1147 words 5 pages
1. What are the main investment sectors of the commercial real estate market usually considered by institutional investors?
Ok, dear student, let start by saying that commercial real state is the property and the Commercial real estate (CRE) is the property, which is used primarily for business purposes. The main investment sectors are CRE market include restaurants, office towers, office parks, gas stations, malls, and convenience stores, to mention just a few. Please, you need to understand here that the CRE will be always among the three majors aspects of real state and the business, which occupy CRE usually rent the space. In addition, another key aspect for you to understand is the fact that Investors usually own the buildings and
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This tends to relatively negate the benefits of diversification of venturing in real estate. The dividends received on the shares of REIT are also fully taxable. Dividends from normal firms are taxed at a reduced rate, thus a section of the greater yield from REIT shares may be cancelled by tax regulations. REITs are also needed to pay at least 90% of the earnings as dividend to reduce the elasticity of REIT management.
4. The endowment fund is already heavily invested in US equities, provide evidence on the average return, variance and co-variances of direct real estate with REITs, equities and bonds.
With a heavy investment in U.S. equities, when the shared risk premium of stocks and REITs is 1.5 percent, we find the investors with a risk dislike of between one and six are well off investing almost completely in REITs, short-selling the bond and capitalizing so less in stocks. The endowment fund may benefit in a similar way even if the risk premium of stock and REITs is set at 2.0 percent with risk dislike to between one and nine. However, if the risk premium of stock and REITs is set at 2.5 percent, the fund’s risk dislike factor is unnecessary, and it hints investors must short-sell the bond and venture more in REITs.
The marginal impact of variations in portfolio returns on the optimum portfolio weights in the REITs is seen to have a sharp decrease when risk dislike is raised. The effect of that variation in the REIT-Stock relation, however, is