A Study Of Investment Strategy And Risks Of REITs

With the development of Chinese real estate market, the demand of financial support is getting serious. But the real estate financial market is not mature nowadays in China. When the real estate developer needs financial support, always they will consult bank. This situation tells the fact that most of the financial risk gathers in bank. And only few companies can get support from capital market. Then comes Real Estate Investment Trust.REITs is designed to solve the problem of finance. Market credit is the core part of REITs. To ordinary investors, REITs is also a kind of tool to invest in real estate. But when REITs become listed, many new problems come together. This dissertation centers around REITs. With the examples from Hong Kong capital market, this dissertation first focus on the structure, asset, portfolio and debt of RE1Ts. Then compare REITs with other real estate investment tools. REITs, as a kind of investment tool, differs from other tools. The risk of REITs is low. The cash flow of REITs does not change frequently. The ratio of equity and debt is strictly limited. And the portfolio of REITs is often commercial real estate project. This means REITs has the ability of resisting inflation. Based on these unique characters, REITs become a choice for investors. But like other investment tools, REITs has its own special risks. When making a decision to invest, investors must be aware of the risks they are facing. The portfolio of REITs is often commercial real estate, so investor of REITs must think of the risk of real estate. Besides this, many REITs has its own financial arrangement. Ordinary investors sometimes ignore these arrangements. They only care about the cash flow of REITs. The example of Champion REITs proves that sometimes the arrangement of REITs is the most important one.