Class—below you will find the Final Exam for our class. There are three questions, but please note that the first and third questions have multiple parts. Please also note the following:
1. For question Two, your response should be no more than 2-3 pages double spaced. The first and third questions contain multiple parts; responses should be no more than 1-2 pages double spaced for each part
2. This is an open book, take-home exam. You should utilize the text and any books assigned during the semester, case law reviewed during the semester, and lecture material. No use of the internet or material outside the class should be consulted or utilized in your response. There should be no consultation or conferring of any kind with each other or with any third party. I will not entertain any inquiries seeking “clarification” of any question or part thereof; if you perceive an ambiguity, note it in your response.
1. The United States Constitution is the bedrock of our legal system. One of the key protections afforded to citizens is the 5th Amendment provision that states that property may not be taken for “public use” without just compensation. It is also true that in the last fifty (50) years or so, very few successful real estate developments occurred without the use of eminent domain.
(A) Discuss the pros and cons of the majority holding in the Kelo v. City of New London case. Specifically, do you agree that “economic development” is a “public use” for which the eminent domain tool should be available? Should the rights of the individual (e.g. Susette Kelo) always trump the rights of developers? Or should the greater good—as reflected in economic development—always take priority over the individual, as long as “just compensation” is paid? Give examples of development projects discussed in class that you think demonstrate your point of view; and make specific reference to the majority, concurring and dissenting opinions of the Kelo decision to support your response.
(B) If you were heading up a development project in Brooklyn, and eminent domain was a necessary tool to make the project a reality, how would you evaluate the liklihood that the courts would allow eminent domain to proceed if there were properties in the development site that were not blighted. Assume that your project would bring economic development and more tax revenue to the site you are looking to develop.
2. The greatest real estate debacle in U.S. history—the Tishman-Speyer purchase of the apartments at Stuyvesant Town and Peter Cooper Village for $5.4 billion—came on the heels of the the subprime mortgage disaster. If you were a loan officer or advisor who underwrites investments in real estate projects, what lessons would you draw from this recent case study of a real estate project gone awry? Reference Other People’s Money and the Robertsdecision in your answer.
3. You are reviewing the possible purchase of an office building in New York City and you expect to close before the end of February. The building is fully occupied with a single net lease tenant who signed a ten year lease in 2007.
(A) What approaches to value would you use to come up with the price to be paid? What information would you review and consider in doing your evaluation? What concerns would you have about reviewing the income/expense statement of the property and any appraisal on the property?
(B) You decide that the property is worth $1 million, and the seller agrees to sell it to you for $1 million. An appraisal on the property also concludes that the property is worth $1 million. The NYC property tax assessment on the building is $1 million. What are the issues you should be considering with respect to the tax assessment as you proceed to a closing and after you acquire the property?