdeen etc
45
Which of the following statements is false?
a) Real estate investment firms specialising in specific locations or submarkets are
likely to have deep networks of local occupier relationships, granular understanding
of micro-location dynamics and intimate knowledge of the local planning and
regulatory environment
b) Real estate investment firms specialising in shopping malls are likely to have a
sophisticated understanding of retailer operations and needs, expertise in optimising
tenant mix and placement, strong relationships with key retail tenants and
specialised marketing and events management capabilities.
c) Real estate investment firms specialising in specific locations or sectors are likely
to outsource the delivery of property management services in order to benefit from
the economies of scale that the global, multi-service real estate advisory firms can
potentially achieve.
d) Multi-asset investment firms with diversified real estate portfolios are likely to
outsource the delivery of property management services.
C
46
47
What are the key questions for contaminated assets?
Is the asset contaminated?
Has a risk assessment been carried out?
Who is responsible for remediation and third-party damages?
47
Front: What are types of environmental exposure in real estate?
Back:
Historic pollution
Current usage
Warranties and indemnities liabilities
48
What is the statutory test for contaminated land in the UK?
More than just the presence of contaminants—must involve significant harm or risk, pollution of controlled waters, and identification of an "appropriate person."
49
What are the financial performance risks associated with poor environmental performance?
Vacancy, higher management/operating costs, slower rental growth, and depreciation.
50
What are the key value determinants for real estate assets?
Location, market conditions, occupancy rate, spec, tenant/lease quality, age, costs, design, and environmental performance.
50
How does environmental performance affect operating costs?
It’s one of many interlinked factors; often difficult to isolate in statistical models.
51
What did Chegut, Eichholtz & Kok (2013) find about BREEAM-certified offices in London?
Rental premium: ~25%
Price premium: 17–36%
52
What is the “operating expense puzzle”?
Some studies find Energy Star buildings have higher, not lower, operating expenses—possibly due to usage patterns and data issues.
53
What does GRESB data show about REITs?
GRESB performance correlates with higher risk-adjusted returns
No link with abnormal stock returns
Positive effect on ROA and ROE
54
What are the three broad types of environmental action in real estate management?
Modify the building (capex/retrofit)
Modify building operations (opex)
Influence user/operator behavior (organizational)
55
Name three typical environmental management practices.
Optimizing HVAC and lighting use
Using green materials/service providers
Enhancing waste and energy efficiency
55
What are some low/no-cost interventions?
Reducing overcooling
Hot water scheduling
Demand-based HVAC control
55
What are key barriers to improving real estate environmental performance?
Costs and financing
Misaligned incentives
Weak technical knowledge
Lease limitations
Policy instability
Inertia and lack of awareness
56
What are emerging themes in environmental real estate management?
Resilience
Social value
Well-being and IEQ
Embedded carbon
IoT and smart building tech
ESG backlash
56
What is a split incentive in real estate?
When the party who pays for the improvement (e.g. landlord) does not reap the financial benefits (e.g. tenant energy savings).
57
What are standard capex projects that can be reframed as environmental improvements?
Major repairs
Refurbishments
System upgrades
These can align with sustainability goals and ESG compliance.
58
four stages of issue maturity
latent: aware of issue, weak evidence base
emerging: political and media awareness of issue
consolidating: emerging body of business practises and specialists professionals
increasing acceptance of regulation
instituionlised: embedded practises become a normal part of business excellence model
59
In their evaluation of MEES policy, which measures did the Department
for Energy and Climate Change project would have the highest uptake in
non-domestic buildings?
'improving' the lights
60
Which is the odd one out?
a) MEES
b) EPC
c) DEC
MEES is a policy instrment, the rest and manadtory energy ceritifcats
61
definition of real estate asset management
the strategic oversight of property assets to maximise their value and return on investment
61
key functions of asset management
Strategic Planning: Developing long-term plans to enhance asset value.
Financial Management: Budgeting, forecasting, and financial reporting.
Lease Management: Negotiating and managing tenant leases to optimize occupancy and rental income.
Capital Expenditure Oversight: Planning and supervising capital improvements.
Risk Management: Identifying and mitigating risks associated with property ownership.
Maximising Property Value: identifying opportunities for improvements/upgrades, efficient day-to-day operations, and strategic maintenance practices
61
what have long leases and the dominance of institutional ownership led to
culture of passive management
62
what is active REAM
significant asset class that needs to be managed
creates costs and opportunities
funds buy these assets as they are perceived as under managed and attempt to reposition them
62
key strategies for active management
- refurbishment and renovation
- repoisitioning
-operational efficiency
- tenant engagement
market anaylsis
62
what is a hurdle rate
minimum level of acceptable return on an investment
63
three types of investment projects
- core investment, cannot be altered by the manager in the future
- value added or opportunistic, can be altered by the manager
- strategic interactions, market participants might go for an option for low ROI eg two developers open a shopping centre but only the first will be profitable
64
what is the vulture approach (risks)
very high risk high reward
65
value lever: tenant mix, core value add
single tenant -> mutiple tenants
66
Value lever: lease re-gearing
long unexpired lease -> short unexpired lease terms
67
Value lever: lease terms
no onerous lease terms -> onerous lease terms
68
value lever: tenant credit
high credit risk -> low credit risk
68
Value lever: building quality
high quality building -> low qual building
69
Which of the following is true? Opportunities to add value to real estate assets will often be:
Positively related with the age of the asset. As the age increases, there tends to be increased need and opportunity for improving buildings.
Negatively related with the number of tenants. More tenants lead to more opportunities. So, it’s positively related.
Positively related with the WAULT. The longer the WAULT, the lower the opportunity for lease regears. So, it’s negatively related.
Positively related with quality of the tenant. The lower the quality of the tenant, the higher the benefit from replacing the tenant with a better one. So, it’s negatively related.
age
70
WHAT DOES icrl STAND FOR?
interdepartmental committee for the re-development of contaminated land
71
SRI
socially responsible investment
71
PRI
principles of responsible investment
72
CSR
corporate social responbilitly
72
what is EMS
Environmental management system
73
GRESB
green real estate and sustainable building institute
73
BREEAM
building research establishment environmental assessment method
74
GBC
green building council
75
LEED
leadership in energy and enviromental design
75
DGNB
Deutsche Gesellschaft fur Nachhaltiges Bauen
75
CASBEE
comprehensive assessment system for built environment efficiency
75
HQE
Haute Qualite Enviromentale
76
GHG
greenhouse gases
76
NABERS
national australian built enviroment rating system
77
EPC
energy performance certificate
78
DEC
display energy certificate
79
ISO 14001
International Standards organisations standard for environmental management
80
EMAS
Eco managment and audit scheme
81
DRR
disaster risk reduction
82
GCB
Green construction board
83
MEES
minimum energy
83
EPED
energy performance of buildings directive
83
BBP
Better building partnership
84
CRREM
Carbon risk real estate moniter
84
SECR
steamlined energy and carbon reporting
84
IEQ
indoor enviromental qualitly
85
SASB
Sustainable Accounting Standards Board
86
UNSDG
United national sustainable development goals
86
GRI
global reporting institute
87
The real estate asset manager benefits from competition between the PM providers
true
87
lack of scale can limit the importance of the real estate asset manager `
False
88
The real estate manager has to oversee multiple providers
False
89
Insourced and third party
True
89
Poperty managment fees are usually charged as a % of rent
flase
89
property managers typically recieve additional fees from the tenant for processing liscences to assign sublet, alter the premise
true
90
An advantage to the investor of using third party solutions for PM is - It is always cheaper
False
90
An advantage to the investor of using third party solutions for PM is - There is potential to benefit from economies of scale
True
91
An advantage to the investor of using third party solutions for PM is - For the real estate asset manager, it transfers operational risk associated with portfolio changes to
the third party provider
True
91
An advantage to the investor of using third party solutions for PM is - There is closer contact with tenants
False
92
An advantage to the investor of using third party solutions for PM is - The is decreased risk of data breaches
False
92
An advantage to the investor of using third party solutions for PM is - It enables concentration on core competencies
True
92
An advantage of Insourced delivery of PM is - It is always cheaper
False
92
An advantage to the investor of using third party solutions for PM is - It enables concentration on higher margin activities
True
92
An advantage of Insourced delivery of PM is - There is potential to benefit from economies of scale
True
93
An advantage of Insourced delivery of PM is - There is closer contact with tenants
False
93
An advantage of Insourced delivery of PM is - For the real estate asset manager, it transfers operational risk associated with portfolio changes to
the third party provider
True
94
An advantage of Insourced delivery of PM is - The is decreased risk of data breaches
False
95
An advantage of Insourced delivery of PM is - It enables concentration on core competencies
true
95
An advantage of Insourced delivery of PM is - It enables concentration on higher margin activities
True
95
An advantage of Insourced delivery of PM is - Information sharing between property managers and real estate asset managers is likely to be better
True
96
An advantage of Insourced delivery of PM is - It is easier to monitor and control the quality of the PM service
uncertain
97
An advantage of Insourced delivery of PM is - Tenant satisfaction is higher
uncertain
98
Penalties for poor performance are common in third party PM agreements
True
99
Incentives for poor performance are common in third party agreements
True
100
total return is a KPI for property managers
False
101
income return isa KPI for third party property managers
False
102
capital return is a KPI for third party property managers
False
102
A urchasers legal due dilligence on an acquisition tends to follow a price agreement
True
102
% of rent collected within a specified timeframe is a KPI for third party property managers
True
102
typically only the seller is represented by an agent
false
102
Perfect liquidity involves the ability to convert an asset to cash or vice versa
without cost or delay
102
There is often one month between the exchange of contracts and completion
True
103
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105
105
106
107
107
107
108
