Alt Inv

FTX4086F ALTERNATIVE INVESTMENTS

TIME: 90 MINUTES

22 APRIL 2013

MARKS: 90

PLEASE READ THE FOLLOWING INSTRUCTIONS CAREFULLY:

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PLEASE DO NOT TURN THIS PAGE OVER UNTIL INSTRUCTED TO DO SO. Ensure that your name and student number appears on the cover of each Answer Book. Please complete this before the test commences. Each of the Three Sections is to be answered in a separate answer book and the answer book must be clearly marked. All Answers must be done in ink, although workings may be done in pencil. Show all workings clearly. You may not write anything in your answer books before the start of the test or once you have been instructed to stop writing. You must remain seated until every paper has been collected. The invigilators will answer no questions relating to the paper during the test. Make whatever assumptions you deem appropriate and clearly state these in your answer. Any reasonable assumption will be considered.

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This test paper consists of 10 pages including the cover page

Section A: Real Estate (30 marks)

Question 1 [7 marks]

On 1 May 2010 Mark signed a three year lease on a 20m2 A-grade office in Claremont. The agreement stipulated a base rent of R300/m2/month, and an escalation rate of 8% per year. Another tenant in the same building has just signed a lease for R360/m2/month. a) Discuss the implications of this scenario for Mark and his landlord, as well as how this came about. (max. 16 lines). (4 marks) b) The loading factor in the building Mark is currently occupying is 1. What does this imply about this building? If Mark decides to rent 20 m2 in another building where the rental is R280/m2/month but the load factor is 1.25, would he be better off than renewing his current lease? Explain (max. 10 lines). (3 marks) Answers a) Given that the escalation rate is 8%, Mark’s current monthly rental would be R377.91 (= R300 x 1.083). √ The current market rental is R360/m2/month as per the other...