Reference no: EM132603581

Real Estate Capital Markets

EXAM QUESTIONS:

Question 1. We have reviewed the evolution of the capital markets and four quadrants all semester. Review the financials for ROIC REIT, provide all alternatives (not just the ones that you would personally prefer) for ROIC to finance the acquisition of a $200 million portfolio in 2020. A list with your discussionof each item suffices. Consider typical caps on leverage, metrics, debt maturity schedule, credit line/revolver availability, and utilize any relevant capital market instruments. TWO HINTS: 1. ROIC is an UPREIT and 2.Credit Facility is $600 million with a $600 million accordion feature.

Question 2. Explain the difference between a High Yield Bond, a Mezzanine piece and a B-note. Where would you rather be in the capital stack with your risk tolerance? Consider the workout and bankruptcy implications of your answer.

Question 3. CMBS: Refer to the attached Bank 2020-BNK27 Mortgage Trust Pre-Sale and17G-7 reportsin the CMBS class tab to answer these questions. This was one of the two CMBS deals reviewed in class so you have seen this deal before.
• CMBS: What historical situations combined to launch CMBS in the late 1980s/early 1990s? Does CMBS 2.0 and 3.0 alleviate any of the prior issues/problems in the CMBS business?
• What tranche would you buy in theBNK 27 deal? Why? (recent pricing for tranches inserted below. Note that Coupon is its face coupon and Yield is recent trading price).
• What type of CMBS deal is BNK 27? Conduit, Fusion, Single Borrower, Single Property? Explain the difference.
• How was the Risk Retention rule handled here-- how was the piece structured, and what are goals of this rule since December 2016?
• Discuss the roles of the Servicer, Special Servicer, and Trustee in CMBS deals.Are there any changes to these positions with CMBS 2.0 and 3.0?
• As the Borrower, would you prefer the hard lockbox or springing lockbox that's typically found in most CMBS deals? What type of lockbox or cash management system does this deal have?

Question 4. As an Individual real estate owner, would you sell your $100 million real estate portfolio that you have owned for 25 years to:
a. Privatereal estate firm
b. Public company
c. REIT
d. UPREIT
e. DownREIT
f. Opportunity Fund

• Remember to discuss each structure in your answer (do not just pick one- I need to see that you understand the array of choices and the difference).
• List the advantages/disadvantages of the structures.

Question 5. Bonus Question We are seeing many retail bankruptcies this year that affect retail REITs. For example, CBL REIT has been negotiating with lenders, which was reported today they successfully made their mortgage and bond payments. The stock is trading at $0.22. Would you suggest REITs or retailers that cannot pay their obligations undergo workouts, liquidate, or complete a pre-packaged bankruptcy like GGP? What factors should be considered?

Attachment:- Real Estate Capital Markets.rar