Investment Management

Question 1

• Why would an investor include RE in their portfolio?

Answer 1

Diversification

Long and Stable Income

Question 2

• What are the methods to enhance returns and income security?

Answer 2

Asset Management - max performance of property by carrying out:

• updating tenant mix
• rent review
• tenant management
• leasing vacant units
• refurbishing

Question 3

What is investment management?

Answer 3

Choosing a pool of financial assets that meet risk return criteria / objectives and address constraints (time, liquidity, cap constraints, diversity)

Question 4

What are the investment management styles?

Answer 4

Active - Attempt to outperform the market with high level of research. Buy undervalued and sell over valued - high cost and volatile
Passive - tracks index and reflect market - managers replicate market - less volatile

Question 5

What are the two mutual fund structures?

Answer 5

Open Ended - Shares can be sold/bought @ anytime based on NAV
Close Ended - Share can only be bought at a certain time - Trading done on the secondary market at premium/discount to NAV

Question 6

What is total return?

Answer 6

Total return is the main bottom line figure
Metric of comparison over certain period
Made up of capital growth - Change in Cap Value relative to original cap value
Income growth - Change in income relative to capital deployed

Question 7

Measurement of risk?

Answer 7

Variance or standard deviation

Question 8

What are indexes/benchmarks?

Answer 8

Indexes are a measurement of market return

Benchmarks are reference points against which performance of an investment can be measured.

Question 9

What benchmarking examples?

Answer 9

IPD, MSCI

Question 10

What are some key metics?

Answer 10

Wault - Sum of ( each tenant income over total income * time to expiry/break )
Vacancy Rate - % of rent or floor area
Total return - capital and income growth

Question 11

What are some of the role of a real estate asset manager?

Answer 11

Max value and return on RE investment - High and consistent rent, reduce expenditure, increase capital value and risk management
Responsible for property strategy, execution and cashflow enhancing
Paid buy investor for:
-sourcing funding
-negotiating prop leases 
-DD on purchase/sale
-determine value and ways to increase
-marketing the asset for rental growth
-Cfw mgmt
-monitoring etc.

Question 12

• Who are the investors in the market?

Answer 12

Private, Institutional, REITS, Cross border investors

Question 13

• What is a risk return profile?

Answer 13

A risk profile identifies the acceptable level of risk an individual is prepared and able to accept for a certain return

Question 14

• How does RE compare to other assets?

Answer 14

Illiquid
Difficult Direct Investment
Stable income (passive)
High transaction costs
Ability to leverage

Question 15

Downside to RE investment?

Answer 15

Expensive
Illiquid
High transaction costs
Cyclical

Question 16

• What makes a good investment?

Answer 16

Long leases
Strong covenants
AM opportunities
Capital appreciation
Sector performance
Location
Quality

Question 17

• What assumptions for an investment model?

Answer 17

Yield - Initial and Exit
Tenancy Schedule
Purchase Price
Growth
Finance

Question 18

• What benchmark did you use for the quarterly reporting?

Answer 18

MSCI All property

Question 19

• What is total return? What are some of the downsides of total return?

Answer 19

Capital return and income return combined. Doesn’t reflect time

Question 20

• What were some of the funds KPIs that would be impacted by the new property?

Answer 20

WAULT, Vacancy Rate, Total Return

Question 21

• What does mitigate lease expiry risk mean?

Answer 21

Increase the WAULT

Or ensure that all lease expiries do not coincide to minimize rental deficit

Question 22

• Why was the fund re-weighting away from office?

Answer 22

Because their portfolio was already heavily weighted to offices and the on-going pandemic was increasing the ability to wfh - until it the outcome of the pandemic was realized they wanted to take advantage of some of the sectors performing better and diversify.