CFA Level I · CFA Level I Exam · Real Estate and Infrastructure
An analyst compares private equity real estate investment with public equity real estate investment (REITs). Which statement is most accurate?
Private equity real estate typically has lower liquidity and is valued using appraisals rather than market prices. Public REITs trade on exchanges with observable daily prices, so appraisal smoothing and illiquidity describe private holdings, not public ones.
- APrivate equity real estate typically has lower liquidity and relies on appraisal-based valuationsCorrect
- BPublic equity real estate is typically valued by appraisals, which smooths reported returns
- CPrivate equity real estate typically has daily market pricing and low transaction costs
Explanation
Private real estate is illiquid, with high transaction costs, and is valued by periodic appraisals. Public REITs have market prices set by trading. The other options reverse these features.
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