Comprehensive Property Portfolio Analysis and Investment Strategies

This report provides a comprehensive analysis of property portfolio investments, focusing on the objectives of investors, fund management, and risk mitigation strategies. Part A establishes a $500 million property fund, outlining investment objectives, property types, and funding sources. It addresses issues in portfolio construction, risk management, and compliance, considering the economic and property market context. Part B delves into A-REIT (Australian Real Estate Investment Trusts), specifically ALE Property, examining its current value, diversification, and risk management approaches. The report includes a valuation of the A-REIT, along with investment recommendations, providing a detailed overview of property portfolio management and financial analysis. The report is a student submission on Desklib, a platform offering AI-powered study tools for students.

Running head: PROPERTY PORTFOLIO ANALYSIS
Property Portfolio Analysis
Name of the Student:
Name of the University:
Authors Note:

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PROPERTY PORTFOLIO ANALYSIS
Executive summary:
Investment is made by the investors with a clear and simple objective of earning maximum
amount of return possible on such investment at a preferred level of risk. Thus, in short
maximizing rate of return from investment at a given rate of risk is the main objective of the
investors while deciding to invest their funds on different projects. A detailed discussion below
shows the importance of conducting a detailed appraisal of different investment proposals to
make correct decisions in regards to the investment choices of investors. There are number of
investment opportunities available to the investors in Australia however, selecting and choosing
an optimum investment opportunity to maximize the use of resources is essential to develop an
optimal investment portfolio for the investors. A detailed discussion on various important aspects
related to investment in the country is provided in this document.

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PROPERTY PORTFOLIO ANALYSIS
Contents
Executive summary:........................................................................................................................1
Part A:..............................................................................................................................................4
Objective of investment:..............................................................................................................4
Overview of fund:........................................................................................................................5
Sources and levels of funding:.....................................................................................................6
Issues in construction of property portfolio:................................................................................7
Managing the risks associated with portfolio:.............................................................................7
Compliance issues:......................................................................................................................7
Economic and property market context:......................................................................................8
Future outlook:.............................................................................................................................8
Critical property portfolio management issues:...........................................................................8
Part B:............................................................................................................................................11
Overview of A-REIT:................................................................................................................11
Current value of the portfolio:...................................................................................................12
Diversification of the property portfolio:..................................................................................13
Risk management strategy used by ALE Property:...................................................................14
Forecast profits and balance sheet:............................................................................................15
Valuation of A-REIT:................................................................................................................18
Recommendations of investments:............................................................................................19

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PROPERTY PORTFOLIO ANALYSIS
References:....................................................................................................................................20

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PROPERTY PORTFOLIO ANALYSIS
Part A:
A strategic report to consider different properties for investment is prepared here to establish a
$500 million property fund. A proper detail and discussion is provided to outline the justification
behind selection a particular property or properties to establish the property investment fund.
Objective of investment:
The broad objective of investors in general have already been discussed in brief at the beginning
of this document. However, with the property investment fund the objective is to provide the
investors with stable income over the long term period. Maximizing the wealth of the investors
along with return is the main objective of the property investment fund (Alcock and Steiner,
2017).
Type of property:
Type of property to invest in depends on the market. From productive agricultural land to
residential properties; from non-agricultural land to commercial properties
Investment type:
Different assets and properties shall be considered to make investment from the available fund to
achieve the objectives of the investors. Diversification of the portfolio is to be kept in mind while
making investment decisions and accordingly the types of investment shall be chosen.
Equity target:
The available fund is $500 million and using this fund a suitable property investment fund shall
be created to provide the investors significant amount of return on such investment.
Management cost:

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PROPERTY PORTFOLIO ANALYSIS
Managing a portfolio requires significant amount of effort on the part of portfolio management
team. In return they needed to be paid management fees in line with their efforts and expertise.
Generally the portfolio management organization charge standard percentage of total turnover as
management fees. In this case it has been assumed that the management fees is 1.5% (Boudry,
2011).
Performance fees:
In addition to the management fees in case the portfolio performs better than expected then
performance fees shall also be paid. It is generally when the return on portfolio is significantly
higher than the expected rate of return that the investors are expected to pay performance fees to
the portfolio management team.
Experience of team:
The experience of the team is above 25 years in managing and building optimum portfolios for
the investors.
Overview of fund:
Acquiring residential properties, commercial properties and productive agricultural properties is
the main objective of the fund. This will help the property fund to achieve its objectives of return
and wealth maximization. Diversification of investment properties is essential to the successful
management of a property fund. Considering the rigidity in property investment it is extremely
important use the funds by acquiring such investment properties to improve the ability of the
property portfolio to manage risk and returns. Efficient risk management is possible by
diversification of investment properties. The following criterions shall be considered when
making investment in these properties (Dede, 2018).

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PROPERTY PORTFOLIO ANALYSIS
The residential properties shall be located in metropolitan locations in Australia:
The residential properties will have significant growth over the years if the location of these
properties are attractive. Acquiring properties in metropolitan locations would help the property
portfolio to grow in the future at significant rate.
Commercial properties shall be located where businesses are operating:
The commercial properties must be purchased in the commercial business oriented area to
increase the potential of earning significant return on such properties in the future.
High quality properties:
The properties must be of high qualities with all necessary facilities to attract the buyers in the
future. Facilities such as power, electricity, water and others must be present in these properties
to improve the overall property portfolio (Im, 2012).
Productive agricultural land:
Productive agricultural land is the land where agricultural activities are carried out in the past as
well as in the present by farmers. Productive agricultural land available at relatively low price
compared to residential and commercial properties has huge potential to provide significant
amount of return to the investors in the future.
Sources and levels of funding:
The sources and levels of funding for investment in property or for in any other investment
option is an important consideration and determinant to the overall ability of the portfolio to earn
significant return from such portfolio. It is generally depends on the availability of fund to the
investors. Thus, if investors have their own equity then they can use such equity to make

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PROPERTY PORTFOLIO ANALYSIS
necessary investment. In addition there is also other options such as using debt fund along with
equity to make investment. Considering the size of the portfolio which is $500 million it is
desirable to have both elements of funds in the property investment portfolio. Thus, using equal
portion of equity and equal portion of debt funds will help the investors to diversify the risk in
investment and management the portfolio better (Im, 2013).
Issues in construction of property portfolio:
Number of issues are faced in construction of an efficient portfolio these include managing the
risk and return of a portfolio effectively, investing in appropriate assets, and diversification of
properties in a manner suitable to the objectives of the investors and others. These have to be
considered and given due importance to construct and efficient property portfolio.
Managing the risks associated with portfolio:
The risk of return and deprecation in the value of the portfolio are two of the most common risks
which must be managed effectively by the portfolio management team. Portfolio managers are
mainly concerned with these two risks, i.e. to ensure that the investors are provided with stable
rate of return on their investments and value of the investment portfolio are not depreciated.
Compliance issues:
Complying the legislative rules and regulations while making investment in properties is
compulsory to continue holding the portfolio in the long run and earning return from such
portfolio. In Australia, the rules and regulations are quite strict to ensure that no malpractices are
taken place in investment decisions.

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PROPERTY PORTFOLIO ANALYSIS
Economic and property market context:
Economic and property market in the country is quite encouraging. The country is developed
economy and has a stable market for property. These encourages investors to invest in the
properties. The properties market especially the commercial and residential properties market are
especially vibrant and growth oriented (Newell and Lin Lee, 2012).
Future outlook:
The long term objective of an investor is to maximize his wealth by appreciation in the value of
investment properties. The future outlook of investment portfolio in this case is to manage the
portfolio in such a way to ensure that the probability of appreciation in the value of investment is
extremely high.
Critical property portfolio management issues:
Managing the ever increasing risk of investment and especially considering the effects of new
investment opportunities on the existing portfolio are critical to the effective management of
property portfolio.
Properties identified for investment are as following:
123 Smith Street, Kempsey, New South Wales:

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PROPERTY PORTFOLIO ANALYSIS
The above property is expected to cost $50 million has a total area of 3,297 square meter.
57 St. Johns Road, Glebe, NSW 2037:

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PROPERTY PORTFOLIO ANALYSIS
The above property has a market value of $8.5 million and is built on a total area of 406 square
meter.
155-157 Auburn Street, Goulburn, NSW:
The above property has a current market price of $25 million and has a total area of 1200 square
meter. The above property has a huge car parking facility which makes it a very attractive
property for number of commercial activities including building a shopping Centre.
47 Bourke Road, New South Wales:

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PROPERTY PORTFOLIO ANALYSIS
The value of the property is $60 million and expected to provide a return of 10% over a long
period of time. The total area of the property is 3,792 square meter.
Part B:
In order discuss about A-REIT ALE Property has been selected out of the provided list of A-
REIT.
Overview of A-REIT:
A-REIT is listed in the stock exchange of Australia as a unitized portfolio of property assets.
This was earlier know as listed property trusts however, latter the name has been changed. The
unit trusts of properties not listed in a recognized stock exchange is known as unlisted property
trusts. Private investors often cannot hold large quantum of properties on their own hence, the
need for A-REIT as it generally owns large quantity of properties. By breaking these large
quantity of properties into small units to allow private investors to invest in these smaller value