Please find the attachment for the assignment details Word count: 2000 Due date: 5th April Document Preview: Real Estate Investment and Valuation Assessment Brief XXXXXXXXXX XXXXXXXXXX00L Real Estate...

Running Head: REAL ESTATE INVESTMENT REPORT 1
Assignment Title
Student Name
Course Name
Instructor Name
Date
REAL ESTATE INVESTMENT REPORT 2
Investment Objective
The primary investment objective of the UK-based pension fund is to maximize the
return on investment that will meet the requirement of the investors. The amount of return
generated should meet the retirement requirement of the investors.
Investor Risk Tolerance
It is a pension fund and has investors ranging from 25 years to 50 years. The funds have
investors with moderate risk tolerance level. The investors of the fund are not risk takers and at
the same time are not risk averse; they take a moderate level of risk.
Investment Opportunities
Two investment opportunities are direct and indirect. Direct investment is those in which
the investment amount will be invested in the UK Sheffield or Changsha (China) commercial
property. Indirect investment opportunity is to make investment in the various classes of assets
like gilts or equity or cash.
Investment Recommendation
Investment recommendation is based on the investor return expectation and the risk
tolerance level. Based on these two factors, the suitable investment will be making the majority
of the investment in the commercial property in UK Sheffield and some portion of the bond
market. It will provide diversification to the portfolio and at the same time will reduce the overall
risk associated with the investment.
Portfolio Investment
The recommendation was to invest the majority of the portion of UK Sheffield
commercial property that is 80% of the investment and remaining 20% in the real estate gilt
REAL ESTATE INVESTMENT REPORT 3
market. The overall investment strategy carries lower level of risk, but there is potential to
generate higher return on investment from this strategy.
Advantage of Investing in UK Sheffield Commercial Property
The major advantage is that the fund will have a significant property in their possession
that can be used for the commercial purposes. There is continuous increase in the property prices
in the UK and the increases are expected to be at perpetuity of 2% (Monaghan, 2017). It will
enable the fund to get a significant capital appreciation at the time of requirement. The next
major advantage is that the commercial property will earn regular rental income from the let out
property. It will be a regular and steady income for the fund that can be used for the distribution
or reinvestment as per the discretion of the fund manager.
In this case, the risk involved in the investment is considerably lower as the fund will
hold an asset that can be liquidated at any time as per the requirement (Kotak, 2015). The
amount of investment made towards the property will remain intact, and there will be no
question of depreciation in the value if they are maintained well. Similarly, there is growing
demand for the commercial property due to growth in business. As the fund will invest in the
commercial property, they will be rented out and can generate a regular rental income. In this
case, the risk of uncertainty about revenues generated from the fund is eliminated.
As the property will be rented out based on the agreement basis for the respective tenure
the fund manager can be assured of the return on investment. In this case, there is always an
appreciation of rent that is charged to the property. Therefore, there will be an increase in the rate
of return generated from the commercial investment. It clearly indicates that the overall risk
involved in the investment is less. But there is a higher potential to generate a growing return on
the investment. It meets the risk and return theory of investment.
REAL ESTATE INVESTMENT REPORT 4
Disadvantage of Investing in UK Sheffield Commercial Property
There are many cases where the value of property gets appreciated, but there are no
buyers to purchase them when the seller wants to liquidate. When the size of property is big, the
buyer required to purchase the property should be a large scale investor (Kotak, 2015). It is not
easy for the seller to find a potential and lucrative buyer at the time of selling that is at the time
of maturity. If the fund manager...