LandLease (Asia) Property Limited (LL) wants to infiltrate the Hong Kong real estate sector. Louisa Martin and her senior advisor Marco Li have two main possibilities to achieve this goal, direct and/or indirect investment. By investigating the different investment possibilities they want to understand the merits and demerits, including risk and return of the possible investments. Bearing these outcomes in mind, they can form a new strategy for the company.
We will discuss 4 different subjects as stated in the assignment: * The merits and demerits of direct real estate investing are highlighted; * The potential benefits for LL of allocating its assets to indirect real estate; * The opportunity of assembling real …show more content…
Sensitivity to interest, dividends pay out, management skills all become risk factors.
4. Opportunities for listing as a REIT on Hong Kong stock exchange
LL also has the possibility to start its own REIT listed on the Hong Kong Stock Exchange.Setting up their own investment fund has some possibilities and merits compared to the other investment opportunities. Of course this investment vehicle also has the necessary disadvantages.
One of the problems that occurred in investing in direct real estate was the large amount of capital needed. When listing as a REIT on the Hong Kong Stock Exchange, this is not necessary. This leads to lower barriers to enter the market. By participating in an IPO, large institutional but also smaller investors are able to invest in your REIT. This makes it easier and probably also cheaper to gain equity for investments. This is an important component for REITs. When new capital is needed for investments in properties in the portfolio (refurbishment), the manager will not have to sell other properties but he can simply raise equity.
One of the important aspects in creating your own REIT is that investments become more liquid compared to direct investing. This is important for the strategy of LL,when listed as a REIT they can still choose the properties and allocations included in the portfolio. However, since there are already REITs listed on the