Study Of Investment Of Equity Real Estate Investment Trust

Equity real estate investment trust (EREIT) has been exiting for a long time in western countries. As one of investment alternative exchanged in public, EREIT is known as an investment scheme constituted as a unit trust that operated by professional management company and invests in diversified property-related assets and uses the income to provide returns to its unitholders. This paper focuses on those investing primarily in income-producing assets, which is named equity real estate investment trust Although the development of REIT in developed country like USA has a long history, there is a lack of systematic and sophisticated theory for REIT. Particularly, most investment theory about REIT originated from securities investment, which has been comparatively well established. From the view of EREIT manager, the paper is seeking to analyze theories related to investment strategy of EREIT. In addition, LINK REIT, listed in Hong Kong has been used to demonstrate the applicability of theories discussed.The paper leads to following results: (1) compared to other types of REIT, EREIT has a special advantage in terms of facilitating real estate financing, providing attractive investment alternative and disposing of bad assets; (2) portfolio theory and asset pricing model can be applied in investment analysis of EREIT with considering the characteristics of real estate market and real estate itself; (3) there is no direct relationship between inflationary rate and nominal return of real estate. Ability to hedge against inflation of Individual property and asset portfolio depends on correlation between real return of assets and inflation rate. (4) when developing portfolio strategy, it is recommended that REIT manager focuses more on assets of certain type or in certain area, rather than invests in properties of all types and in large area.; (5) maximizing income should be the criteria when considering the scope of REIT; (6) compared to securities fund, manager should pay more attention to analysis of individual assets.The results of this paper indicate that the theory about EREIT could be well applied in real case, even though there is a lack of systematic theoretic system. Based on case study, several related theories have seen a good applicability, including portfolio theory, individual assets theory.