Land Lease

1996 Words Mar 1st, 2013 8 Pages
. Introduction
LandLease (Asia) Property Limited (LL) wants to infiltrate the Hong Kong real estate sector. Louisa Martin and her senior advisor Marco Li have two main possibilities to achieve this goal, direct and/or indirect investment. By investigating the different investment possibilities they want to understand the merits and demerits, including risk and return of the possible investments. Bearing these outcomes in mind, they can form a new strategy for the company.
We will discuss 4 different subjects as stated in the assignment: * The merits and demerits of direct real estate investing are highlighted; * The potential benefits for LL of allocating its assets to indirect real estate; * The opportunity of assembling
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The Hong Kong real estate sector has ten listed major property companies that basically form the market. Graphical analyses can be found in the appendix. The 3 largest companies, based on market capitalisation, are Sun Hung Kai Properties, Cheung Kong (Holdings) and Henderson Land Development. Due to a consolidation in the property sector these key players increased their share of new residential sales from 30% to 50%.
Since both REITS as share in real estate properties are traded on the (supposedly transparent) Hong Kong Stock Exchange, they are considered to be relatively liquid. This has risk merits since no long investment is required and allocation is relatively quickly possible. The investors does not need special local knowledge since all locations and properties are already chosen. No extra capital need to be spent on property management and maintenance. Investors also do not have to worry about the tenants since the property companies of REIT managers do this for them. Indirect investing can contribute to international diversification of the portfolio, which happens to be in arm length with the LL strategy.
One of the downsides of indirect investment is that as a minority shareholder the firm would lack certain control rights regarding management of the underlying assets. Furthermore, a number of the major listed property companies were involved in non-property investments and in sectors as Hotels. Since LL is

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