scholarly journals Market heterogeneity, investment risk and portfolio allocation

2017 ◽  
Vol 10 (5) ◽  
pp. 641-661
Author(s):  
Charles-Olivier Amédée-Manesme ◽  
Michel Baroni ◽  
Fabrice Barthélémy ◽  
François Des Rosiers
Keyword(s):  
Real Estate ◽  
Quantile Regression ◽  
Efficient Frontier ◽  
Portfolio Allocation ◽  
Individual Investors ◽  
Investment Risk ◽  
Content Type ◽  
Management Context ◽  
Housing Attributes ◽  
Real Estate Assets

Purpose The purpose of this paper is to address the heterogeneity of real estate assets with regard to investment risk measurement, with Paris’ apartment market as a case study. Design/methodology/approach Quantile regression is used to handle the fact that willingness to pay for housing attributes may vary greatly over both space and asset value categories. The method is alternately applied on central and peripheral districts of Paris, or “arrondissements”, with hedonic indices built for nine deciles over a 17-year period (1990-2006). Portfolio allocation is subsequently analysed with deciles being the assets. Findings The findings suggest that during the slump, peripheral districts show better resilience and define the efficient frontier while also exhibiting a lower volatility. In addition, higher returns are observed for lower-priced apartments, both central and peripheral. During the recovery and boom stages of the cycle, the highest returns are experienced for the cheapest apartments in central locations, whereas upper-priced, centrally located units yield the lowest returns. Originality/value The originality of this research resides in the application of quantile regression in a real estate investment and risk management context. The methodology may raise individual investors’ and practitioners’ attention, especially index providers’.

Evaluating the cost and benefits of earthquake protection of buildings

2018 ◽  
Vol 11 (2) ◽  
pp. 263-278 ◽  
Author(s):  
Benedetto Manganelli ◽  
Marco Vona ◽  
Pierfrancesco De Paola
Keyword(s):  
Real Estate ◽  
Seismic Risk ◽  
Risk Mitigation ◽  
Tax Incentives ◽  
Seismic Retrofitting ◽  
Content Type ◽  
Seismic Risk Mitigation ◽  
The Cost ◽  
Earthquake Protection ◽  
Real Estate Assets

Purpose The purpose of this study is the evaluation of the cost and benefits of earthquake protection of buildings to verify whether the legislative push, through tax incentives, will produce results and lead to a redevelopment of private real estate assets. Design/methodology/approach Through contingent valuation, this research aims to measure the propensity of homeowners to invest in the seismic security of their properties. The sample of homeowners was selected in a southern Italy city, which was characterized by a medium-high seismic hazard. The willingness to pay, once made independent from the family income, was compared with the actual cost of a seismic retrofitting technique to assess its cost-effectiveness. Findings The analysis developed on an example case shows that the economic sustainability of the intervention is only verified when considering the current tax incentives for this type of intervention. Practical implications Choosing to introduce a system to compulsory insurance against seismic risk could certainly be a strong incentive for the implementation of retrofitting interventions on private real estate assets. In this direction, investigations like this can be fundamental to establish the fair risk premium. Originality/value The need for effective seismic risk mitigation policies is also based on the growing awareness of the, often fatal, effects of seismic events, emphasized by the recent medium and high intensity events that hit Italy. The issue of the security of residential buildings is therefore a very topical issue in view of their high seismic vulnerability and the vast number of buildings requiring major seismic retrofitting. Therefore, the propensity of owners to intervene in improving the seismic performance of their properties can be crucial in seismic risk mitigation.

scholarly journals Crowdfunding REITs: a new asset class for the real estate industry?

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Lucia Gibilaro ◽  
Gianluca Mattarocci
Keyword(s):  
Real Estate ◽  
The United States ◽  
Individual Investors ◽  
Diversification Strategy ◽  
Content Type ◽  
The Real ◽  
The Real Estate ◽  
Real Estate Sector ◽  
Real Estate Investments ◽  
Asset Class

PurposeThe paper aims to study the performance of crowdfunding REITs with respect to traditional REITs in order to evaluate the differences in the risk–return profile and their usefulness for a diversification strategy within the indirect real estate investments.Design/methodology/approachThe paper considers the crowdfunding REITs introduced after the JOBS act in the United States and evaluates their performance and risk during the time period 2016–2018. Performance achieved by crowdfunding REITs is compared with other types of REITs in order to evaluate their usefulness for constructing an optimal portfolio strategy based on a standard mean variance approach.FindingsResults show that the performance of crowdfunding REITs is more stable over time with respect to other REITs and the lack of correlation with traditional REITs may be exploited for constructing a more efficient diversified portfolio of indirect real estate investments.Practical implicationsCrowdfunding REITs have different performance with respect to standard REITs and, especially individual investors, may benefit from including this new investment opportunity in their portfolio.Originality/valueThe paper is the first study on the performance of the crowdfunding REITs that is evaluating their usefulness for a diversification strategy within the real estate sector.

Chile retail will struggle as COVID-19 hastens change

2020 ◽  
Keyword(s):  
Real Estate ◽  
Business Model ◽  
Domestic Demand ◽  
Retail Sector ◽  
Shopping Malls ◽  
Social Unrest ◽  
Content Type ◽  
The Social ◽  
Consumer Habits ◽  
Real Estate Assets

Significance Chile’s retail sector is reeling from the successive impacts of the social unrest that erupted in late 2019 and, since March, the COVID-19 pandemic, which has also affected the operations of its larger players in other countries. Even before these two events, the industry was struggling to adapt its business model to changing consumer habits. Impacts Even if domestic demand increases by 7.7% in 2021, as the Central Bank anticipates, it will remain well below its level in mid-2019. Retail is among the sectors where most jobs have been lost during the pandemic, affecting women in particular. Shopping malls may emerge as especially vulnerable to a likely reduction in the return on retail real estate assets.

scholarly journals The impact of lease structures on the optimal holding period for a commercial real estate portfolio

2015 ◽  
Vol 33 (2) ◽  
pp. 121-139 ◽  
Author(s):  
Charles-Olivier Amédée-Manesme ◽  
Michel Baroni ◽  
Fabrice Barthélémy ◽  
Mahdi Mokrane
Keyword(s):  
Real Estate ◽  
Portfolio Management ◽  
Cash Flows ◽  
Commercial Real Estate ◽  
Content Type ◽  
Holding Period ◽  
Specific Risk ◽  
The Impact ◽  
Real Estate Assets ◽  
Rental Value

Purpose – The purpose of this paper is to demonstrate the impact of lease duration and lease break options on the optimal holding period for a real estate asset or portfolio. Design/methodology/approach – The authors use a Monte Carlo simulation framework to simulate a real estate asset’s cash flows in which lease structures (rent, indexation pattern, overall lease duration and break options) are explicitly taken into account. The authors assume that a tenant exercises his/her option to break a lease if the rent paid is higher than the market rental value (MRV) of similar properties. The authors also model vacancy duration stochastically. Finally, capital values and MRVs, assumed to be correlated, are simulated using specific stochastic processes. The authors derive the optimal holding period for the asset as the value that maximizes its discounted value. Findings – The authors demonstrate that, consistent with existing capital markets literature and real estate business practice, break options in leases can dramatically alter optimal holding periods for real estate assets and, by extension, portfolios. The paper shows that, everything else being equal, shorter lease durations, higher MRV volatility, increasing negative rental reversion, higher vacancy duration, more break options, all tend to decrease the optimal holding period of a real estate asset. The converse is also true. Practical implications – Practitioners are offered insights as well as a practical methodology for determining the ex-ante optimal holding period for an asset or a portfolio based on a number of market and asset-specific parameters including the lease structure. Originality/value – The originality of the paper derives from its taking an explicit modelling approach to lease duration and lease breaks as additional sources of asset-specific risk alongside market risk. This is critical in real estate portfolio management because such specific risk is usually difficult to diversify.

Determining customers’ preferences for housing attributes in India

2016 ◽  
Vol 9 (4) ◽  
pp. 502-519 ◽  
Author(s):  
Vijay Kumar Gupta ◽  
Gunjan Malhotra
Keyword(s):  
Real Estate ◽  
National Capital Region ◽  
Kano Model ◽  
Content Type ◽  
The Real Estate ◽  
Real Estate Sector ◽  
Indian Consumers ◽  
National Capital ◽  
Cross Tabulation ◽  
Housing Attributes

Purpose The purpose of this paper is to understand customers’ preferences for housing attributes in India. Design/methodology/approach The study highlights the attributes important to the customer when purchasing residential property. The Kano model has been used to understand these preferences of consumers. The data are collected across Delhi and the National Capital Region and have been analyzed using the cross-tabulation approach. Findings Demographics of the consumers play an important role in deciding purchase of residential real estate. Because of their income level, Indian consumers prefer low-rise residential complexes. Originality/value The study helps to understand the diverse behavior of Indian consumers when they invest in the real estate sector, especially residential.

The pricing of corporate real estate holdings on the UK capital market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Julian Seger ◽  
Kristina Stoner ◽  
Andreas Pfnuer
Keyword(s):  
Real Estate ◽  
Capital Market ◽  
Service Industries ◽  
Content Type ◽  
Balance Sheets ◽  
Corporate Real Estate ◽  
The Uk ◽  
Real Estate Assets ◽  
Estate Ownership ◽  
The Capital Market

Purpose The purpose of this study is to find out if corporate real estate ownership is priced into the capital market performance of non-property companies in the UK. This is of particular interest because ownership still represents a significant weight on the balance sheets and is predominantly considered unfavourable due to its bulkiness and difficult revisability in the event of changes in space demand. This draws attention to the UK as one of the most important European economies that have been exposed to strong uncertainties and dynamics, for example, due to the withdrawal voting of the United Kingdom from the European Union (BREXIT). Design/methodology/approach A first look at the real estate assets reported in balance sheets provides insight into possible changes in ownership strategy. This serves as a basis for subdividing companies based on their real estate assets using a portfolio-based approach and that are then analysed using the Fama and French multi-factor model with regard to their influence on capital market returns. Findings In general, the share of real estate assets has fallen over the past 10 years, although coinciding with BREXIT voting, some industries such as manufacturing show a turnaround. At the same time, ownership is priced in as a factor on the capital market, which applies to a sample across industries, as well as to separately considered sectors in the manufacturing and service industries. The pricing also shows a counter-cyclical pattern. Practical implications Corporate real estate management should be aware of the negative influence of ownership, especially against the background of economic fluctuations. The reduction of ownership can reduce the associated cost of capital and increase company success. Originality/value Previous UK-related studies mostly refer to a period before the global economic crisis in 2008, and therefore, are too old to reflect a changed view on corporate real estate ownership because of new corporate environmental conditions, based on inaccurate proxies or mainly refer to the retail segment. This research gap is closed.

Real estate portfolio construction for a multi-asset portfolio

2015 ◽  
Vol 33 (6) ◽  
pp. 548-573 ◽  
Author(s):  
Jon R.G.M Lekander
Keyword(s):  
Real Estate ◽  
Data Series ◽  
International Investments ◽  
Content Type ◽  
The Real ◽  
The Real Estate ◽  
Asset Portfolio ◽  
Sector Type ◽  
The Impact ◽  
Real Estate Assets

Purpose – The purpose of this paper is to explore how tenant end demand dependence and investment market segmentation, as estimated through sector type, impacts real estate portfolio strategy in the context of the multi-asset portfolio. Design/methodology/approach – The analysis is performed for six investor domeciles, for domestic and international investments over several cycles. The analysis is performed in a mean variance framework. Findings – The findings are consistent with the hypothesis that an investor benefits from investing in real estate assets where end demand is dependent on local factors rather than global factors. Practical implications – The efficiency of the overall multi-asset portfolio benefits from a deeper understanding of how the real estate portfolio is constructed. Locally dependent real estate, i.e. real estate that is dependent on local economic factors, tends to better support the overall portfolio than do real estate that is dependent upon global factors. Originality/value – The paper contributes to the broader knowledge through extending earlier studies using similar methodology by extending the data series to cover the impact of the latest global financial crises, as well through extending the knowledge how the real estate portfolio should be constructed to better support the overall objectives of the multi-asset portfolio.

The energy efficiency of corporate real estate assets

2016 ◽  
Vol 18 (2) ◽  
pp. 68-101 ◽  
Author(s):  
Markus Surmann ◽  
Wolfgang Andreas Brunauer ◽  
Sven Bienert
Keyword(s):  
Energy Efficiency ◽  
Energy Consumption ◽  
Real Estate ◽  
Energy Management ◽  
Environmental Performance ◽  
Corporate Environmental Performance ◽  
Total Energy Consumption ◽  
Content Type ◽  
Building Characteristics ◽  
Real Estate Assets

Purpose On the basis of corporate wholesale and hypermarket stores, this study aims to investigate the relationship between energy consumption, physical building characteristics and operational sales performance and the impact of energy management on the corporate environmental performance. Design/methodology/approach A very unique dataset of METRO GROUP over 19 European countries is analyzed in a sophisticated econometric approach for the timeframe from January 2011 until December 2014. Multiple regression models are applied for the panel, to explain the electricity consumption of the corporate assets on a monthly basis and the total energy consumption on an annual basis. Using Generalized Additive Models, to model nonlinear covariate effects, the authors decompose the response variables into the implicit contribution of building characteristics, operational sales performance and energy management attributes, under control of the outdoor weather conditions and spatial–temporal effects. Findings METRO GROUP’s wholesale and hypermarket stores prove significant reductions in electricity and total energy consumption over the analyzed timeframe. Due to the implemented energy consumption and carbon emission reduction targets, the influence of the energy management measures, such as the identification of stores associated with the lowest energy performance, was found to contribute toward a more efficient corporate environmental performance. Originality/value In the context of corporate responsibility/sustainability of wholesale, hypermarket and retail corporations, the energy efficiency and reduction of carbon emissions from corporates’ real estate assets is of emerging interest. Besides the insights about the energy efficiency of corporate real estate assets, the role of the energy management, contributing to a more efficient corporate environmental performance, is not yet investigated for a large European wholesale and hypermarket portfolio.

Quantification of financial consequences of buildings' ageing: analysis of panel building-level data from the Polish office space market

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Bolesław Kołodziejczyk ◽  
Dmytro Osiichuk ◽  
Paweł Mielcarz
Keyword(s):  
Real Estate ◽  
Financial Performance ◽  
Content Type ◽  
Financial Outcomes ◽  
Level Data ◽  
Real Estate Investments ◽  
Occupancy Rates ◽  
The Impact ◽  
Real Estate Assets

PurposeRelying on a unique proprietary Polish office market space database, the paper attempts to quantify the impact of buildings' age on the financial performance of real estate assets.Design/methodology/approachPanel econometric modeling was utilized to disentangle the impact of buildings' functional obsolescence and technical deterioration on their long-term financial performance.FindingsIn line with casual empiricism, our findings show a negative associative link between properties' age and potential lease revenue. The concomitant stickiness of service charges presages a possible long-term deterioration of financial outcomes of real estate investments. While older buildings generally have higher occupancy rates, the absorption rates are found to be negatively affected by the properties' age. On the bright side, the elasticity of vacancy rate with respect to rental rates is found to decrease as buildings get older. Further, the rent differential is confirmed to be more pronounced in higher age properties hinting at an existing potential for price discrimination, which may at least partially compensate for stagnant rents.Originality/valueOur empirical results confirm the properties' age to be a statistically significant factor in shaping the long-term performance of real estate assets, which should be better accounted for in financial projections for real estate developments.

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