Another advantage associated with REITs is the requirement to pay a high percentage of the revenue to its shareholders – in the US it is defined that at least 90% of the revenue has to be distributed each year (Krewson-Kelly and Thomas, n.d.). In certain cases, the REITs are choosing to distribute up to 100% of its ordinary income and capital gains as this enables to save most of the taxes that would otherwise be payable at the entry level (Simontacchi and Stoschek, 2011). Same as in the US, in countries such as the UK, Argentina, South Korea et al, it is also mandatory for REITs to distribute 90% of the total revenue (Stooker, 2014). In the UAE the minimum dividend payment requirement stands at 80% of the total audited annual net income (Enbdreit.com, …show more content…
The large portion of the annual profit that is distributed through dividends (80% to 90% depending on the jurisdiction, as elaborated above) has a short-term positive aspect for investors; however, the remaining 10% of profit available for reinvestment is limiting the REITs growth potential. The fund managers, when seeking to increase further acquisition potential are usually seeking funds from financial institutions which is increasing the interest payments and decreasing the future profits. Apart from these risks there are also other potential disadvantages related to the cyclic nature of real estate market (such as a potential capital depreciation) and the increasing property taxes in some jurisdictions (Barnes, …show more content…
Shun, 2005). However, for the purpose of this research and later analysis of the REITs performance and comparison to S&P 500 index, the classification of REITs based on the investment philosophy will be elaborated. According to this classification criterion, REITs can be classified into the following categories (Fabozzi, Anson and Jones,
This case study examines various real estate contracts – the Real Estate Purchase Contract (REPC) and two addendums labeled Addendum No. 1 and Addendum No. 2 – pertaining to the sale of 1234 Cul-de-sac Lane in Orem, Utah. The buyers in this contract are 17 year old Jon D’Man and 21 year old Marsha Mello; the seller is Boren T. Deal. The first contract created was Jon and Marsha’s offer to purchase Boren’s house. This contract was created using the RESC form, which was likely provided by their real estate agent as it is the required form for real estate transactions according to Utah state law. The seller originally listed the house on a Multiple Listing Service (MLS); Jon and Marsha agreed that the asking price was too high for the neighborhood (although we are not given the actual listing price), and agreed to offer two-hundred and seven-thousand dollars ($207,000) and an Earnest Money Deposit of five-thousand dollars ($5,000). Additionally, the buyers requested that the seller pay 3% which includes the title insurance and property taxes. After the REPC form was drafted, the two addendums were created. Addendum No. 1 is from the seller back to the buyer, and Addendum No. 2 is the buyer’s counteroffer to the seller.
This paper is written to provide a reasonably comprehensive overview of Section 1031 of the IRC as it pertains to real estate transactions, and to offer some thoughts on the wealth-creation advantages that 1031 Exchanges offer.
AS REI strives to meet consumer demand they also need to pass various legal and regulatory restrictions in order to meet the federal safety requirements. One great example would be helmets where in order for them to be sold they need to meet tough safety requirements set forth by state laws. Usually depending on the state different age and conditions vary. Usually helmets made for specific sports will have a much higher cost than those made for minimum usage like bicycle helmets. Even though bicycle helmets still have a strict safety requirement. To benefit from the safety standards consumers have found that is best to pay ore for these specific products.
This case study addresses the issues face by Kelwhit & Torilaine Enterprises Ltd (K&T), and help to make decision of K&T’s future growing direction. The key question is if K&T should take more stores to expand the business under the current circumstances.
Client was arrested on 11/30/2015. Client reported she was incarcerated at Riker’s Island. On 1/5/2016, Client walk in the Social Service Office to informed this worker that she re-entered the shelter on 1/5/2016. Client in the meeting had body odor. Client reported since 11am she being asking onsite RA for her personal belonging so that she can take a shower and changes her clothes. Client continues to report due to limited staff onsite she was told to wait until the RA return from lunch. . In the meeting client was dressed in slack black pants and sweat black hooded sweater. She appears to be calm, cooperative and forthcoming with information.
As noted in the case, their initial payout ratio was 15%. However, when they considered increasing their dividends, they wanted the payout ratio to be 25% to 30%. The issue at hand is whether or not they can keep a consistent payout even with their drop in sales and earnings in 2003. T...
Recreational Equipment, Inc. (REI) loves to be outside, loves to play and they know first-hand how important it is to have quality outdoor gear. With a 100% satisfaction guarantee REI stands behind its award winning products. REI strives to reduce environmental footprints, they support nationwide efforts to clean beaches, restore local habitats and to build trails.
2014, CT REIT completed 13 property acquisitions all of which made up approximately 1.5 million additional Square feet of gross leasable area. This then translates to long term monthly cash distributions on a tax- efficient basis for it's shareholders.
Each year, America’s travel and tourism industry generates approximately $1.5 trillion dollars in economic output, or about 2.6% of the country’s gross domestic product (Select USA, 2016). Nearly 20% of this economic activity is directly related to accommodations, which serve the short term lodging needs of pleasure and business travelers. Unlike other American economic sectors, this lodging industry is a highly fragmented, diversified market with an incredible variety of suppliers. Temporary overnight lodging can range from undeveloped campsites, hostels, and capsule hotels all the way up to mansions and incredibly luxurious five store hotels. Price ranges run the gamut from just a few dollars a night to thousands of
When prices increase, the quantity decrease (Graph 1) and new firms enter the market in order to make economic profits. However this does not mean the real estate agents or brokers earn more money. On the contrary, the prices they charge may increase, but the number of houses each sell do not change (Goolsbee, 2005, Online). From this it is evident that the price of products in the real estate market is not affected by the entry of new firms.
Naser, K., Nuseibeh, R. and Rashed, W., 2013. Managers' perception of dividend policy: Evidence from companies listed on Abu Dhabi Securities Exchange. Issues in Business Management and Economics, 1(1), pp. 001-012.
Each step of the appraisal process involves an unknown amount of estimation error. The combination of these errors is unlikely to produce a perfect, error-free estimate of value. Thus, appraisal error is virtually unavoidable. Investors need reasonable estimates of value when buying, selling, or retaining commercial property, so an unknown amount of appraisal error adds uncertainty to the decision-making process. Despite the uncertainty, investors have learned to make allowances for appraisal error in their decision-making processes. The way in which real estate investors interpret appraisal errors has a material effect upon the decisions that they make. In particular, the predominant belief among real estate professionals is that appraisal error is random. This belief materially influences investor attitudes toward portfolio management and the valuation process itself. Lack of understanding of the relative magnitudes of random and nonrandom components of total appraisal error has consequences for optimal portfolio strategies. For example, investors who deem the bulk of total appraisal error to be random may reasonably conclude that error in estimates is beyond their control or influence. To minimize total portfolio valuation error, such investors may assemble large, diverse portfolios even though the cost of owning an array of properties of various types and in various locations is expensive. On the other hand, if the bulk of total appraisal error is nonrandom, investors would do better to pay attention to improving value estimates on each property rather than hoping that the errors in values of a large pool of properties will offset one another. In particular, investors should institute valuation controls and procedures to minimize the errors in each valuation of individual portfolio assets. Such controls might include obtaining multiple simultaneous estimates, changing appraisers for each periodic revaluation, or increasing the frequency of valuations. This conclusion becomes particularly significant in light of studies like Miles that determine that the typical magnitude of total appraisal error is about ten percent of appraised value. Information in three recent empirical studies provides evidence that previous appraisal research has been mistaken in assuming most appraisal error to be random. The demonstration that most appraisal error is nonrandom should encourage real estate investors to focus additional attention on individual asset selection and valuation at the expense of portfolio assembly.
William Sharpe, Gordon J. Alexander, Jeffrey W Bailey. Investments. Prentice Hall; 6 edition, October 20, 1998
According to Investopedia (Asset Allocation Definition, 2013), asset allocation is an investment strategy that aims to balance risk and reward by distributing a portfolio’s assets according to an individual’s goals, risk tolerance and investment horizon. There are three main asset classes: equities, fixed-income, cash and cash equivalents; but they all have different levels of risk and return. A prudent investor should be careful in allocating each asset class to his portfolio. Proper asset allocation is a highly debatable subject and is not designed equally for everybody, but is rather based on the desires and needs of the individual investor. This paper discusses the importance of asset allocation, the differences and the proper diversification within the portfolio.
Real estate is a fixed, tangible and immovable asset in form of houses or commercial property (Seldin & Richard 1985). Real estate market involves developing, renting, selling/purchasing and renovating of these assets (houses). Market participants includes developers (contractors, engineers, and so on), facilitators (mortgage companies, real estate brokers, banks, management agents and so on), owners, renters (leasers) and renovators (Seldin & Richard 1985). Like other economic markets, real estate markets have internal and external forces that make impacts in the market (Seldin & Richard 1985).