Question #12
Reading: Reading 33 Real Estate Investments
PDF File: Reading 33 Real Estate Investments.pdf
Page: 7
Status: Incorrect
Correct Answer: A
Your Answer: B
Question
Which of the following most accurately identifies one of the characteristics of a private equity investment in income-producing real estate?
Answer Choices:
A. Sensitivity to the credit market
B. Homogeneity
C. Passive management
Explanation
Real estate values are sensitive to the cost and availability of debt capital since large
amounts of borrowing are required to purchase real estate properties. Real estate is
heterogeneous, as no two properties are the same. Direct ownership of real estate
properties is management intensive. Other unique characteristics possessed by real estate
properties include: fixed location, high unit value, depreciation, high transaction cost,
illiquidity, and difficult to value.