CAIA - 18 - International Real Estate Investments Flashcards Preview

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Flashcards in CAIA - 18 - International Real Estate Investments Deck (32)
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1

A number of issues exist with international real estate investing:

 

1. Lack of ___ knowledge

2. ___costs

3. ___restrictions on foreign ownership

4. Higher ___costs

5. Complex ___

6. ___-___markets

7. ___and ___risks

8. ___ ___risk

9. Lack of ___to local services

A number of issues exist with international real estate investing:

 

1. Lack of local knowledge

2. Agency costs

3. Regulatory restrictions on foreign ownership

4. Higher transaction costs

5. Complex taxation

6. Small-scale markets

7. Political and economic risks

8. Exchange rate risk

9. Lack of access to local services

2

About ___% of the $33 trillion of commercial real estate in Europe, Asia-Pacific and North America is invested and ___% is investable. ___% is not investable.

About 37% of the $33 trillion of commercial real estate in Europe, Asia-Pacific and North America is invested and 26% is investable. 36% is not investable.

3

___ costs are the total costs of buying and selling a residential property.

Roundtrip costs are the total costs of buying and selling a residential property.

4

International real estate investing generates ___ expected returns than domestic real estate.

International real estate investing generates higher expected returns than domestic real estate.

5

Real estate returns across regions have ___ correlations.

Real estate returns across regions have low correlations.

6

In theory, hedging currency risk ___ the efficient frontier.

In theory, hedging currency risk enhances the efficient frontier.

7

Real estate investing offers income taxation advantages to those in ___-income tax brackets.

Real estate investing offers income taxation advantages to those in high-income tax brackets.

8

Accounting depreciation usually ___ true economic depreciation.

Accounting depreciation usually exceeds true economic depreciation.

9

What is the present value of the depreciation tax shield (equation).

10

Gains on real estate investments are taxed when they are ___.

Gains on real estate investments are taxed when they are sold.

11

There are 3 key reasons why leverage is central to most real estate investing:

 

1. Leverage is used to increase ___ ___ ___

2. Leverage in foreign currency ___the debt

3. Leverage offers ___-___financing

There are 3 key reasons why leverage is central to most real estate investing:

 

1. Leverage is used to increase assets under management

2. Leverage in foreign currency hedges the debt

3. Leverage offers tax-deductible financing

12

There are a number of challenges associated with international real estate investing:

 

1. ___ relationships

2. ___ ___

3. ___and ___ costs

4. ___ and ___risks

5. ___risks

6. ___ ___risks

There are a number of challenges associated with international real estate investing:

 

1. Agency relationships

2. Information asymmetries

3. Illiquidity and transaction costs

4. political and economic risks

5. legal risks

6. exchange rate risks

13

Real estate portfolio managers, as agents of investments, serve two key functions:

1) as ___ of properties

 2) as ___ ___in buying and selling properties.

Real estate portfolio managers, as agents of investments, serve two key functions:

1) as managers of properties

2) as decision makers in buying and selling properties.

14

There are 3 reasons why agency relationships matter:

 

1. The market is ___

2. Investors cannot rely on ___ ___ to monitor and control managers

3. Good managers can consistently ___ ___ ___.

There are 3 reasons why agency relationships matter:

 

1. The market is inefficient

2. Investors cannot rely on other investors to monitor and control managers

3. Good managers can consistently generate abnormal returns.

15

According to Geltner et al. (2014), the so-called free lunch is not free since foreign investors are exposed to ___ ___ and additional costs to ___ ___.

According to Geltner et al. (2014), the so-called free lunch is not free since foreign investors are exposed to information disadvantages and additional costs to obtain information.

16

All else equal, domestic real estate investments ___ international real estate investments.

All else equal, domestic real estate investments outperform international real estate investments.

17

Illiquidity is ___ severe for international real estate investments.

Illiquidity is more severe for international real estate investments.

18

Political risk is ___ for real estate investments.

Political risk is significant for real estate investments.

19

Government regulation is an example of ___ risk.

Government regulation is an example of economic risk.

20

The risk that a title is encumbered or fraudulent is an example of ___ risk.

The risk that a title is encumbered or fraudulent is an example of legal risk.

21

___ ___risk is the key short-term risk that foreign investors are exposed to.

Exchange rate risk is the key short-term risk that foreign investors are exposed to.

22

___ ___are restrictions imposed on foreign investors' capital that hinder or increase the cost of repatriation of international earnings. These risks are highest in ___markets.

Capital controls are restrictions imposed on foreign investors' capital that hinder or increase the cost of repatriation of international earnings. These risks are highest in emerging markets.

23

What is the variance of foreign property in terms of property and currency? (equation)

24

In theory, investors can use two approaches to determine optimal portfolio weights for international real estate investments:

 

1. ___ ___ ___

2. ___ ___ ___

In theory, investors can use two approaches to determine optimal portfolio weights for international real estate investments:

 

1. Modern portfolio theory

2. International index weights

25

Using ___ ___ ___leads to countries being over/under represented. This issue can be resolved by using ___adjustments.

Using international index weights leads to countries being over/under represented. This issue can be resolved by using GDP adjustments.

26

A key drawback of investing in international REITs is that their ___ are ___ ___.

A key drawback of investing in international REITs is that their returns are highly correlated.

27

There are 4 types of debt real estate investments:

 

1. First ___ ___

2. ___ ___-___securities

3. Real estate ___ ___

4. ___ ___ of REITs

There are 4 types of debt real estate investments:

 

1. First mortgage claims

2. Commercial mortgage-backed securities

3. Real estate mezzanine debt

4. Corporate debt of REITs

28

First claim mortgages are ___ liquid than REITs and have exposure to ___ ___ risk.

First claim mortgages are less liquid than REITs and have exposure to interest rate risk.

29

The advantages of CMBS is that they are ___, ___-___and have ___enhancements

The advantages of CMBS is that they are liquidwell-diversified and have credit enhancements

30

The disadvantage to CMBS is that they are ___ ___.

The disadvantage to CMBS is that they are less transparent.

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