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Finance and Market , short question. - Essay Example
Author : camilareichert
Finance & Accounting
Pages 34 (8534 words)
Finance and Market Name: Instructor: Course: Date: Question 1: Answer: Real Estate Investment Trust can conduct property investment in two different approaches. The first approach is the application of diversification, where the REIT considers a combination of various lines of business under the same business title…
For the purpose of this study, we dwell on the advantages and disadvantages of the diversification of REITs holdings’ activities as opposed to the focused approach. Advantages Wider Market Cover When a REIT agency registers to venture into specific areas, there is an aspect of additional market cover. REIT can thus conduct a number of projects which essentially maximize its potential. This in the broader picture implies additional return on investment and maximizes the proportions of dividends that the shareholders gain in the REIT investment. This is not usually the practical case of REITs business that is restricted to specific line of real estate development. If REITs companies have specifications to operate in restricted lines of business, they cannot later on expand to more openings and business opportunities. In a diversified perspective however, REITs have to enjoy a dynamic market characterized by a wide range of business opportunities than maintenance of an ordinary real estate portfolio. Dynamism and Innovations Secondly, diversification have in the past enabled RETs to introduce and practice innovative ideas in the real estate properties without the risks of exceeding the limits of operation as stated in the description of the real estate portfolio. ...