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BFX3355 - Property investment - S2 2025

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A property with a trailing cap rate of 5.7% was purchased for $28,480,000 in Year 0, and the rent is expected to grow by 1% per year. The purchase was financed using an interest-only debt of 70% at an interest rate of 5.85% per annum. Capital improvements are $238,000 and structural reserves are $115,000 in Year 2. What is the income return on equity (ROE) for this property at the end of Year 2? Ignore any tax.
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Which of the following is most unlikely to be a direct determinant of cap rate in the property asset market?
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Equilibrium between current supply and demand in the space market is reflected by:

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What type of return is closest to the cap rate of a property in the market?

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The manager of a property fund wishes to track the changes in performance of Southland Shopping Center over time. The manager also wants to compare its overall performance to Eastland Shopping Center. Which type of returns are suitable for these analyses?
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A Real Estate Investment Company (REIC) has a weighted average cost of capital at 9% and $1.6 million of total capital to invest. The REIC aims to earn rental income from the investment and does not intend to sell the property in the short term. Which of the following properties is the most appropriate one to invest in?

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When the RBA decreases the cash rate, which is the most likely effect on the 4-Q model?

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In the real estate space market, when the demand curve intersects the supply curve above the replacement cost of rent, developers will:

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Which of the following factors is NOT a primary centripetal force acting on a city:
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A property was purchased for $1.2 million in Year 0. The projected NOI is $100,000 in Year 1, which is expected to increase at a rate of 5% per annum. The property is sold at the end of Year 2 for $1.5 million, and the selling cost is 3% of the price. Given a safe reinvestment rate of 6%, what is the modified internal rate of return (MIRR) of this project?
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