please answer the following questions

5. When making the final calculations regarding their return on investment, the Team seemed to put a lot of weight on a single element that seemed to be fairly arbitrary, optimistic, and distant in terms of time. What was that one element?

A. The ending sale price--the value of the building would have to go up about 20% per year to result in this sale price

B. Theabilitytoreplacetenantsbyusingtheleasingagent

C. The purchase price for the land--it had to be no more than 25% of the final cost of the

Project

D. The desire of all of the investors to be able to leave their investments in the project until the fifth year

6. There are four generally accepted types of shopping centers. What type was the Dream Team trying to create?

A. Superregional shopping center

B. Neighborhood shopping center

C. Regional shopping center

D. Community shopping center

7. In real estate development, the expenses of the project are greatest at the beginning and then become more regular thereafter. While income from rents should be fairly regular, the business can suffer when the income from rents or the expenses fluctuate. Many businesses fail in these times of fluctuations because they have not managed their very well.

A. Tenant selection

B. Marketing approach

C. Cash flow

D. Investor contributions

The Dream Team Invests in Real Estate, or How to Lose S280,000 OVERVIEW About two years ago, Mick Olson and Reed Nelson were discussing their stock portfolios. Each had done fairly well in the stock market and had created quite a nest egg. Reed suggested that while he had been very happy with his return on investment, he was itching for a more active, interesting investment, preferably in real estate. Mick said that he was thinking the same thing and wondered if they could come up with something. The two men found a parcel of land near a retail development area. The parcel was owned by an elderly woman who knew nothing about real estate except the relative value of land in the area. Mick and Reed found five other people who were equally interested. Each of the investors was approached because of their professional expertise. It was felt that the investment group should consist of people who could bring money to the deal but who could also bring their personal knowledge to the group as well. An accountant, a developer, a marketing manager, a lawyer, and a project coordinator joined the group. A deal was made for the land. The purchase price was $700,000, and they paid cash for it. The parcel was almost four acres square, 400 ft. wide x 450 ft. deep, in size and fronted on a moderately busy street. It backed up to a large wetland that encroached on the property about 100 feet. These real estate investors, who now called themselves "The R E Dream Team," then set to work to determine the best use for the land. They inquired about possible tenants, and they received numerous inquiries about the property. After about a month of considering possible tenants, they felt that they had nine viable options which included a gas station, a theater, a strip mall, a muffler shop, and others. They discounted all but the theater and the strip mall because those two options offered, far and away, the best possible return. The Dream Team was then faced with making a decision as to which course to take. They calculated the net present value (NPV) and the internal rate of return (IRR) for both the theater and strip mall and found that each yielded about the same return. They then reviewed the marketplace. Using a large map, they put a circle around the area from which they expected to draw the most customers, then put pins where each of the other theaters and strip malls were currently located. Calculating the number of residents in the areas, they came up with a number of possible customers for each investment. The theater was slightly easier to study because there were figures on how often people go to movies. The strip mall's tenants had a large degree of variance, so its attractiveness to the consumer would fluctuate. In the end, the theater came out looking like the better investment but only by a small margina margin that was not enough to sway the investors from ignoring other factors. They felt that a group of tenants would be a better investment than a single tenant . If the theater did not work, they would be left with a single-use building and no tenant at all. If they lost a tenant or two from the strip mall, the other tenants would still be paying rent, so they could stay current on their payments. They felt it was unlikely that all of the tenants in the strip mall would fail at the same time., however, they delayed their decision about which investment to pursue until they gathered more facts. Unfortunately, the Dream Team was about to become the Reality Team. It turned out that the developer in the group did most of his homework but not all of it. Once the team decided to go ahead with the building, the developer contacted a civil engineer who would help them design the layout of the land, with building placement, parking, and street access. They took their concept plan to the city engineer. After barely glancing at the plan, the city engineer asked them what they intended to do about the wetland. They told him that they intended to fill in about 50 feet of the encroaching wetland and then to use the rest of the area for runoff from the parking lot. The city engineer informed them that the site would not work because not only could they not disturb the wetland, but they had to provide for a 50 foot buffer and sediment ponds so that their parking lot runoff did not go directly into the wetlands. Once those were in place, the space that was left would not be sufficient for setback requirements from the road plus required parking. The building, as planned, would not meet the code. Over the next couple of weeks, the team tried to come up with every conceivable layout for the property but could not make it work with the wetland. They then reconsidered previously discarded plans like the gas station and muffler shop. They contacted prospective clients, but only two businesses had interest and neither was a national chain, meaning they would be a high risk. The team members were terribly disillusioned with their investment, and there was a great deal of finger-pointing going on between investors. In the final analysis, since the investment was not going to result in a good, or even fair, return, they just wanted to get out. They sold the land to the gas station business for $420,000 and disbanded the Dream Team