Skip to content

CS Professional · Strategic Management and Corporate Finance · Real Estate Investment Trusts

Sunrise Realty wants to monetise its fully let office parks without selling them outright and wants investors to share rental income. It transfers the assets to a REIT through a sponsor arrangement and lists the units. Which of the following is the primary strategic benefit to the sponsor in this route?

The main benefit is capital recycling: the sponsor releases funds tied up in mature, income-producing properties to deploy in new projects, while investors get listed, liquid exposure to rental yields. REITs stay regulated, need valuations and offer no guaranteed returns.

  1. AIt keeps the assets on its balance sheet and the REIT bears no regulatory limits
  2. BIt unlocks capital from mature assets for fresh projects while investors gain access to rental yieldsCorrect
  3. CIt removes any requirement to disclose valuations of the assets
  4. DIt converts the rental income into guaranteed fixed returns for the sponsor

Explanation

The sponsor recycles capital locked in stabilised, rent-yielding assets into new projects, and investors get liquid access to real estate income. REITs remain regulated, require valuations, and do not provide guaranteed returns.

Did you get it right without looking?

One question tells you little. A timed set on Real Estate Investment Trusts shows your real accuracy, how long you take and where you lose marks.

Practise Real Estate Investment TrustsFree diagnostic mock

More Real Estate Investment Trusts questions