ALTERNATIVES MODULE 79

Question 1

79.1 What are the characteristics of residential real estate?

Answer 1

Question 2

79.1What are the characteristics of commercial real estate?

Answer 2

Question 3

79.1 In what ways are real estate investments Uniquely Different?

Answer 3

Question 4

79.1 What are the characteristics of price discovery for real estate markets?

Answer 4

Appraisals are known to be too cautious when the market is going up and too optimistic when coming down (smoothed returns)

Question 5

79.1 What are private forms of real estate investment?

Answer 5

Question 6

79.1 What are public forms of real estate investment?

Answer 6

Question 7

79.1 What are three types of REITS?

Answer 7

Equity - are involved with buying property

Mortgage REITs - acting more like a lender

Hybrid rent - hybrid of the two

Question 8

79.1 What are the advantages of direct real estate investors?

Answer 8

Question 9

79.1 What are the disadvantages for direct real estate investors?

Answer 9

initial outlays - taxes, lawyers, etc etc

Question 10

79.1 indirect investments in real estate is a way to pool capital for smaller investors to gain access to various investment vehicles.

Describe some Investment vehicles available:

Answer 10

Question 11

79.1 How are REITs tax efficient?

Answer 11

Minimal tax on the fund, only the investors pay tax - so avoids double taxation.

The catch - the REIT has to distribute income through to investors.

Question 12

79.1 What are the characteristics of REITs?

Answer 12

Question 13

79.1 What is a ‘senior debt’ real estate strategy?

Answer 13

First Mortgage/ Investment grade commercial mortgage backed security

Question 14

79.1 What is a core real estate strategy?

Answer 14

te ‘Bond-like’

Question 15

79.1 What are ‘core-plus/value-add real estate strategies?

Answer 15

Core plus = higher, riskier, and less predictable returns

Value-add - larger effort project (price appreciation is the real return, not income from it)

Question 16

79.1 What are ‘opportunistic real estate strategies’?

Answer 16

Question 17

79.1 Show me the 5 types of real estate investment on a risk and return diagram:

Answer 17

higher risk = core-plus and above

Question 18

79.1 What are the two types of returns you can get form real estate investments?

Answer 18

Income and Price appreciation

Question 19

79.1 What are two benefits of real estate investments?

Answer 19

multiples year lease income is predictable, stable, and adjusted for income

low correlation with other asset classes

Question 20

79.1 Why are real estate investments likened to a convertible bond?

Answer 20

Question 21

79.1 Diversification benefits of real estate: But also caveats:

Answer 21

Question 22

79.2 What is the ownership structure of Infrastructure?

Answer 22

Early private investments, waves of privatisations, mix of private and public

Question 23

79.2 Name some features of infrastructure investments:

Answer 23

Question 24

79.2 Name three infrastructure contractual payments:

Answer 24

take or pay - obligating buyers to commit to a minimum amount - or there is a set amount penalty

Question 25

79.2 What is a public-private partnership?

Answer 25

Question 26

79.1 Name three types of economic infrastructure investments (and examples of each).

Answer 26

Question 27

79.1 Name some characteristics of social infrastructure investments (and examples of each).

Answer 27

public-private partnership, public, or private

Question 28

79.1 What are Greenfield investments?

Answer 28

Question 29

79.1 What is the Build-operate-transfer (BOT) life cycle:

Answer 29

Question 30

79.1 Show me a BOT diagram:

Answer 30

Question 31

79.1 What are Brownfield investments?

Answer 31

Question 32

79.1 What are secondary-stage investments?

Answer 32

Question 33

79.1 What are the characteristics of direct investments into underlying infrastructure?

Answer 33

Relying on partnerships

Question 34

79.1 What is a concession agreement?

Answer 34

Having the right to operate

Question 35

79.1 What are the characteristics of indirect investments into infrastructure funds?

Answer 35

Question 36

79.1 What are the characteristics of debt financing of infrastructure projects?

Answer 36

Question 37

79.1 What is the investor risk-return profile for operational secondary stage, brownfield, and Greenfield infrastructure investments? Note which are riskiest to safest!

Answer 37

Question 38

79.2 What are the returns and diversification benefits from infrastructure investments?

Answer 38

Question 39

79.2 During steep market downturns, the correlation between REITs and market equity returns tends to:

Answer 39

increase They are still 'risky assets' - and highly liquid so people can take money out when feeling risk averse in downturns