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Paper eres2013_134:
Identifying Switching Signals Across the Four Quadrants of Real Estate: A United Kingdom Case Study

id eres2013_134
authors Moss, Alex; Malcolm Frodsham
year 2013
title Identifying Switching Signals Across the Four Quadrants of Real Estate: A United Kingdom Case Study
source 20th Annual European Real Estate Society Conference in Vienna, Austria
summary Purpose - The purpose of this paper is to identify and quantify the importance of the major market factors driving the relative risk and returns across all four real estate quadrants (public/ private, debt/ equity) in the UK over the period 1992-2012, and to identify the pricing signals for investors to alter portfolio weightings across the four sectors at different points in the cycle. Design/methodology/approach - For consistency we have taken the IPD All Property Index as a proxy for the returns available in the direct market. This represents the base case ungeared returns available. We have then replicated each of the four quadrants as follows: 1) Listed real estate we have geared the direct real estate returns using the actual LTV ratios throughout the period of a leading UK company, and replicated the impact of a listed valuation by applying the EPRA discount /premium to NAV to the underlying NAV changes. This allows us to decompose returns into separate gearing and valuation impacts. 2) Listed debt we have used the return and volatility series of listed real estate bonds available throughout the period 3) Unlisted real estate . We have looked at the IPD Index, AREF leverage ratios and secondary market pricing to replicate these returns, and 4) Unlisted debt we have modelled these returns using available data and assumptions regarding fees, LTVs and delinquency rates.Findings - We aim to show, using the listed sector as a leading indicator, the pricing signals to switch portfolio weights through the cycle using all four quadrants available to investors. Originality/value - We believe that there is a lack of literature on this topic, in particular focussing on the interdependence and relationships between the four quadrants. By using a consistent measure for direct market returns and then constructing the risk and return for all quadrants rather than using disparate indices we believe we provide a more consistent methodology for evaluating the risk and return characteristics than has hitherto been undertaken.
keywords Risk and return, Four quadrants, Pricing sigmals, UK cycle
series ERES:conference
type paper session
email alex.moss@consiliacapital.com
more http://library.eres.org/cgi-bin/rsa98.pl?conf=ERES2013&type=session&theme=P&slot=6701
discussion No discussions. Post discussion ...
ratings
session P-8: Real Estate Portfolio Management
last changed 2014/10/21 21:51
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