Private Real Estate Research Articles

Infrastructures and Sustainability: An Estimation Model for a New Highway Near Genoa

The economic development of a territory is strongly correlated to its level of infrastructure (railway, roads, etc.); the complexity of this type of works requires careful planning and design that cannot be separated from the assessment of the impacts generated on citizenship affected by the new infrastructures. This study deals with the instrument defined by the Liguria Region for the implementation of infrastructures through the instruments called “Programmi Regionali di Intervento Strategico—P.R.I.S.” (Regional Strategic Intervention Programs) established by the Regional Law n. 39/2007. The aim of the P.R.I.S. is to guarantee the social protection of citizens that reside (as owners or tenants) or carry out economic activities in real estate units incompatible with the construction of the infrastructure, according to the main Italian law (Presidential Decree n. 327/2001) about the expropriation of private real estate for the construction of public works. In particular, the construction of a new link of the A7-A10-A12 motorway sections near the city of Genoa (called “Gronda”) is considered. The new infrastructure involves the expropriation of about 100 residential units and the relocation of about 50 production activities; the related P.R.I.S. defines the conditions that allow social cohesion through the recognition of indemnities for the expropriation of the real estate properties and the compensation of other expenses that the residents have to pay for their relocation. The valuation of the indemnities is developed through a multi-parameter model applicable for the estimation of real estate units (residential and productive) at a large-scale (mass appraisal); it is derived from the Market Comparison Approach and considers the most meaningful real estate characteristics. The aim is to develop a mass appraisal estimation model applicable in an easy way on real estate units with different destinations use. The model can be applied for the estimation of ordinary and special indemnities to be recognized for owners and tenants affected by the expropriation of their real estate units for the construction of public projects.

The financialization of rental housing: Evictions and rent regulation

Evictions in the private rental sector have acquired primary importance in the public debate. Unaffordable rents and insecurity in the private rented sector have been appointed as one of the primary reasons for homelessness. Due to high rental prices and a chronic housing shortage, families who are not able to find alternative accommodation might fall into homelessness when they are evicted from their homes. This study contributes to the current understanding of the conditions that led to the lack of affordable housing and limited housing options in Ireland. While a range of factors contribute to the housing and homelessness crisis in the country, this paper examines current data and legislation relating to the entry of corporate landlords into the private real estate market. In the face of the unhelpful structural trends of rising poverty and increasing homelessness, this work argues that current levels of homelessness are associated with insecurity in the private rented sector and rising rent unaffordability. This paper finds that the current housing policy framework that focuses on temporary remediation is increasing the commitment to financial actors connected to global corporations and collaborating to the weak regulation of the housing market.

A Behavioral Interpretation of the Nav Discount Puzzle in Listed Real Estate Companies

Executive Summary The net asset value (NAV) discount is a long standing puzzle in the listed real estate context. In this paper, we extend the literature's rational and noise trader explanations by exploring the influence of specific irrational behaviors. Based on behavioral biases identified in the stock and real estate markets, we hypothesize the existence of a relation between lagged NAV growth and the NAV discount. The findings provide initial evidence of trend-chasing behavior between the dual real estate markets. The results have broader implications for the perception of the relation between public and private real estate markets.

Private Real Estate Returns, Style Drift, and Procyclical Risk Taking

This paper documents that development exposure is an important determinant of private real estate returns and market risk exposure. It also documents that open-end private real estate funds have time-varying, procyclical market risk exposure through their development activities. As such, these funds are disproportionately exposed to the downside of the market cycle. Lastly, I find that fund flow pressure is the primary driver of time-varying development exposure. Funds buy a higher proportion of safe, liquid assets compared to risky, illiquid assets when they have larger unfulfilled subscriptions. While this increases assets under management quicker, it also hurts existing investors by decreasing their market risk exposure at the time when it is the most desirable and beneficial. Additionally, funds stop developing as redemption requests increase, leading to lower market risk exposure when the market recovers.

Practical Applications of Another Look at Private Real Estate Returns by Strategy

<h3>Practical Applications Summary</h3> In <b>Another Look at Private Real Estate Returns by Strategy</b>, from the Special Real Estate Issue 2019 of <b><i>The Journal of Portfolio Management</i></b>, authors <b>Mitchell A. Bollinger</b> and <b>Joseph L. Pagliari, Jr.</b>, demystify the levels of risk-adjusted, net-of-fee returns that investors earn across value-add and opportunistic real estate funds, in comparison to the returns of core-strategy funds. The article also examines the fee structures across these various real estate strategies, and evaluates whether or not they are justified. They conclude that core strategies have outperformed both value-add and opportunistic strategies on a risk-adjusted net-of-fee basis.

Estimating Economic Benefits from Urban Green Space in Shaanxi Province with a Simultaneous Equations Model (SEM)

In this paper, the economic benefits from urban green space in Shaanxi Province are estimated with a simultaneous equations model (SEM) in this paper. The conclusion is drawn as follows :(1) With the increase of investment, the urban green space of Shaanxi province has been continuously expanding. However, the new urban green space has not generated any social and economic benefits yet, and each square kilometer of it requires an investment of 80 million yuan of GDP. (2) Investment plays an important role in generating new urban green space. The coefficient of investment (a2=4.89, p<0.05) indicates that a private real estate investment of 1 billion yuan can generate 4.890 square kilometers of urban green space. (3) Among five urban spatial models, the expansion of urban transportation space and urban industrial space can promote the growth of GDP and bring new social and economic benefits. In the end, possible reasons on these results are discussed in order to provide a frame of reference to promote the development of urban green space planning in Shaanxi province.

Exchange-traded fund investing as European open-end diversified core equity real-estate funds' cash substitute

PurposeThe study is set to explore a viability for substituting part of cash holdings within European open-end diversified core equity (ODCE) real-estate funds with listed real-estate exchange-traded fund (ETF) alternative. Academically, this research bridges a knowledge gap within private real-estate market research.Design/methodology/approachFirst, the study investigates the correlation between ODCE and ETFs to assess series interdependence. Next, the study generates a blended ODCE and ETF portfolio and examines its performance by quantifying a) the contribution to returns and b) the diversification benefits.FindingsThe findings suggest that a 1 percent spare cash allocation to an ETF increases ODCE fund returns by few bps although the diversification benefits are more nuanced.Practical implicationsReal estate and other investment vehicles are encouraged to review their cash-holding strategies. Real estate, infrastructure or private equity vehicles could designate a small proportion of available cash to asset class-specific ETFs. These cash substitutes are likely to increase returns and could strengthen diversification, although there are some caveats. For ESG-conscious investors, sustainable ETFs and associated passive conduits with strong responsible investment characteristics could provide cash replacement alternatives at the margin.Originality/valueThe study adds additional evidence on the contested issue of blending private and public real estate.

Negotiation or Schedule-Based?

Problem, research strategy, and findings: Local governments can secure valuable public benefits from private real estate development through negotiations or schedule-based exaction programs. Nevertheless, few studies have empirically examined their relative strengths and weaknesses. In this study I compare the experiences of two major U.S. cities, Boston (MA)—where exactions are heavily negotiated—and Seattle (WA)—where public benefits are secured through statutory exaction programs with pre-established schedules. I analyze the entitlement processes of large-scale projects approved in 2016 in each city and show that both approaches have their own strengths and weaknesses. Boston was able to extract substantial public benefit packages, but uncertainty was high, and projects were subject to inconsistent decision making at times. By contrast, Seattle’s schedule-based approach was found to be fair and certain while yielding moderate public benefit packages. Despite the commonly held belief that negotiating land uses on a project-by-project basis is associated with significant process delays and a lack of transparency, the case of Boston offers a different perspective. Boston’s projects were approved in a shorter time frame and were subjected to more public meetings per project than Seattle’s.Takeaway for practice: U.S. local governments are likely to rely on both negotiations and schedules to extract public benefits from real estate developments. Though schedule-based exaction programs ensure overall fairness and certainty of the entitlement process, project-by-project negotiation could potentially yield significant public benefits. However, uncertainty can be high in a negotiation-heavy system, which may disadvantage small-scale developers. Moreover, negotiations may open up room for poor and inconsistent decision making, which must be mitigated by establishing clear policies and standards to guide the negotiation process. Both negotiation and schedule-based processes can be designed to ensure a transparent process with multiple public participation opportunities.

Law and Inclusive Urban Development: Lessons from Chile’s Enabling Markets Housing Policy Regime

Abstract This Article addresses the recent international trend in development theory and practice towards an “enabling markets” approach in housing policy. This approach delegates to housing markets the responsibility of providing affordable housing and therefore limits the role of government to stimulating the private sector through targeted subsidies. I ask whether an enabling markets policy constitutes an adequate regulatory strategy for the provision of sustainable housing solutions for the urban poor. I explore this question through an in-depth case study of Chile’s housing policy regime, which was a pioneer in the implementation of an enabling markets strategy; for over four decades, successive governments have been able to provide access to housing to a vast portion of low-income residents, in the context of a regulatory framework that favors private real estate development. However, this success story is marred by an important failure. Through its market-based regime, Chile has routinely clustered low-income families on cheap land, usually located at the periphery of the country’s urban centers, and often in areas with poor public and private services. The main argument I present in this Article is that Chile’s commitment towards an enabling markets regulatory regime has helped to reinforce the pattern of urban exclusion, and has prevented the government from experimenting with alternative policy strategies that may be more effective in promoting inclusionary housing. The main limitation of the enabling markets strategy is that it assumes that the delivery of targeted subsidies will generate an adequate supply of affordable housing for the low-income sector. The Chilean experience shows that this assumption is false, because subsidies are rarely sufficient to enable beneficiaries to compete for well-located housing, while private companies have strong incentives to agglomerate low-income housing in the least desirable urban areas. I argue that, in order to promote urban inclusion, governments need to experiment with an alternative policy strategy that I call a “planning housing markets” approach, which involves using land-use governance mechanisms to ensure that low-income housing is fairly distributed within cities.

What happens during flight to safety: Evidence from public and private real estate markets

AbstractLittle is known about the performance of public and private real estate investments during and after flight to safety (FTS). We document that public real estate securities offer a partial hedge during FTS events. In addition, periods with multiple FTS events forecast slower economic growth, resulting in weaker long‐run investment performance of real estate assets. Following FTS, the probability of a drop in real estate cash flows increases by up to 20%, with quarterly cash flow growth rates declining by as much as 27%. Private market real estate price appreciation over the four quarters following FTS is nearly wiped out.

Large Urban Developments as Non-Planning Products: Conflicts and Threats for Spatial Planning

The article approaches different concepts of Large Urban Developments (LUDs) as products of the notion of a “spatial fix” (Harvey, 2001), which explains why built or natural environments can be deployed in the process of creating opportunities for new investments. Greece and Cyprus are two countries in the south of the European Union that underwent delayed urbanisation and significant land fragmentation in the form of small size private ownerships and with limited experience in comprehensive development. Greece has adopted a well-structured but complex spatial planning system, bureaucratic with limited effectiveness, adaptability or flexibility of delivery processes. On the other hand, Cyprus has a flexible but centralized system, effective in processing change but problematic in regulating quality in the built environment. Both countries recently experienced major financial crises. In the early 2010s, both governments promoted, as part of an economic recovery policy, extensive real estate development on public or privately-owned land with emphasis on LUDs as ways of addressing economic shortfalls. Inappropriately, LUDs have been primarily “conceived” as opportunities to attract foreign investments rather than a means of tackling crucial current deficiencies. New spatial planning frameworks merely add greater “flexibility” to the system in order to accelerate large private real estate investment. The article attempts to reveal, through case studies’ reviews, the impact of LUDs in countries with no infrastructure or experience in accommodating large-scale investment. It explores how the experience in Greece and Cyprus differs in terms of the relevant legislation adopted, the effectiveness in fulfilling its primary objective in attracting investment, and what are the possible social and environmental consequences on the planning acquis.

Detecting Factor Risk in Private Asset Returns

The authors introduce a novel approach of attributing factor risk to a time series of reported private asset returns. Their factor-optimized lagged-beta (FOLB) method uncovers more latent factor risk than standard unsmoothing techniques, offering a more precise attribution of factor betas and alpha for major categories of private assets, including buyout, venture capital, and private real estate. They find that factor-adjusted alpha is most robust for buyout, though results vary somewhat by factor-model specification. The FOLB method enhances portfolio management by providing improved estimates of factor risk and alpha for private asset classes, an optimal factor benchmark for asset allocation modeling and manager performance benchmarking, and new procedures for unsmoothing reported private asset returns to estimate risk parameters for portfolio optimization. <b>TOPICS:</b>Analysis of individual factors/risk premia, factor-based models, style investing <b>Key Findings</b> • The factor-optimized lagged-beta method offers improved estimates of factor risk and alpha for private asset classes. • Factor-adjusted alpha is most robust for buyout. • The method provides an optimal factor benchmark for asset allocation modeling and manager performance benchmarking and new procedures for unsmoothing reported private asset returns to estimate risk parameters for portfolio optimization.

Does Large-Scale Neighborhood Reinvestment Work? Effects of Public–Private Real Estate Investment on Local Sales Prices, Rental Prices, and Crime Rates

ABSTRACTDuring the 1990s, the U.S. Department of Housing and Urban Development awarded over $6 billion in competitive grants (HOPE VI) to spur neighborhood redevelopment. We add to HOPE VI research by examining the impacts of a large set of public–private real estate investments, including HOPE VI, made over a 16-year period in a distressed neighborhood of Pittsburgh, Pennsylvania (Hill District). We estimate the effects of $468 million additional public–private investments that Hill District received compared with a demographically similar neighborhood on sales prices, rental prices, and crime. We find large, statistically significant impacts of these investments on residential sales prices, commercial sales prices, and on rental prices, and a marginally significant yet meaningful decline in nonviolent arrests. For each $10 million of public–private investment, we find a 0.95%, 2.7%, and 0.55% increase in residential sales prices, commercial sales prices, and rental prices, respectively. Given the accumulated difference over 16 years of $468 million in these investments across the two neighborhoods, the percentage increases amount to large changes in prices over that time. Cities should anticipate the potential impacts of major neighborhood investment on low-income households, especially unsubsidized renters who most directly experience the brunt of rising rents.

The Predictability of Real Estate Excess Returns: An Out-of-Sample Economic Value Analysis

We study the recursive, out-of-sample realized predictive performance of a rich set of predictor choices and models, spanning linear and Markov switching frameworks when the forecast target is represented by excess NCREIF and equity NAREIT returns. We find considerable pockets of predictive power, especially at the short- and intermediate horizons and for private real estate returns, both in absolute term and in comparison to a simple, but powerful, historical sample mean benchmark. We then test whether such forecasting accuracy may translate to positive, risk-adjusted out-of-sample performance in a recursive mean-variance portfolio allocation exercise, selecting weights of stocks, bonds, cash, and real estate (private or public). Consistently, we find that especially in the case of private real estate, significant improvements in realized Sharpe ratios and mean-variance utility scores are achieved from a range of strategies, exploiting predictability at intermediate horizons, especially when supported by Markov switching models. These results are robust the inclusion of transaction costs and extend to public real estate.

Asset allocation decision-making practices of institutional real estate funds in a developing economy

PurposeIn a bid to broaden the understanding of the real estate investment decision-making framework, the purpose of this paper is to examine the real estate asset allocation decision-making practices of real estate funds in Nigeria, a developing economy. This is with a view to providing information toward enhancing real estate investment decisions.Design/methodology/approachA mixed-methods approach comprising a combination of literature review, expert interviews and semi-structured questionnaire survey is adopted for this study. Through literature review and expert interviews, the asset allocation decision-making process of institutional real estate funds was identified. Based on the literature review and expert discussions, a semi-structured questionnaire was developed and self-administered on fund/portfolio managers of 59 institutional real estate funds in Nigeria to investigate their asset allocation decision-making practice. Data were analyzed using descriptive and inferential statistics for the closed-ended questions while the open-ended questions were content analyzed.FindingsThe findings revealed that the asset allocation decision-making process utilized by public and private real estate funds follows an opportunistic asset accumulation approach. The decision-making process also varies depending on the nature of the fund. Further findings showed that government policies, political uncertainties and regulatory mechanism motivate asset allocation decisions. Moreover, majority of the sampled real estate funds employed a combination of in-house personnel and external consultants (hybrid), while mean/standard deviation and cash flow analysis (DCF, NPV) were mostly utilized by the funds in making property investment decisions.Practical implicationsThe findings implied that the real estate asset allocation decision-making process of institutional property investors in Nigeria deviates from the normative model of the asset allocation process prescribed in the literature and varies depending on the nature of the real estate funds. As such, familiarization of institutional investors with government policies, political climate and other regulatory mechanism (barriers to entry) guiding the ownership and operation of real estate assets in the country could improve their real estate investment decisions.Originality/valueThe study complements and extends existing literature on real estate asset allocation decision-making process of institutional investors from the viewpoint of the actors involved in a developing African economy.

Explaining the premium to NAV in publicly traded Australian REITs, 2008–2018

PurposeThe purpose of this paper is to explore the levels and determinants of net asset value (NAV) premiums/discounts for publicly traded Australian Real Estate Investment Trust (A-REIT) market during the last decade. A-REITs were severely affected by the global financial crisis as S&amp;P/ASX 200 A-REIT index-listed property stocks experienced 47 per cent discount to NAV, on average, in 2008–2009 crisis. Since 2013, A-REIT sector has exhibited a strong recovery from the financial crisis and traded at high premiums to date. Understanding the relationship between pricing in the public and private real estate markets has taken on great importance as A-REITs continue to trade at significant premium to NAV unlike their counterparts in the USA and Europe.Design/methodology/approachThis paper follows a rational approach to explain variations in NAV premiums and explores the company-specific factors such as liquidity, financial leverage, size, stock price volatility and portfolio diversification behind the A-REIT NAV premiums/discounts. The study specifies and estimates a model of cross-sectional and time variation in premiums/discounts to NAV using semi-annual data for a sample of 40 A-REITs over the 2008–2018 period.FindingsThe results reveal that A-REIT premiums to NAV can be explained not only by the liquidity benefit of listed property stocks but also positive financial leverage effect. During the past decade, A-REITs have followed an aggressive approach in financing their growth by using borrowed funds to purchase assets as the income from the property offsets the cost of borrowing and the risk that accompanies it. Debt-to-equity ratio has to be considered as an important source of NAV premiums as highly geared A-REITs that favoured debt financing over equity financing traded at significant premiums to NAV of their underlying real estate assets.Practical implicationsThe paper includes implications for the REIT market investors. The regression analysis shows that specialty A-REITs with a focus on creative market niches traded at higher premiums compared with other property stocks, especially in the post-GFC recovery period. Specialty REITs are more highly valued by the market than their traditional specialised counterparts (e.g. office and retail REITs), and those pursuing a diversified strategy.Originality/valueThis paper presents an Australian case study as the A-REIT market provides a suitable environment for testing the effect of financial gearing on the REIT premium to NAV. The study provides empirical evidence supporting the importance of debt-to-equity ratio in explaining the variation in A-REIT NAV premiums.

Causes of Rework in Construction Projects in Ukraine

AbstractThe collapse of the Soviet Union was the cause of a significant decline in many economies of the newly created countries. However, many of them, including the Ukrainian economy, are slowly recovering. One of the largest branches of the economy in this country is construction, which, despite political turmoil, is constantly growing, especially in the private real estate development sector. Despite the fact that the construction market is constantly developing, it is limited by the costs of rework and alterations resulting from many reasons. The key negative effects of modifications to the results of the project are exceeding the budget and time of project implementation, dissatisfaction with the project team, violation of contractual requirements and lowering the quality of the final product. Therefore, the purpose of this article was to determine the reasons for the emergence of rework in the in Ukraine by analyzing the results of surveys conducted among construction enterprises.

Another Look at Private Real Estate Returns by Strategy

This article examines the risk-adjusted, net-of-fee performance of noncore funds and generally finds that investors would have been better served by merely placing additional leverage on their core investments rather than investing in noncore assets. Using several datasets to create a mosaic-like view of the performance of private real estate investments, the authors find that over the 2000–2017 study period, value-added funds have, on average, generated an alpha of –3.26%; similarly, opportunistic funds have generated an alpha of –2.85%. Consequently, had investors in core funds used more leverage (loan-to-value ratios of 55% to 65%), they would have saved approximately $7.5 billion per year in unnecessary investment-management fees. The higher fees charged by these noncore funds were a material factor contributing to their negative alphas. Value-added funds charged approximately three times as much in fees as core funds, and opportunistic funds charged approximately four times as much. How and why these fee structures might change in the future is also explored. However, the fee differentials (relative to core funds) are insufficient to explain the entirety of the negative alpha associated with value-added and opportunistic investing. These conditions imply that noncore managers have, on average, overpaid for (and/or mismanaged) fund assets. TOPICS:Real estate, other real assets, private equity Key Findings • This article examines the risk-adjusted, net-of-fee performance of non-core funds and generally finds that investors would have been better served by merely placing additional leverage on their core investments. • Over the 2000–2017 study period, value-added funds have, on average, generated a negative alpha of −3.26%; similarly, opportunistic funds have generated a negative alpha of −2.85%. • Had investors in core funds used more leverage (loan-to-value ratios of 55% to 65%), they would have saved approximately $7.5 billion per year in unnecessary investment-management fees.

The entwined futures of financialisation and cities

AbstractThis article considers the future of financialisation as it is entwined with that of cities. It poses the question of how cities can regulate financialisation. ‘Financialization’ is understood here to encompass the myriad of social, economic, legal and political dimensions of the transition from industrial capitalism to finance capitalism. This transition implicates the financial sector and their motives as well as the new roles that financial ideas play in everyday lives. That new role for finance has been understood to be a ‘normative order of reason’ that informs public decision-making and governance. While the efforts of national and transnational law to regulate the financial sector have been studied, there has been far less focus on local governments. Local governments, however, play a crucial role in how financial capitalism takes hold through their regulation of real estate and urban space (real estate being a key current engine of financial markets). Local governments mediate the ways that finance takes hold in cities and the built environment and the way that those transformations exclude certain populations. In short, they mediate the ‘spatialization’ of finance. This triangular constitution of local governance, financialisation and urban space can be observed in the shrinking of public space. The article first examines the relationship between public space and democracy, and the role of law as the underlying structure that allocates urban space towards the use of the public or the use of private real estate actors. This engagement demonstrates how urban space is a key site of financialisation’s dual dimensionality: as a sector with material accumulation of resources and as a constellation of rationalities and cultures. The article then turns to a discussion of city efforts to regulate the financial sector, and popular resistance to the ideologies of finance. Through that examination, this article hopes to demonstrate that efforts to regulate the financial sector are only one level on which to regulate financialisation. ‘Regulation’ here becomes a complex endeavour, requiring an engagement with the modes of reasoning and culture promulgated by financialisation as well as the financial sector and its activities.

The Effects of the Internet on Real Estate Marketing in Gwadar, Pakistan

The paper is about the control of speculations and fraud cases in real estate marketing using the internet. The area under consideration is the new port city Gwadar. The deep Sea port of Gwadar has been constructed with the cooperation of Chinese government in 2002. Gwadar Development Authority has been established in 2003 as a statutory body for the city planning and execution, but not a single piece of land is under control of this Authority. The area has a significant location in the region for investment and also has scenic beauty. People all over the country and abroad are interested in investing in real estate in this area. Currently, it is a small town, less developed, poor infrastructure and far from the main cities of Pakistan. So visiting Gwadar is not feasible for everyone in this condition but on the other hand, there is no doubt that the land of Gwadar is precious for future. Most of the people who can invest in Gwadar but don’t because of fear of fraud cases in the private real estate market. In this paper we have addressed the problem how this land can be made accessible to everyone. I suggested that the internet can be the right mode of real estate marketing in this area with the involvement of No Objection Certificate (NOC) issuing authority (GDA). GDA is making the map of Gwadar on GIS, which can be utilized in this scenario for the benefits of the people. After our survey to the market, it is concluded that provincial government should make a policy that the internet will be the only mode of transactions in real estate marketing in Gwadar with the involvement of government sector. GDA may provide the GIS map of the area and updates about the NOC’s of each scheme on internet. Finally, GDA may use its Computer Cell for providing confirmation email to every investor whether his/her scheme/plot is valid or not.&#x0D;