Study On Risk Management Of Real Estate Investment Trusts

Real Estate Investment Trust is a financial investment product which first developed in the United States in 1960s. With the development of 50 years, it already has a considerable scale. In the process of development, real estate investment trusts not only solved the problem of fund shortage for the development of real estate in the United States, but also increased the returns of portfolio investments in capital market. On the one hand, real estate is a very typical capital-intensive industry, but China's real estate industry is characterized by small scale, scattered resources, inefficient use of social resources. It is not accordance with the characteristics of capital-intensive in real estate industry. On the other hand, real estate industry and the financial industry should have a very close relationship. In fact, the development of China's real estate industry lack of financial support. Particularly in recently, China issued a series of fiscal policy and monetary policy to curb real estate prices which impeded the domestic real estate development enterprises'to change traditional financing channels. Introduction of new financial instruments have been urgent. United States, Europe and Asian countries successfully launched the Real Estate Investment Trust's experience shows that real estate investment trusts have become a mature solution to problems of Real estate investment trusts as a real estate securitization product, its risk factors have its own particularity and complexity. It has multiple risks which include the real estate market risk, capital market risk and risk in the process of fund operation. So the general risk management system can not substitute the risk management of real estate investment trusts. Based on the feature of risk, this article attempts to study the risk management of real estate investment trust, and provide a solid foundation for China's real estate investment trusts.Based on the full understanding about real estate investment trusts'risk management of domestic and international study. The article use qualitative analysis and quantitative analysis, theoretical analysis and empirical analysis method to study REITs'risk management. Firstly, we should identify the risk of real estate investment trusts. Secondly, we use risk indicators to assess risk of the case. Finally, based on the risk assessment results, we provide the risk aversion strategies of real estate investment trust. It can minimize the risk of loss and promote the healthy development of real estate investment trusts.This paper is structured as follows. Chapter I introduces the research background, purpose, current situation of internal and external research, research methodology and innovation. ChapterⅡdescribes the concept, characteristics, classification of real estate investment trust fund and meaning of China's development of REITs. ChapterⅢintroduces systematic risk and non-systematic risk. Systemic risk includes the economic cycle risk, policy risk and legal risk. Non-systematic risk includes moral hazard, liquidity risk and management risk. Chapter IV introduces three aspects. First of all, the paper introduced the situation of Chinese overseas-listed real estate investment trust. Secondly, the paper introduced the theory of risk assessment. Finally, we assess the REITs risk through Yuexiu fund data. Chapter V proposed the macro and micro measures. Macro measures include establishment of a sound laws and regulations system, strengthening the external supervising and management and creating a favorable social environment. Micro measures include establishment of internal risk management system, project risk management, moral hazard control and reinforcing personnel training.Innovation of this paper is mainly reflected in two aspects. First, this paper use empirical analysis method to quantify risk of the case and correlation coefficient of the case and market data; Second, this paper established an early warning system which can control the risk of the real estate investment trusts from beginning.There has some unsatisfactory because of the author' limited knowledge. This article only analyzed the main points of REITs risk. China faces many other issues in the process of development REITs which still need to conduct in-depth theoretical study. At present, Chinese mainland has no real REITs. The collection of data on real estate investment trust is limited. Therefore, quantitative analysis of this article is slightly inadequate.