Download or read book The Cross Sectional Dispersion of Commercial Real Estate Returns and Rent Growth written by Alberto Plazzi and published by . This book was released on 2007 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: We estimate the cross-sectional dispersion of returns and growth in net operating income (NOI) of apartments, industrial, retail and office properties using panel data for U.S. metropolitan areas over the period 1986 to 2002. Cross-sectional dispersion is a measure of the total volatility faced by investors in commercial real estate. To the extent that most of that volatility is difficult to diversify, cross-sectional dispersion may be an appropriate measure of risk. We document that for apartments, industrial, retail, and office properties, the cross-sectional dispersions are time-varying. Interestingly, their time series fluctuations can be explained by macroeconomic variables such as the term spread, default spread, inflation, and the short rate, which capture macroeconomic fluctuations. The total volatilities are counter-cyclical and also exhibit an asymmetrically larger response following negative return shocks, which might be due to leverage and credit channel effects. Finally, we find a positive relation between future returns and their cross-sectional dispersion. This total risk-return trade-off suggests that investors indeed demand compensation for being exposed to total volatility in the commercial real estate market.

Download or read book Expected Returns and the Expected Growth in Rents of Commercial Real Estate written by Walter N. Torous and published by . This book was released on 2016 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Commercial real estate expected returns and expected rent growth rates are time-varying. Relying on transactions data from a cross-section of U.S. metropolitan areas, we find that up to 30% of the variability of realized returns to commercial real estate can be accounted for by expected return variability, while expected rent growth rate variability explains up to 45% of the variability of realized rent growth rates. The cap rate -- that is, the rent-price ratio in commercial real estate -- captures fluctuations in expected returns for apartments, retail properties, as well as industrial properties. For offices, by contrast, cap rates do not forecast (in-sample) returns even though expected returns on offices are also time-varying. As implied by the present value relation, cap rates marginally forecast office rent growth but not rent growth of apartments, retail properties, and industrial properties. We link these differences in in-sample predictability to differences in the stochastic properties of the underlying commercial real estate data-generating processes. Also, rent growth predictability is observed mostly in locations characterized by higher population density and stringent land use restrictions. The opposite is true for return predictability. The dynamic portfolio implications of time-varying commercial real estate returns are also explored in the context of a portfolio manager investing in the aggregate stock market, Treasury bills, as well as commercial real estate.

Download or read book New Frontiers in Real Estate Finance written by Patrick Lecomte and published by Routledge. This book was released on 2021-06-04 with total page 222 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book introduces three innovative concepts and associated financial instruments with the potential to revolutionise real estate finance. The factorisation of commercial real estate with factor-based real estate derivatives is the first concept analysed in this book. Methodological issues pertaining to factors in real estate risk analysis are covered in detail with in-depth academic reference. The book then analyses the digitalisation of commercial real estate. The environment in which buildings operate is changing fast. Cities which used to be made up of inanimate architectural structures are growing digital skins and becoming smarter. Smart technologies applied to the built environment are fundamentally changing buildings’ role in cities and their interactions with their occupants. The book introduces the concept of smart space and analyses the emergence of ‘digital rights’ or property rights for smart buildings in smart environments. It proposes concepts and methods for identifying, pricing, and trading these new property rights which will dominate commercial real estate in the future. Finally, the tokenisation of commercial real estate is explored. Sometimes described as an alternative to securitisation, tokenisation is a new tool in financial engineering applied to real assets. The book suggests two innovative applications of tokenisation: private commercial real estate index tokenisation and data tokens for smart buildings. With factorisation, digitalisation, and tokenisation, commercial real estate is at the forefront of innovations. Real estate’s unique characteristics, stemming from its physicality, trigger new ways of thinking which might have a profound impact on other asset classes by paving the way for micro markets. Factor-based property derivatives, digital rights, and tokens embody how commercial real estate can push the boundaries of modern capitalism and, in doing so, move at the centre of tomorrow’s smart economies. This book is essential reading for all real estate, finance, and smart technology researchers and interested professionals.

Download or read book Private Real Estate Markets and Investments written by H. Kent Baker and published by Oxford University Press. This book was released on 2014-08-07 with total page 311 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides an overview of private real estate markets and investments. The 14 chapters are divided into three sections for conventional and alternative real estate investments and regulatory issues. Conventional investable real assets examined are retail spaces, apartments, offices, and industrial facilities owned by corporate entities. Alternative real estate assets are uniquely and extensively addressed. These include healthcare, both for facilities and the pricing to make it an investable asset; infrastructure contains roads, bridges, and public utilities; and resources are in land, agriculture, oil, and gas. The regulatory section includes appraisal and valuation, brokerage and transaction costs, sustainability, and green buildings. Readers should gain a greater appreciation of what is needed to be successful when investing in private real estate markets. The share of real estate in institutional portfolios has risen above a previous 5% target, as investors avoid the risks of low interest rates. The world's wealth is shifting to emerging markets where real estate is already a dominant asset class and public securities markets are limited. Institutions with long horizons avoid publicly traded markets because they want to capture any premium from illiquidity. Real estate involves local and cultural restrictions on land usage, sustainability and on the regulation of the illiquidity. For information about public real estate, read Public Real Estate Markets and Investments.

Download or read book The Reits Real Estate Investment Trusts written by Kim Hin David Ho and published by Partridge Publishing Singapore. This book was released on 2021-11-26 with total page 354 pages. Available in PDF, EPUB and Kindle. Book excerpt: Chapter 1 examines the significance of ‘green’ buildings on the operational and financial performance of REITs. The Chapter covers different direct real estate sectors, namely office, retail and residential, for the REITS concerned to evaluate the consistency of the results. Chapter 2 looks at the risk neutral and non-risk neutral pricing of real estate investment trusts in Singapore (S-REITs), via comparing the average of the individual ratios (of deviation between expected and observed closing price/observed closing price), with the ratio (of standard deviation/mean) for closing prices, via the binomial options pricing tree model. Chapter3 highlights that while the Markowitz portfolio theory (MPT) is popular in modern finance to model portfolios with maximum total returns (TRs) for a given systematic risk, the more flexible multivariate copula model is introduced that enables investors and portfolio managers to obtain the optimal portfolio. Chapter 4 looks at a value investing framework, in which a REIT and real estate comany investment operation is deemed to be one, where a “thorough analysis”, should promise the safety of a principal and an adequate total return. Chapter 5 examines the market reactions of Malaysia’s listed property trusts and property common stocks to corporate restructuring activities – direct real estate asset acquisitions and new listings. Chapter 6 reports the Monetary Authority of Singapore (MAS) consultations with the Inland Revenue Authority of Singapore (IRAS) and the Ministry of Finance (MOF), to introduce the Income Tax Act (ITA) amendments, and a new temporary relief measure for real estate investment trusts (REITs) in Singapore. The Chapter also looks at the proposal by the Asian Public Real Estate Association (APREA) to the MAS, to create a private REIT structure Chapter 7 looks at the key issues and notes on the valuation of the public real estate investment trusts (REITs) and the real estate companies, adopting several valuation metrics to value REITs on a stand-alone and a relative basis. Chapter 8 looks at the unique Asian REIT institutional environment, pertaining to the S-REIT, while cross referencing it to that of the CapitaMall Trust (S-CMT) and the Hong Kong HK- Link REIT. Chapter 9 summarises the book’s findings and highlights the contributions and recommendations made.

Download or read book The Economics of Commercial Property Markets written by Michael Ball and published by Routledge. This book was released on 2012-10-12 with total page 422 pages. Available in PDF, EPUB and Kindle. Book excerpt: This new text provides a rigorous analysis of real estate markets. Three main sections cover: microeconomics of property markets the macroeconomics of commercial property the financial economics of property Global empirical examples illustrate the theories and issues. This often complex area is made accessible: each chapter contains a boxed summary and questions for self-testing or discussion.

Download or read book Underwriting Commercial Real Estate in a Dynamic Market written by Christian Redfearn and published by Academic Press. This book was released on 2019-05-14 with total page 262 pages. Available in PDF, EPUB and Kindle. Book excerpt: A recurrent theme in Underwriting Commercial Real Estate in a Dynamic Market is that good thinking and good underwriting go together. This stands in contrast with "getting an answer" or even worse "reverse engineering" - getting to a solution by assuming that current trends in market pricing is best. The cases in Underwriting Commercial Real Estate in a Dynamic Market will force readers to recognize that there is no single answer, but rather a range of answers that will depend on numerous perspectives. And, in order to make valuation decisions, they will have to undertake a rich conversation about what constitutes a good trade-off and what does not. Cases can be structured for use with introductory material as well as advanced topics.

Download or read book The Effects of Rental Growth Expectation on Real Estate Return written by Yishuang Xu and published by Open Dissertation Press. This book was released on 2017-01-26 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation, "The Effects of Rental Growth Expectation on Real Estate Return: a Term Structure Model and an Empirical Test in Hong Kong" by Yishuang, Xu, 徐怡爽, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. Abstract: The investor's expectation is instinctively to be linked to the asset's return by the finance experts and analysts. However why and how it affects the return are poorly understood and explained. Can the investor's expectation really move the market? How much the influence does it have? This study looks at this well-known puzzle between real estate returns and investors' expectations on rental income growth of real estate assets. Based on the theoretical model in this study, the questions whether, why and how the investors' expected rental income growth has effects on the real estate returns are answered. The study focuses on both private and public real estate (REITs) returns and examines whether they can be explained by the facts in Hong Kong. The theoretical model is derived from the Gordon Growth Model. The novelty of the model is to define the term structure of interest rate on the expected rental income. Empirically, the linkage between the two markets is identified through the REIT's dividend, which is specified to be distributed from 90% of the real estate asset's income. Under this specification, strong evidence is found for expected rental income growth predictive power. In this study, the relationship between the monthly end-of-period REIT's return and monthly expected rental income growth of corresponded real estate asset is tested by panel model, which does the superb job in fitting both cross-sectional and time-varied return patterns of REITs. As the REITs in Hong Kong had just launched since the end of year 2005, the sample period of this study is from November, 2005 to April, 2010. Unlike the standard asset pricing model, this study adds the investor's expectation as one of the factors which determine the REIT's return to adjust the out-performance tendency of certain asset. The study also confirms the hypothesis in private real estate market by finding that investors' expectation on rental growth imposes a positive and significant impact on the real estate return in Hong Kong. The quarterly data series of macro-economic factors, such as Gross Domestic Production, Inflation rate, Interest rate, Employment rate are tested to confirm their effects on the real estate return together with the investor's expectations on both future rental income and inflation. All four real estate sectors, including residential, office, retail and industrial property sectors, are inclusively tested in this study. For both private and public real estate markets in Hong Kong, the investor's expectation has positive effects on the corresponding asset's return. The evidence in this study shows that the change of investor's expectation would cause positive change of REIT's return. It reveals that the investors' expectation plays a vital role in the movement of both private and public real estate markets. When most investors expect a tendency of increasing earning, the real estate return tends to rise with controlling of other economic factors. Though the conclusion of this study is well-known and frequently used to explain or predict the movement of real estate market, the theory behind it is commonly ignored. This study looks deeper into it by improving Gordon Growth Model to capture the investor's expected rental income growth without econometric forecasting or questionnaire investigation. The series...

Download or read book Asset Location Timing Ability and the Cross Section of Commercial Real Estate Returns written by David C. Ling and published by . This book was released on 2018 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the sensitivity of equity REIT returns to time-varying MSA allocations of REIT property portfolios. Using a large sample of individual commercial property holdings, we find significant cross-sectional and time variation in REIT geographic exposures and the ability of these exposures to explain the cross-section of REIT returns. Importantly, the pattern of MSA exposure effects changes quickly as local market information is incorporated into property values both across MSAs and over time. We further find evidence consistent with REIT managers being able, on average, to both identify MSAs that will outperform in the following year and overcome the costs and delays associated with increasing allocations to these MSAs. This ability to time allocation decisions is most prevalent in non-Gateway markets and varies significantly across MSAs and over time. Furthermore, financially flexible firms with a larger platform and experience owning and operating properties in multiple markets are better positioned to quickly act on investment opportunities they identify in major MSAs. In contrast, the ability to time market exit is more highly correlated with a firm's perceived growth options and investment opportunities.

Download or read book Mispricing Income Growth written by Patrick Daniel Rowe and published by . This book was released on 2007 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper is an investigation into the relationship between real estate capitalization rates and income growth. The paper includes a cross-sectional analysis of approximately 25 markets in the United States. The paper analyzes apartment and office markets separately, for two different periods of time. Multi-variable regression techniques are used to explore the relationships between cap rates in different markets and rent growth, appreciation, and employment growth, as well as Liquidity and Supply Constraint factors. For this analysis, periods of time were chosen ranging from 1996 to 2002 so that subsequent rental growth, appreciation, and employment growth data was available. With this information, future growth of these variables is back tested. The results of the regressions are then compared to the theoretical relationships that should exist between cap rates and future income growth and appreciation. The results show that market pricing does not accurately price future income growth in a consistent manner. This provides significant evidence that the real estate capital market is inefficient in its pricing of assets in different markets based on the future rental behavior in individual markets. The last aspect of the thesis is the development of an investment strategy that capitalizes on the inefficiencies discovered in the analysis. The strategy enables the investor to make investments that should demonstrate superior risk-adjusted returns based on the space market fundamentals in individual markets.

Download or read book Commercial Real Estate written by Lloyd R. Manning and published by . This book was released on 2002 with total page 420 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book REIT and Commercial Real Estate Returns written by Sheridan Titman and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In the years surrounding the financial crisis, the share prices of equity Real Estate Investment Trusts (REITs) were much more volatile than the underlying commercial real estate prices. To better understand this phenomenon we examine the cross-sectional dispersion of REIT returns during this time period with a particular focus on the influence of their capital structures. By looking at both the debt ratio and the maturity structure of the debt we separate the pure leverage effect from the effect of financial distress. Consistent with leverage and financial distress costs amplifying the price decline, we find that the share prices of REITs with higher debt to asset ratios and shorter maturity debt fell more during the 2007 to early 2009 crisis period. Although REIT prices rebounded with the bounce back in commercial real estate prices, financial distress costs had a permanent effect on REIT values. In particular, we find that REITs with more debt due during the crisis period tended to sell more property and issue more equity in 2009, when prices were depressed.

Download or read book Risk and Return in Institutional Commercial Real Estate written by Ryan Hunter Jones and published by . This book was released on 2012 with total page 106 pages. Available in PDF, EPUB and Kindle. Book excerpt: Commercial Real Estate is a large asset class, increasingly owned by professional investment managers. Investment managers need a thorough understanding of the risk return relationship and tools to adequate implement sound investing, portfolio management and risk management strategies. Equilibrium asset pricing models are tools that identify and quantify the risk factors priced by the capital market and establish risk adjusted LONG RUN expected returns. This thesis creates portfolios of properties by property type, geographic location and asset size. Total return indices are created for each portfolio to test single factor and multifactor asset pricing models cross sectionally within the commercial real estate asset class. Historical total return data is used from three sources including: NCREIF; the stock market-based FTSE NAREIT Pure-Property Index Series; and a novel "synthetic" total return index created by the researcher from the repeat sale transaction-based Moody's/RCA CPPI Indices. The asset pricing model test results for the NCREIF and PureProperty indices show that a substantial amount of the variation in LONG RUN total return can be explained by a portfolio's beta with respect to a market index and property specific variables such as property type, location and asset size. The asset pricing model test results for the RCA indices were poor and failed to explain the cross-section of commercial real estate returns. Thus, it appears that certain parts of the commercial real estate market may be operating without a systematic relationship of risk and return.

Download or read book The Risk and Return of Commercial Real Estate written by Liang Peng and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: I compare the performance of the index-based time series approach and the cross-sectional approach in estimating factor loadings of non-traded assets, and show that the latter likely provides less biased and more efficient estimates. I then use the cross-sectional approach to estimate the loadings of privately owned commercial real estate on the Fama and French (1993) factors, the Pastor and Stambaugh (2003) liquidity factor, and two bond market factors, using a sample of 14,115 properties in the 1977-2012 period. I find statistically significant loadings, of which the signs seem consistent across property types, but the magnitude varies. Using the time series approach on the same data, I find insignificant loadings on virtually all factors. To investigate the sources of the weak results from the time series approach, I conduct a Monte Carlo simulation in which both approaches are correctly specified and indices can be estimated perfectly. Simulation results suggest that the cross-sectional approach provides more accurate estimates under reasonable market conditions.

Download or read book Valuation in the Us Commercial Real Estate written by Eric Ghysels and published by . This book was released on 2012 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider a log-linearized version of a discounted rents model to price commercial real estate as an alternative to traditional hedonic models. First, we verify a key implication of the model, namely, that cap rates forecast commercial real estate returns. We do this using two different methodologies: time series regressions of 21 US metropolitan areas and mixed data sampling (MIDAS) regressions with aggregate REITs returns. Both approaches confirm that the cap rate is related to fluctuations in future returns. We also investigate the provenance of the predictability. Based on the model, we decompose fluctuations in the cap rate into three parts: (i) local state variables (demographic and local economic variables); (ii) growth in rents; and (iii) an orthogonal part. About 30% of the fluctuation in the cap rate is explained by the local state variables and the growth in rents. We use the cap rate decomposition into our predictive regression and find a positive relation between fluctuations in economic conditions and future returns. However, a larger and significant part of the cap rate predictability is due the orthogonal part, which is unrelated to fundamentals. This implies that economic conditions, which are also used in hedonic pricing of real estate, cannot fully account for future movements in returns. We conclude that commercial real estate prices, at least at an aggregate level, are better modeled as financial assets and that the discounted rent model might be more suitable than traditional hedonic models, at least at an aggregate level.

Download or read book Commercial Real Estate Analysis Investments written by David Geltner and published by Thomson South-Western. This book was released on 2007-01-01 with total page 848 pages. Available in PDF, EPUB and Kindle. Book excerpt: The well-known and respected authorship team of Geltner and Miller bring you a new edition of what has become the undisputed and authoritative resource on commercial real estate analysis and investment. Streamlined and completely updated with expanded coverage of corporate and international real estate investment, this upper-level real estate text presents the essential concepts, principles and tools for the analysis of commercial real estate (income producing) from an investment perspective. Once again, COMMERCIAL REAL ESTATE ANALYSIS AND INVESTMENTS, 2e, bridges the gap between mainstream finance and the current cutting edge of professional real estate practice, in order to address the implications of their key differences. This new edition continues to integrate relevant aspects of urban and financial economics to provide users with a fundamental analytical understanding and application of real estate investments – now using a student version of ARGUS® software on CD-ROM included with the book. ARGUS software is a Windows-based program used extensively throughout the real estate investment industry to solve complex investment and valuation problems. Also included free on CD is a student version of Crystal Ball®, professional-grade software used to perform risk analysis on commercial investments.Contributing author Piet Eichholtz from the University of Maasstricht contributes an entire chapter that explores international real estate investments, both opportunistically and structurally, by outlining elements for developing and implementing real estate investments successfully abroad. Jim Clayton from the University of Cincinnati thoroughly revised and updated the finance coverage and end-of-chapters questions throughout. In this edition Geltner and Miller enhance their unmatched pedagogy by adding in a discussion of the real options application to real estate development and streamlining the discussion of data returns.

Download or read book The Global Determinants of Direct Office Real Estate Returns written by Ivo De Wit and published by . This book was released on 2002 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the determinants of direct office real estate returns by analyzing rents, capital appraisals, and total returns. A recently compiled global database of major cities in Asia, Europe, and the United States provides a unique opportunity to give a macro-view of the effects of economic growth and supply and demand factors on nominal real estate returns. The global database provides quarterly observations from 1986 through 1999. To address the smoothness problem of appraisal-based price data and regulated rents, we employ the Generalized Method of Moments to estimate a dynamic panel-data model. The model allows us to combine the cross-sectional and time-series dimension in our quarterly data. We find that Gross Domestic Product, inflation, unemployment, vacancy rate, and the available stock all have an effect on real estate returns.