The Right of Acquisition: Options in Commercial Real Estate

2017 ◽  
pp. 1-10
Author(s):  
Craig Furfine ◽  
Mitchell Petersen
Keyword(s):  
Real Estate ◽  
Interest Rates ◽  
Real Options ◽  
Fair Value ◽  
Commercial Real Estate ◽  
List Type ◽  
Discounted Cash Flow ◽  
Real Options Theory ◽  
The Real Estate ◽  
The Right

In April 2012 Bill Nichols, a financial analyst at the real estate investment firm Koenig Capital, was about to enter a unique lease renegotiation. One of Koenig's tenants, Hasperat Inc., had sixteen years left on its long-term lease of the Kelley Building, a 165,000-square-foot office building in downtown Cleveland. The lease contained a clause giving Hasperat the option to buy the Kelley Building from Koenig. When Nichols tried to place a mortgage on the property to take advantage of low interest rates, he learned that the existence of this option in the lease contract prevented lenders from offering Koenig their lowest rates. As a result, Nichols had been tasked with renegotiating the lease to remove the option clause. This unexpected event offered Nichols the opportunity to use his financial skills. He needed to calculate the fair value of the purchase option to be able to justify to his superiors by how much they should compensate Hasperat. Students will step into the role of Bill Nichols and apply real options modeling techniques to value the purchase option in Hasperat's lease.After reading and analyzing the case, students will be able to: Apply real options theory to the valuation of a purchase option in a commercial real estate lease Identify the common mistakes in applying traditional discounted cash flow (DCF) analysis to financial problems with option components

scholarly journals Expropriation and Valuation of Agricultural Lands

2020 ◽  
pp. 12-20
Author(s):  
Cengiz Kurt ◽  
Seda Hatice Kurt
Keyword(s):  
Real Estate ◽  
Fair Value ◽  
Real Property ◽  
Land Expropriation ◽  
The Real ◽  
The Real Estate ◽  
Valuation Method ◽  
Constitutional Right ◽  
Procurement Procedure ◽  
The Right

Although the right to property is a constitutional right, the most common administrative process that terminates it is expropriation. The first condition that gives legal validity and legitimacy for the expropriation process to terminate the right to property is public benefit; The second condition is to determine the real value of the expropriated real estate and to pay this amount to the property owner in a reasonable time. Protection of the right to property can only be ensured if the fair value of the real property is determined. It is essential for the administrations to apply the procurement procedure first in expropriation. The determination of the purchase value is provided by the valuation commission formed by the administration. The valuation commissions should be based on the income to be obtained from the lands in accordance with the Expropriation Law No. 2942 in determining the land expropriation values. As a result of the fact that the valuation commissions do not include objective criteria in the valuation method with the income method, the real and fair value of the real estate cannot be reached and there is no agreement between the parties. It is important that members of the valuation commission are objective and knowledgeable in this regard. In this study, the principles regarding the application of the income method in determining the land expropriation values by the valuation commissions of the administration were examined and some suggestions were brought.

The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate

2016 ◽  
pp. 1-14
Author(s):  
Craig Furfine
Keyword(s):  
Real Estate ◽  
Interest Rates ◽  
Private Equity ◽  
Commercial Real Estate ◽  
Strategic Decision ◽  
Holistic View ◽  
Operating Income ◽  
Final Property ◽  
Retail Shopping ◽  
Management Issues

With interest rates near all-time lows in late 2015, Stanley Cirano knew it was an opportune time to consider the financing on his portfolio of commercial real estate. Cirano Properties was the general partner on three separate private equity investments of retail shopping centers in suburban Chicago. The first, Brookline Road Shopping Center, had been acquired in 2006 and had been managed through the financial crisis and real estate downturn. The property was performing well and Cirano wondered whether it made sense to refinance or sell. The second property, Columbus Festival Plaza, had been acquired in a 2010 bankruptcy auction. Although the property had needed a good amount of capital improvements, Cirano was proud of the growth in net operating income he had been able to generate. The final property, Deerwood Acres, had been developed by Cirano himself after acquiring the property in 2013 from the previous owner, who had been operating a go-cart track and drive-in theater on the land. Cirano expected great things from the property, though his lease-up had been slower than anticipated. Although the three properties had different levels of performance and presented different management issues, they all shared the fact that they were all significantly financed, in part, with debt. As the properties were acquired at different times, Cirano had simply selected what seemed like reasonable financing at the time. With his concern that interest rates would soon be rising, Cirano thought it made sense to take a holistic view of his portfolio, consider what debt options were available to him, and make a sound strategic decision on the financing of all his assets at the same time.

scholarly journals AVALIAÇÃO EM MASSA DE IMÓVEIS USANDO GEOESTATÍSTICA E KRIGAGEM BAYESIANA (UM ESTUDO DE EM BALNEÁRIO CAMBORIÚ/SC)

2017 ◽  
Vol 13 (1) ◽  
Author(s):  
Ricardo André Hornburg ◽  
Norberto Hochheim
Keyword(s):  
Real Estate ◽  
Spatial Econometrics ◽  
Moving Average ◽  
Spatial Regression ◽  
Fair Value ◽  
Real Estate Market ◽  
Bayesian Kriging ◽  
The Real Estate ◽  
Bayesian Geostatistics ◽  
Spatially Distributed

RESUMO: Uma das grandes dificuldades que se tem na avaliação em massa de imóveis é encontrar um modelo que mostre a realidade do mercado de imóveis para que se possa construir uma Planta de Valores Genéricos (PVG), usada como base para a cobrança do Imposto Predial e Territorial Urbano (IPTU). Este artigo apresenta um método que combina o uso da econometria espacial com a geoestatística bayesiana visando estimar o valor dos imóveis levando em consideração as interações espaciais devidas às características da localização. Os métodos da regressão espacial e da krigagem bayesiana são usados com esta finalidade. A técnica da regressão espacial possibilita a modelagem da dependência espacial. A técnica da krigagem bayesiana permite estimar valores de variáveis espacialmente distribuídas a partir de valores adjacentes considerados como interdependentes. Dessa maneira, a krigagem é considerada um método de médias móveis. O semivariograma é a ferramenta básica de suporte às técnicas de krigagem, permitindo representar quantitativamente a variação de um fenômeno regionalizado no espaço. Uma aplicação do método proposto é realizada no bairro Centro da cidade de Balneário Camboriú (SC), usando-se uma amostra de dados de mercado para a avaliação em massa de imóveis do tipo apartamento. Destaca-se como contribuição do método apresentado uma possibilidade de melhora na determinação do valor justo dos imóveis numa avaliação em massa, amparando assim a equidade e consequente justiça fiscal quando aplicados pelos municípios. ABSTRACT: One of the greatest difficulties in bulk value appraisal of buildings is to find a model that shows the reality of the real estate market so you can build a Standard Ground Value (SGV), used as a basis for the collection of Land and Territorial Tax Urban (Land Tax). This paper presents a method that combines the use of spatial econometrics with Bayesian geostatistics in order to estimate the value of real estate taking into account the spatial interactions due to the characteristics of the location. The methods of spatial regression and Bayesian kriging are used for this purpose. The spatial regression technique allows the modeling of spatial dependence. The Bayesian kriging technique allows the estimation of values of spatially distributed variables from adjacent values considered as interdependent. In this way, kriging is considered a moving average method. The semivariogram is the basic tool to support kriging techniques, allowing quantitative representation of the variation of a regionalized phenomenon in space. An application of the proposed method is carried out in the downtown neighborhood of Balneário Camboriú (SC), using a sample of market data for the mass evaluation of apartment-type properties. As a contribution of the method presented, there is a possibility of improvement in the determination of the fair value of real estate in a mass valuation, thus supporting equity and consequent fiscal justice when applied by municipalities.

scholarly journals International Real Estate Review

2010 ◽  
Vol 13 (3) ◽  
pp. 323-350
Author(s):  
Andrés Navarro-Galera ◽  
◽  
María del Carmen Pérez-López ◽  
Lázaro Rodríguez-Ariza ◽  
◽  
...  
Keyword(s):  
Real Estate ◽  
Fair Value ◽  
International Standards ◽  
Financial Reports ◽  
The Real Estate ◽  
Construction Company ◽  
Value Evaluation ◽  
Value Model ◽  
Real Estate Assets

Some international standards have proposed that the fair value approach should be used to evaluate real estate assets. The choice to use this method or another approach could influence the quality of the financial reports published in response to information demands by company stakeholders.In this study,we will examine whether fair value evaluation, in the real estate context, improves the utility of construction company financial reports. For this purpose, we have addressed a questionnaire to financial directors that concern the relevance, reliability and viability of this valuation criterion. Based on the opinion of the respondents, our results show that the fair value model would improve the usefulness of financial reports to evaluate company solvency, and would also improve the comparability, timeliness and understandability of such reports.

scholarly journals International Real Estate Review

2010 ◽  
Vol 13 (2) ◽  
pp. 218-237
Author(s):  
Susan Wachter ◽  
Keyword(s):  
World War Ii ◽  
Real Estate ◽  
Interest Rates ◽  
Economic Cycles ◽  
Asset Bubbles ◽  
The Great Recession ◽  
The Great Depression ◽  
Data Points ◽  
Short And Long Term ◽  
The Right

The present period of financial instability is also likely to become known as the end of an era; an era of economic calm and policy consensus on ways to maintain market stability. After World War II, the federal government operated on the Keynesian principles that the right mix of spending, regulation, and interest rates could tame economic cycles and eliminate surges of unemployment. In this period, now known as the Great Moderation, we assumed that we knew how to prevent economic crises, such as the recurrence of the Great Depression. However, it is clear that those principles were erroneous as the economy has entered a lesser, but still severe downturn; the Great Recession. This paper looks at the sources of the ongoing economic crisis and points to the unique role in its origins of real estate asset bubbles and mispriced credit, not only in the origin of this crisis, but of many financial crises. An analysis of the data points to the role of mispriced mortgage backed securities (MBS) in the spread of aggressive mortgage products and the unwarranted price speculation that resulted in massive foreclosures. In turn, the paper addresses the source of mispriced risk in MBS as incomplete markets in real estate and non-tradability of MBS and related securities, which ultimately led to the collapse of financial system, threatening global economic health. The paper also suggests corrective measures that can and should be taken to assist the short and long term recovery.

Enterprise Resource Planning Under Open Source Software

2010 ◽  
pp. 1571-1589
Author(s):  
Ashley Davis
Keyword(s):  
Real Options ◽  
Open Source ◽  
Open Source Software ◽  
Enterprise Resource Planning ◽  
Resource Planning ◽  
Future Trends ◽  
Critical Factors ◽  
Real Options Theory ◽  
The Right ◽  
Options Theory

Open source software is becoming more prevalent in businesses today, and while still a relatively immature offering, open source enterprise resource planning (OS-ERP) systems are becoming more common. However, whether or not an OS-ERP package is the right software for a given organization is a little researched question. Building on the current real options thinking about platform acquisitions, this chapter proposes the five most critical factors to consider when evaluating an OS-ERP package. To adequately do this, a great deal of detail about the current offerings in OS-ERP software is presented, followed by a review of the real options theory and thinking behind using these factors to evaluate OS-ERP options. The international implications of OS-ERP are presented in the “Future Trends” section.

scholarly journals Urban Heritage as Ethos in Resource-Based Small-Scale Property Management

2019 ◽  
Vol 11 (19) ◽  
pp. 5354
Author(s):  
Ingrid Martins Holmberg
Keyword(s):  
Real Estate ◽  
Real Estate Market ◽  
Small Scale ◽  
The Real ◽  
The Real Estate ◽  
Construction Market ◽  
Urban Heritage ◽  
The Real Estate Market ◽  
Set Up ◽  
The Right

This study puts urban heritage in the setting of property owners’ small-scale and resource-based management of ordinary old buildings. This phenomenon indicates a need not only to reconceptualize urban heritage in its actual complex web of negotiations over constraints of the regulation (urban planning, including preservation) and economy (the real estate market) but also to pay attention to the emergence of a new ethos. The case concerns a Swedish second-city context and the specific moment in time: When the 1990s recession had disarmed the real estate market. Based upon ethnographic fieldwork, this study used an assemblage perspective to allow for a following of entanglements of material and matter. The study sheds light upon the emergence of a small-scale and resource-based management in the midst of managerially defined cycles of investment. Important for the output was 1) the set-up of a network of skilled craftsmen, antiquarians, and entrepreneurs ‘of the right mindset that enabled for the authentic material result but that also helped navigate regulation and financial parties, 2) the “alternative market for reverential maintenance and repair” that guaranteed the appropriate supply of materials, products, and skills that differed from the mainstream construction market. For the means of understanding the ethos involved, the study introduced the notion of “factual life-span of buildings”. The overall aim of this article was to contribute to research on heritage urbanism by adding a resource management perspective that focusses on the entanglements of material and matter.

scholarly journals Information for decision-making in in-house and outsourced real estate management organisations

Facilities ◽  
2016 ◽  
Vol 34 (13/14) ◽  
pp. 891-905 ◽  
Author(s):  
Peter Palm
Keyword(s):  
Real Estate ◽  
Decision Maker ◽  
Commercial Real Estate ◽  
Decision Makers ◽  
Content Type ◽  
The Real ◽  
The Real Estate ◽  
Real Estate Sector ◽  
Estate Management ◽  
Real Estate Management

Purpose The purpose of this paper is to examine how the real estate owner (decision maker) insures being able to make informed decisions and how they differ according to organisational form. Design/methodology/approach This research is based on an interview study of nineteen firm representatives, six decision makers and thirteen management representatives, all from Swedish commercial real estate sector. Findings The study concludes that, regardless of organisational setting, the industry has a plan regarding handling information. The decision makers have all secured themselves access to the required/desired information. How this is done and what kind of information it is however differ, if the real estate management is in-house or outsourced. Furthermore, a clear focus on financial and contractual information is evident in both organisational settings. Research limitations/implications The research in this paper is limited to Swedish commercial real estate sector. Practical implications The insight the paper provides regarding required information can shed light on how information systems are built and how to improve your information sharing. Originality/value It provides an insight regarding how the industry, depending on organisation setting, prioritises different information and how the decision maker secures access to it.

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