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Article
Publication date: 14 October 2020

Mengmeng Dou, Lesley Anne Hemphill and Lay Cheng Lim

The paper aims to quantitatively investigate vacant industrial land valuation accuracy in China, given the importance of the industrial market as an underlying pillar to…

Abstract

Purpose

The paper aims to quantitatively investigate vacant industrial land valuation accuracy in China, given the importance of the industrial market as an underlying pillar to promote urban growth especially in emerging economies.

Design/methodology/approach

In China, the government formulates a Land Benchmark Price (LBP) to serve as a price reference point to sell land rights. To gain an in-depth understanding of the valuation practice by LBP, this paper uses correlation analysis to investigate the varying dynamics between the transaction-based prices and LBP appraisal-based estimates. Furthermore, a margin of error examination investigates the distortion in LBP land appraisals, with an amended LBP presented to improve the accuracy of the current LBP method.

Findings

Different influencing factors are identified to impact the actual market transaction prices and the LBP construction, leading to a large discrepancy in industrial land appraisals. A systematic problem is recognised that the construction of the LBP follows urban bid curve theory, whereas the land transaction prices do not, demonstrating that an urgent LBP update is needed to capture the market dynamics for industrial market.

Practical implications

The paper sets out discrepancies in valuation accuracy surrounding the application of the LBP valuation approach in China. This has practical implications for valuers in terms of raising their awareness of the deficiencies in the approach and the pitfalls they need to guard against in their appraisals. It also has implications for developers and investors who rely on valuer appraisals to assess the viability of land purchases; hence, they need to express caution in the appraisal advice sought. Finally, the results demonstrate to the standard setters how they need to modify the LBP equations to better capture market dynamics.

Originality/value

The paper examines valuation accuracy in transitional economies, through valuation differentials between appraised price and the transacted price. The value of the work lies in the analysis of the fundamental differentials between market price and appraised value, which is of importance to investors/developers, practicing valuers, as well as government officials responsible for setting the valuation standards.

Details

Journal of Property Investment & Finance, vol. 39 no. 5
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 24 August 2020

Martin Edward Haran, Daniel Lo, Michael McCord, Peadar Davis and Lay Cheng Lim

The purpose of this paper is to test the extent to which company-specific attributes including market capitalisation, capital structure and investment focus impact upon…

Abstract

Purpose

The purpose of this paper is to test the extent to which company-specific attributes including market capitalisation, capital structure and investment focus impact upon the performance of European listed real estate companies. Enhanced understanding of firm-level performance drivers is important for investors in order to diversify their investment portfolios and to mitigate company-specific risks at different points in the real estate cycle.

Design/methodology/approach

The study centres on six key listed European real estate markets selected on the basis of market capitalisation, diversity, transparency and maturity. A series of statistical tests are undertaken using EPRA and Bloomberg data for the period of 2007–2017 using 113 listed property companies, all of whom were contemporaneous constituents of EPRA indices in this period. A series of customised performance indices were constructed to evaluate firm-level performance attributes.

Findings

Firm-level attributes collectively account for more variation of risk-adjusted return than sector-level attributes over the investigation period. The impact of firm-specific attributes on performance varies significantly from country to country attributable to the contrasting cyclical property market trends in the pre– and post–Global Financial Crisis period. REITs outperformed non-REITs on a risk-adjusted basis attributed to the strong performance of “niche” market entrants allied with stronger regulatory structure. Finally, the findings showcase that sector specialist firms outperform diversified companies inferring that investors should seek to attain diversification through portfolio-based approaches rather than firm-level strategies.

Practical implications

The results have implications for real estate companies aiming to raise capital internally for growth as higher return on equity in general signals reduced cost of capital. Secondly, the findings should be of practical use to multinationals specialising in international real estate trading in designing their business plans in general and formulating cross-country investment strategies in particular. Last but not least, a more refined conceptualisation of corporate-level performance drivers should complement existing professional practices in relation to business/company appraisal.

Originality/value

The research integrates EPRA and Bloomberg data sets to create a series of bespoke index constructs to measure the impact of firm-specific attributes on European listed real estate companies. Additionally, the authors construct a Herfindahl Index (H.I.) to further the debate on the impacts of diversification within the listed real estate sector. This serves to further heighten investor understanding of investment allocation and portfolio optimisation strategies for the listed real estate sector given the increasingly diverse range of investment opportunities within emerging sub-markets.

Details

Journal of Property Investment & Finance, vol. 39 no. 4
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 14 November 2016

Danielle McCluskey, Lay Cheng Lim, Michael McCord and Peadar Thomas Davis

The purpose of this paper is to analyse the changing nature of commercial leases with specific reference to the landlord and tenant relationship, lease lengths and…

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1860

Abstract

Purpose

The purpose of this paper is to analyse the changing nature of commercial leases with specific reference to the landlord and tenant relationship, lease lengths and incentivisation in the post-recessionary UK property market.

Design/methodology/approach

The research applies data analysis utilising the Estates Gazette Interactive database coupled with survey analysis conducted across three UK cities to investigate and compare the changing nature of the commercial property leasing market and the landlord and tenant relationship.

Findings

The empirical analysis highlights that recessionary conditions prevalent in the market from the 2007 global crisis has caused a reassessment of lease structures, leading to shorter lease terms and increased use of incentives, as tenants have been empowered to negotiate more flexible leases due to their stronger market position.

Originality/value

This paper builds upon previous research conducted back in 2005, investigating commercial leases in the market up-cycle. The recent volatility in the commercial property sector requires fresh insights and in-depth analysis of lease patterns, length and covenant strength, which is fundamental for investor decision-making. In addition, past research has tended to consider solely landlord or occupier perspectives, whereas this research offers new insight into the landlord–tenant lease negotiation process.

Details

Journal of Corporate Real Estate, vol. 18 no. 4
Type: Research Article
ISSN: 1463-001X

Keywords

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Article
Publication date: 19 April 2013

Lay Cheng Lim, James Berry and Karen Sieraki

The paper aims to assess property returns using yield differentials for prime and secondary properties as a real estate decision‐making tool. It seeks to demonstrate how…

Abstract

Purpose

The paper aims to assess property returns using yield differentials for prime and secondary properties as a real estate decision‐making tool. It seeks to demonstrate how property portfolios can be optimized through rational stock selection within the respective sectors identified in the IPD Index.

Design/methodology/approach

The paper utilises IPD data over the period Q1 2001 to Q4 2011 to investigate the performance returns on an annual and quarterly basis across key market sectors. It measures the rolling four quarters total return to illustrate the shift in prime and secondary performance for the different sectors to analyse the buy and sell decisions of institutional investors.

Findings

This paper indicates that investors can optimise property performance through rational stock selection and that secondary commercial property values display greater volatility compared to prime stocks. Investors need to take calculated risk in anticipation of higher total returns based on a buy/sell strategy when secondary stock outperforms prime.

Research limitations/implications

These findings can have a number of implications for real estate decision making. Firstly, capital growth is still the main factor that influences return and these returns are sensitive to wider economic and market conditions. Secondly, rational stock selection is likely to have major benefits in a difficult and an illiquid market. Thirdly, the choice of prime or secondary does matter and strong heterogeneity exists in each of the sectors and therefore offers potential for sector diversification.

Originality/value

This paper contributes to an understanding of property investment decision making by evaluating the differential spread/gap between low and high yield properties to determine the opportunities to sell/buy prime/secondary property.

Details

Journal of Property Investment & Finance, vol. 31 no. 3
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 1 January 2006

Moira Hamilton, Lay Cheng Lim and William McCluskey

This paper aims to contribute to the theory, practice and development trends in relation to commercial property leases.

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4367

Abstract

Purpose

This paper aims to contribute to the theory, practice and development trends in relation to commercial property leases.

Design/methodology/approach

The paper utilises three key methodological approaches to the research, namely, case studies, desktop literature review and questionnaire survey analysis. This approach enables the in‐depth analysis of both primary and secondary data in relation to the wider commercial property leasing market.

Findings

The main findings from an analysis of the case study cities demonstrate clearly that office tenants are requiring shorter lease terms, more tenant break options and rent reviews to market value.

Research limitations/implications

The paper relates to the development of commercial property leases. While the research inferences are drawn from four major cities they would nonetheless represent a similar pattern from across the UK.

Practical implications

The findings of this paper should be of practical benefit to those involved in the drafting of commercial leases and in particular the management and leasing of commercial property.

Originality/value

This paper presents the results of original empirical research utilising data drawn from several authoritative sources. The value of the work lies in the lease patterns that have been discovered through the case studies analysis.

Details

Property Management, vol. 24 no. 1
Type: Research Article
ISSN: 0263-7472

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Article
Publication date: 1 July 2006

Lay Cheng Lim, Alastair Adair, Stanley McGreal and James Webb

The paper aims to contribute to the understanding of the current valuation practices and services offered across Asia, in particular the valuation techniques and…

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2084

Abstract

Purpose

The paper aims to contribute to the understanding of the current valuation practices and services offered across Asia, in particular the valuation techniques and methodology used by practising valuers in Hong Kong.

Design/methodology/approach

In order to gain professional opinions and an in‐depth understanding of Hong Kong valuation service providers, the methods and concepts used, and the extent of involvement with Chinese clients and businesses, the paper reports the findings of interviews with major real estate valuation firms and a survey of individual valuers involved in the appraisal of properties in Hong Kong and China.

Findings

The results show that there are significant differences between the strategic management and the operational level across several facets of the valuation process in Hong Kong and China. The paper contributes to an understanding of behavioural influences within valuation.

Research limitations/implications

The main limitation is the restriction of the survey on Hong Kong‐based valuers. Further research will widen evidence to valuers based in mainland China.

Originality/value

This paper presents the results of original empirical research utilising data drawn from interviews and survey questionnaires. The value of the work lies in the analysis of the strategic overview of the organisation, management and operation of appraisal practice in Hong Kong.

Details

Journal of Property Investment & Finance, vol. 24 no. 4
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 20 July 2010

Terry V. Grissom, James N. Berry and Lay Cheng J. Lim

The purpose of this paper is to integrate land use and option pricing theories using case study analyses to compare a portfolio of uses comprising single and mixed‐use…

Abstract

Purpose

The purpose of this paper is to integrate land use and option pricing theories using case study analyses to compare a portfolio of uses comprising single and mixed‐use development on the same site and assess the effects on the risk‐return profile of potential development schemes. The integration of land use development based on highest and best use (HBU) is tested against a combination of uses on the selected sites at a point in time in the downswing of the real estate cycle.

Design/methodology/approach

The proposed methodology integrates the development valuation approach with option theory in which both consider the relationships of cost and value associated with alternative development options. The approach used in this paper addresses the broader consideration of project coordination inclusive of land use flexibility and opportunity costs endogenously associated with development strategies. By investigating the uncertainty of economic options specific to the development process, the methodology considers the significance of complementary components of strategic decisions and entrepreneurial effort within a return/risk management strategy.

Findings

The stochastic model when compared to the real option model enhances strategic decisions and development project management by allowing the consideration of single/mixed‐use alternatives. The development process is facilitated by the research findings whereby alternative uses are tested to maximise the potential use of the site. The analyses consider optimal funding strategies in developing and investing for a range of use options on regeneration sites.

Practical implications

The significant insights apparent from the research is the quantification of the strategic specification of development as a productive process and an investment endeavour. The proposed model enables a comparison of a HBU based on a single development, a mixed‐use development or a combination of uses as the difference between the scenarios impacts on land value and profit measures, especially where these measures are calculated as distributive residuals.

Originality/value

The stochastic model developed in this paper provides a value‐added contribution to real estate literature by considering the complexity of the interrelationships between urban land economics, land use theory, valuation appraisal methodologies, portfolio analysis and option pricing as applied in the development of regeneration schemes.

Details

Journal of European Real Estate Research, vol. 3 no. 2
Type: Research Article
ISSN: 1753-9269

Keywords

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Article
Publication date: 4 May 2012

Terry Grissom, Lay Cheng Lim and James DeLisle

The purpose of this paper is to investigate the strategy that a turnaround in the USA will portend a turnaround in the UK's economy and property market. For this strategy…

Abstract

Purpose

The purpose of this paper is to investigate the strategy that a turnaround in the USA will portend a turnaround in the UK's economy and property market. For this strategy to operate, it is assumed that the capital and property markets in and between the two nations are highly integrated with endogenous pricing functions.

Design/methodology/approach

Given the endogenous assumptions of the conjectured research statement, tests of integration (or segmentation) between two capital and property markets are conducted. Correlation, tracking error analysis, and a multiple systematic risk factor model are used to test the pricing relationships. The methodological form employs variant macroeconomic variable pricing models (MVM) of alternative combinations of systematic affects operating across and between the national markets.

Findings

Pricing integration is noted between the UK and US capital markets, while the property markets are economically and statistically segmented. Opportunities for arbitrage based on different prices/returns for equivalent risk exposures are statistically observed between the UK and USA. The effect is that systematic pricing between the two markets cannot be addressed solely by diversification options. This infers a potential for arbitrage (statistically, strategically or in practice) is possible, given that systematic risk exposures between the two markets are not equivalently priced across cyclical phases. In this context it is inferred that the probable measure of pricing differences across the two markets is more than a cyclical lag effect.

Originality/value

The paper delineates the degrees of integration/segmentation in the UK and US property and capital markets as a function of systematic risks in changing economic conditions. These differences support the existence of statistical arbitrage and the specification of investment behaviour as a function of differencing pricing expectations. These findings can assist in the formulation of investment and hedging strategies to assist in managing international portfolios subject to cyclical market exposures. This paper contributes to an understanding of and foundation for testing the nature and impact of cycles on property investment performance as a function of pricing changes.

Content available
Article
Publication date: 14 August 2007

James Baxter

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700

Abstract

Details

Journal of Property Investment & Finance, vol. 25 no. 5
Type: Research Article
ISSN: 1463-578X

Content available
Article
Publication date: 20 July 2010

Stanley McGreal

Downloads
286

Abstract

Details

Journal of European Real Estate Research, vol. 3 no. 2
Type: Research Article
ISSN: 1753-9269

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