Reference no: EM133578623

Property Investment and Finance

Learning Outcome 1: Evaluate the investment characteristics of various classes of income producing property and risks for investors.

Learning Outcome 2: Apply relevant concepts of mathematics and finance to property investment analysis.

Learning Outcome 3: Develop after tax and financial management techniques to maximise property investment performance.

Learning Outcome 4: Evaluate property investment and portfolio strategies

Learning Outcome 5: Assess the structure of property financing and associated risks

Research a suitable A-REIT from the Australian Market.

Provide the name of the A-REIT that you have used as the basis for your report

Part 1

Scenario: You are the Fund Manager for an Australian Real Estate Investment Trust (A-REIT). You have been tasked with preparing a report recommending investment to a group of prospective local institutional investors.

Note: (A listed A-REIT is preferred as research information and data would be more accessible).

Using your selected A-REIT, your report should include:

• Executive Summary

• Introduction, including why you selected this A- REIT

• Outline of the fund and the types of properties held within the fund.

• Highlight portfolio performance against relevant industry benchmarks

• Key attributes including income revenues, capital growth and any tax benefits

• Overview of investment strategies/objectives

• Required rates of return

• Portfolio asset allocations

• Overall market conditions and the current investment market for property

• Inclusion of relevant graphs, charts and images

• Recommendations to invest

Part 2

Scenario: You have been successful, and the institutional investors have committed to investing in the A-REIT.

As the Fund Manager you are now required to conduct research using the portfolio's own performance metrics (required rate of return) to identify a suitable asset to add to the existing portfolio assets.

Prepare a pro-forma of discounted projected cash flows for your hypothetical asset.
Note: provide basic property information i.e. expected revenue stream/s, vacancy factor, operational expenses and other information that may be relevant.

Apply sensitivity analysis to key investment parameters (i.e. rental growth rates, interest rates, discount rates and resale capitalisation rates) to the potential asset that would increase the overall portfolio return and also reduce the volatility (risk) of the portfolio.

The value of the potential asset should not be greater than 10% of the overall value of the existing portfolio.

Financial leverage is required to facilitate the purchase with financing approved at a LVR of 65%.

Areas that the report should highlight include:

• Research markets, i.e. Sydney, Melbourne etc and provide reasoning for examining the selected market.

• Discussion on sources of finance

• Outline of asset allocation criteria.

• Evaluation of risk management strategies to identify, measure and control the main risks

• Source suitable industry benchmarks (Property Indices/Past returns from the A-REIT portfolio)

• Calculation of the required rate of return

• Calculation of correlation to the existing Portfolio

• Financial calculations and ratio analysis to consider include:

• NPV, TWRR, IRR, PI, Co-variance, Co-efficient of Variation (CV), Correlation co-efficient, Equity Return before Tax/After Tax, Rp - Portfolio Rate of Return, WALE, WACC.

• Capital Asset Pricing Model (CAPM)

• Modern Portfolio Theory (MPT) and Diversification (How this has influenced your recommendation)

• Beta and risk premium

• Conclusion:

• Recommendation

• Complete list of all references and sources of information

• Appendices

Attachment:- Property Investment and Finance.rar