What challenges do hybrid REITs commonly face?

Hybrid REITs, which combine investments in both physical properties and mortgage financing, indeed face unique challenges due to their dual focus. The correct choice highlights that managing both property investments and mortgage financing requires specialized skills and resources. Each aspect demands different strategies for operations, maintenance, market analysis, and tenant management, which can complicate the overall management of the REIT. This dual responsibility can also expose the hybrid REIT to risks associated with both real estate market fluctuations and the lending markets.

In terms of the other choices, lacking diversification in property types is not an inherent challenge for hybrid REITs since they often invest in a range of property types alongside mortgages. Investing exclusively in residential properties is incorrect because hybrid REITs typically encompass various asset classes, including commercial and industrial properties. Limited access to capital markets is not a unique issue for hybrid REITs; many factors impact capital access across all types of REITs, making this challenge not exclusive or defining for hybrids. Therefore, the primary challenge stems from the complexities involved in managing a diverse investment strategy that spans both real estate and mortgage lending.