MMP321 Lecture Notes - Lecture 10: Spot Contract, Tax Treaty, Real Estate Investment Trust

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31 May 2021
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MMP321 Topic 10 Seminar Solutions
1
Topic 10: Global Property Investment
Question 1:
Describe three ways an investor can invest indirectly in international property
markets.
ANSWER:
Three ways to invest ‘indirectly’ in international property markets:
1. Purchase units in a local PF that owns international properties.
2. Purchase units in a PF operating in another country (traded in another
currency).
3. Purchase units in a “globalREIT” which holds interests in worldwide
portfolio. Unit prices either denominated in either local or overseas
currency.
Question 2:
Identify and explain the two key drivers for investing in international property
markets.
ANSWER:
Two key drivers for investing internationally:
Diversification: investing in property markets globally can provide risk reduction
for investors. Research has shown that investors can achieve improved risk/return
outcomes by including international properties in a mixed asset portfolio.
Enhanced returns: International investment can provide higher potential returns
than are available domestically. International property investments are available
across the risk-return spectrum. Enhanced returns are likely to be available in
higher risk markets and funds.
Question 3:
Discuss three conclusions from empirical research on diversification across
international property markets.
ANSWER:
Refer to Rowland (2010) pp 314-315.
Question 4:
Commercial property investments can be segmented into four investment
strategies. What are these four strategies and where does each sit on the risk-
return spectrum?
ANSWER:
The four strategies are:
Core: substantially rented; orderly lease expiration schedule; high quality; invest
primarily in the major property types (Office, industrial, retail).
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