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You are a real estate investment manager at a state pension fund with a very large diversified portfolio. Your

real estate allocation has fallen below the fund's target portion of the overall portfolio because your stock market investment allocation gained value last year. Also, your managing director and you think there are some very interesting opportunities available at the moment due to market conditions. You are fortunate in that the fund will allow you to invest in debt, equity or real estate, but the volatile economy (US and overseas) provides no clear direction in the market. Despite this, you have found three distinct opportunities, each of which can consume the entire $100 million allocation you need to place within the next month. You are otherwise sufficiently diversified such that a $100 million acquisition of any of the following will not adversely impact the fund's balance.

The opportunities are:

• A 300,000 SF office building in a CBD that can be purchased at an unlevered 5% capitalization rate. You're not sure if it's a bit pricey, and you will have to finance it within six months and lever the return to meet your goals. You may assume that the due diligence has been done and you are satisfied that the property is appropriate for the fund. The property is "in transition" with one-third of the leases expiring within two years and another third in five years.

• A portfolio of CMBS bonds issued in 2019 with the bonds maturing over various terms depending upon tranche -refer to Ready Capital Mortgage Trust 2019-5 deal. Look at the next page for pricing information, yields, and average life of the tranches.

• A secondary stock offering for a large retail REIT (rated Baa1) with a diversified portfolio by geography and tenant throughout the USA. The issuer plans to raise $500 million of new equity. The REIT's dividend yield is 6%. Gross assets are approximately $13.4 billion. The REIT's portfolio is levered at 42% (debt + preferred/gross assets), secured debt/gross assets is 4.1%, Net debt/EBITDA is 6x, and fixed charge coverage is 3.6x at 2Q19. The prospectus includes the typical statement that the money will be used for operations, to pay down debt and to make future opportunistic acquisitions.

Your managing director wants a review of the pros and cons of each investment, plus your recommendation for the fund's actual investment.

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