cfa l2 finquiz reading (38-41)-alternative-l2-2013

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1、Reading38PrivateRealEstateInvestments31.INTRODUCTIONFormsofRealEstateInvestments:TypesofLendinginthePrivaterealestatemarket:a)Privateequityinvestmentinrealestateproperties.Ita)Directlending:Itreferstomortgage-lendingbybanks201referstoadirectownershipofrealest

2、ateproperties.orinsurancecompanies.Inamortgage-lending,realestatepropertiesserveascollateralfortheloan.b)Publiclytradeddebtinvestment.Itreferstoanindirectownershipofrealestatepropertiesi.e.viainvestinginb)Indirectlending:Itreferstopubliclytradeddebtmortgage-b

3、ackedsecurities;realestateinvestmentinvestmenti.e.mortgage-backedsecurities(MBSs).trusts(REITs)etc.2.REALESTATEINVESTMENT:BASICFORMSFormsofrealestateinvestmentmarket:Directownership:Directinvestmentinrealestateisusuallyinlargelotsandisnoteasytodivideintosmall

4、er1)Privatemarket:Inaprivatemarket,aninvestorpieces;also,directownershipislessliquid.purchasesaproperty(referredtoasdirectinvestmentinanasset)orprovidesamortgageloantothebuyer.REITs:REITsrepresentsharesofpublicly-tradedcompaniesthatbuyandsellrealestate.Itisaf

5、ormof·Mortgagelendingisregardedaslessriskythanpooledrealestateinvestment.equityinvestmentorunsecuredlending.·Directownershipinpropertiesinvolvesrelatively·REITsarehighlyliquid;largerinvestmentsbecauseoftheindivisibilityofreal·REITsinvolveprofessionalmanagemen

6、t;estateproperty.However,itenablesinvestorsto·REITsinvolvelowerinvestmentthandirectownershiphavegreaterdecision-makingcontrol.ofrealestate;·Privatemarketinvestmentisrelativelymoreilliquid.·REITspricereflectboththeperformanceofthemanagementofthecompanythatowns

7、therealExamples:estateandthevalueoftheunderlyingproperties.·REITscanbeusedbyinvestorswithshortinvestment·Soleownershiphorizonsandhigherliquidityneeds;·Jointventures·REITshavehighercorrelationwithstocksandbonds·Arealestatelimitedpartnershipsthandirectownership

8、ofrealestate;hence,itdoes·Acommingledrealestatefund(CREF)notprovidethesamediversificationbenefitsasthat·Mortgagesofprivaterealestate.2)Publicmarket:Inapublicmarket,aninvestorWhenthereturn