Question

1.A triple net lease shifts more cost uncertainty to a tenant than a gross lease.

True

False

2.Commercial properties with stable tenants should have lower cap rates than if these same buildings had very risk tenants. A risky tenant is one who is likely to default on lease payments.

True

False

3. In gross lease the tenant does not have to even think about electricity consumption, property insurance, taxes, or janitorial services. All of these are covered without limits in the tenant’s gross lease payments.

True

False

4. An increased demand for commercial properties in a specific location should lower the cap rates for these properties.

True

False

5.An investor is trying to decide between two almost identical commercial properties, property A and property B. Property A has a cap rate of 10 and property B has a cap rate of 5. She must consider the possibility that the annual net operating income of property A is less certain or that the asking price for property B is too high or both.

True

False

6.If an investor/manager believes she can increase the net operating income of a building then she would probably view the current cap rate on the building as low and a potentially good investment. While other investors might see the property as overvalued.

True

False

7.Credit ratings are assigned by the ratings agencies Moody’s and Standard and Poor’s to private companies and are an indication of the ability of the company to honor its financial commitments. Both of these rating agencies are divisions of the Federal Reserve Bank of New York.

True

False

Answer 1

1) Triple net lease is a lease where the tenant pays all expenses in addition to a periodic rent.

Hence the statement is True

2.True because risky tenants will command a risk premium which adds up to the cap rate

3. True, because in a gross lease all expenses are taken care of. Only a gross payment has to be paid

4. False bacause nn increased demand for commercial properties in a specific location should increase the cap rates for these properties since the return required will increase.