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1 – 10 of over 15000Muhammad Faishal Ibrahim, Seow Eng Ong and Kola Akinsomi
The purpose of this paper is to investigate Shariah compliant real estate development financing and investment in the Gulf Cooperation Council (GCC).
Abstract
Purpose
The purpose of this paper is to investigate Shariah compliant real estate development financing and investment in the Gulf Cooperation Council (GCC).
Design/methodology/approach
In this paper, the authors employed desk research and survey to examine issues relating to Shariah compliant real estate development financing and investment. Following the desk research, 18 in‐depth interviews were conducted with senior executives of banks, real estate developers and consultants.
Findings
Equity Shariah instruments are found to be in high demand by real estate investors, however they are rarely offered by Islamic banks. In addition, the survey results confirm that Islamic financiers tend to partner real estate companies through land acquisition to post construction, contrary to how conventional financiers operate, therefore reducing moral hazard issues.
Research limitations/implications
As Shariah compliant real estate research and knowledge is limited, the authors faced a challenge in getting respondents who are familiar and willing to participate in the interview. Nevertheless, the 18 respondents gave adequate inputs to enable the authors to write the research paper.
Practical implications
The paper includes challenges and implications for the future developments of Shariah compliant real estate development financing and investment.
Originality/value
This paper provides the Shariah compliant perspective of real estate development financing and investment, where the current knowledge is very limited.
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Christoph Pitschke and Stephan Bone‐Winkel
The New Basel Capital Accord (Basel II) was published in June 2004. This modification of the regulatory framework for banking institutions raises the question to what extent real…
Abstract
Purpose
The New Basel Capital Accord (Basel II) was published in June 2004. This modification of the regulatory framework for banking institutions raises the question to what extent real estate financing will be impacted and how market participants can be adequately prepared. Aims to examine the impact of Basel II on the future pricing and availability of debt capital and on the cost of capital in real estate financing and to present possible reactions for real estate developers.
Design/methodology/approach
This research paper follows a deductive approach. First, the New Basel Capital Accord and the main features of commercial real estate financing are presented. On a normative level, the implications for developers are explained. Since no information regarding the behaviour of market participants in commercial real estate financing was available, the authors have ascertained the relevant questions within the framework of an empirical analysis. A total of 205 banking institutions were asked to fill out a survey pertaining to commercial real estate financing. The results of this survey are partly presented and interpreted.
Findings
The availability and the pricing of debt capital will be risk‐adjusted and will depend on the amount of regulatory equity banks will have to hold in reserve for a credit engagement. The cost of debt capital in real estate financing will rise due to systemic reasons of the New Basel Capital Accord. Banks are/will be very restrictive with regard to credit allowances. The use of the positive leverage effect will become more difficult. Structured financing, particularly the use of private equity, is the best way to fill a potential financing gap.
Originality/value
The paper is a timely investigation of a significant regulatory framework that is of world‐wide significance. The New Basel Capital Accord is introduced in its fundamental structure and the two relevant rating approaches are described and put into context. The paper reduces the complexity of the comprehensive and sophisticated Basel Capital Accord. Based on the facts that have been analysed, recommendations of how real estate developers can react to the changes in financing that lie ahead are given.
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Graham Squires, Norman Hutchison, Alastair Adair, Jim Berry, Stanley McGreal and Samantha Organ
– This research aims to provide an insight into large-scale real estate projects in Europe and how they are using a more innovative blend of finance.
Abstract
Purpose
This research aims to provide an insight into large-scale real estate projects in Europe and how they are using a more innovative blend of finance.
Design/methodology/approach
The methodology involved a mix of desk-based study, interviews and case studies. Interviews were held with financiers, policymakers, developers, investors, fund managers and academics. The specific case projects were Battersea Power Station Development in London; Leipziger Platz site in Berlin; and the Lammenschans site in the city of Leiden, The Netherlands.
Findings
The research found that there is growth in the blend of financial products used in real estate development within large-scale mixed-use projects. This new blend is set with greater equity financing, often from domestic and foreign consortiums generating institutional funds – alongside private debt financing – that utilise a mix of large-scale multi-bank finance.
Practical implications
The scale of the challenge in financing real estate development allied with capital budget constraints has meant that the appetite for innovative finance mechanisms has gained considerable momentum in practice and policy. This research investigates current examples in development finance and provides a discussion of the opinion of key multi-stakeholder participants in the individual cases, and trends more strategically at a broader level.
Originality/value
This detailed study of three major development sites and at a more broader strategic level is significant, in that it provides a better understanding of the differing blends of finance that are being used.
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Technological developments are having an impact on the construction sector and are creating a paradigm shift in project delivery methods. Traditional project delivery systems are…
Abstract
Purpose
Technological developments are having an impact on the construction sector and are creating a paradigm shift in project delivery methods. Traditional project delivery systems are inadequate in current project development processes. A more integrated project delivery system and the establishment of contractual and financial structures are needed. The purpose of this study is to incorporate integrated project delivery and real estate certificate concepts and propose a model for real estate development.
Design/methodology/approach
As a methodology, both integrated project delivery and real estate certificate concepts are reviewed individually, and a case to real estate certificate in Turkey is examined.
Findings
A real estate certificate is a new method for financing the development process. The system covers the financial dimension of the integrated project delivery system. When these two concepts are combined, they provide an alternative to the real estate development process.
Research limitations/implications
This study is a preliminary study and lays the foundation for future studies.
Practical implications
In theory, both concepts have many advantages, in practice, it is essential to create the necessary legal basis for these advantages to be valid. As this process requires significant planning and contract management, the proposed model must be properly designed at the start of the project.
Originality/value
This study proposes a new model for real estate development by combining integrated project delivery and real estate certificate concepts.
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Funminiyi Emmanuel Olayiwola, Bioye Tajudeen Aluko and Timothy Oluwafemi Ayodele
Pre-letting and pre-sale financing arrangements have been widely adopted to increase housing delivery in the developed economy. Despite the increasing level of adoption in some…
Abstract
Purpose
Pre-letting and pre-sale financing arrangements have been widely adopted to increase housing delivery in the developed economy. Despite the increasing level of adoption in some developed countries, some are reverting to spot property buying because of factors militating the adoption of pre-letting and pre-sale financing. However, little has been done on the factors influencing the adoption of these trust-based financing arrangements in the developing economy where there are challenges of trust and market transparency.
Design/methodology/approach
Using a closed-ended questionnaire, 87 property development companies (PDCs), which constituted 63.5% of the 137 PDCs in Lagos metropolis, were sampled. Variables that influence adoption of pre-letting and pre-sale financing arrangements were presented to respondents for rating on a five-point Likert scale, ranging from 1 (not influential) to 5 (very highly influential). With the aid of SPSS software, acquired data were analysed using principal component analysis (PCA), mean rating and standard deviation.
Findings
The PCA finding revealed that factors influencing the adoption of pre-letting and pre-sale financing had 69.641% total variance. Top-rated components were fear of financial risk and firm’s reputation and poor government involvement and contractors' credibility, with 15.114% and 11.895% variances, respectively. The study findings suggested that the buyers' apprehension regarding the transfer of financial risk and the reputation of the firms significantly influence their decision to embrace both arrangements. As a result, the buyers' willingness to engage the financing arrangements is reduced, which consequently imparts adoption negatively. Furthermore, there is worrisome lack of government involvement, a crucial aspect for the success of such arrangements.
Practical implications
Pre-letting and pre-sale financing arrangements are found to be highly suitable for environments where there is trust. The findings enlighten the development firms on the need to uphold their reputation, as buyers attach great significance to the credibility and integrity of the companies they engage in business.
Originality/value
This paper is one of the few attempts that have sought to explore the factors influencing pre-letting and pre-sale financing arrangements in an emerging market like Nigeria.
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Nhung Thi Nguyen, An Tuan Nguyen and Dinh Trung Nguyen
This paper aims to examine the effects of investor sentiment on the development of the real estate corporate bond market in Vietnam.
Abstract
Purpose
This paper aims to examine the effects of investor sentiment on the development of the real estate corporate bond market in Vietnam.
Design/methodology/approach
The research uses an autoregressive distributed lag (ARDL) model with quarterly data. Additionally, the study employs Google Trends search data (GVSI) related to topics such as “Real Estate” and “Corporate Bond” to construct a sentiment index.
Findings
The empirical outcomes reveal that real estate market sentiment improves the growth of the real estate corporate bond market, while stock market sentiment reduces it. Also, there is evidence of a long-run negative effect of corporate bond market sentiment on the total value of real estate bond issuance. Further empirical research evidences the short-term effect of sentiment and economic factors on corporate bond development in the real estate industry.
Research limitations/implications
Due to difficulties in collecting data, this paper has the limited sample of 54 valid quarterly observations. Moreover, the sentiment index based on Google search volume data only reflects the interest level of investors, not their attitudes.
Practical implications
These results yield important implications for policymakers in respect of strengthening the corporate bond market platform and maintaining stability in macroeconomic and monetary policies in order to promote efficient and sustainable market development.
Social implications
The study offers some suggestions for regulators and governments to improve the real estate corporate bond market.
Originality/value
This is the first quantitative study to examine the effect of sentiment factors on real estate corporate bond development in Vietnam.
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Stephen Roulac, Alastair Adair, Stanley McGreal, Jim Berry and Suzanne Allen
A central consideration in real estate is the analysis of those factors that impact upon value, in particular how value is created in real estate development and investment deals…
Abstract
Purpose
A central consideration in real estate is the analysis of those factors that impact upon value, in particular how value is created in real estate development and investment deals. The converse of understanding how real estate value may be destroyed is equally important. The paper seeks to argue that a better understanding of these processes would allow more informed and successful decisions to be made in structuring investments and evaluating performance.
Design/methodology/approach
An innovative web‐based survey tool was employed. The paper analyses expert opinion based on a sample of 97 real estate professionals from North America and Europe. Those issues that can impact on the creation and destruction of value in real estate development and investment projects and their relative magnitude of impact are assessed.
Findings
There is no apparent distinction between those factors that create value and those that destroy value, though there are variations in the magnitude of impact. Idea/concept is the major influence for development projects and is even more pronounced for real estate investment. Perception/recognition of the opportunity is a key driver of value.
Research limitations/implications
Limitations arise from the response rate which allows an upper tier of analysis across the entire data set but is not of sufficient size to disaggregate either by respondent professional group or by geographical region.
Originality/value
Although the objective of real estate development, investment and deal making is value creation, there is, paradoxically, little literature about creating value. This paper is the first study to elicit opinion internationally on the subject and to quantify the relative contribution of a range of factors concerning value creation and destruction in a real estate project.
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Against the background of initiatives, which have taken place to foster real estate research in Europe, this article seeks to analyse important dimensions of that research.
Abstract
Purpose
Against the background of initiatives, which have taken place to foster real estate research in Europe, this article seeks to analyse important dimensions of that research.
Design/methodology/approach
The article investigates the evolution from 2000 to 2015 in the proportion of papers published by authors with a European affiliation in the three main international real estate journals (Real Estate Economics, Journal of Real Estate Finance and Economics and Journal of Real Estate Research). Then, focusing on papers with at least one European author and/or concentrating on Europe, the article analyses papers published from 2008 to 2015 in the two main European real estate journals (Journal of European Real Estate Research and Journal of Property Research) by authors’ country of affiliation, by country of study and by theme. Finally, we analyse links between author’s country of affiliation and country of study and theme, respectively.
Findings
The results show that the proportion of papers published by European authors in the three main international real estate journals has increased during the 2000-2015 period. The author's analyses of papers published in the two European real estate journals suggest that UK-based researchers are the most prolific. There is also a strong “home bias” in that authors largely focus on the country in which they are based. The interest in housing and valuation increased markedly during the period. Finally, the article reports linkages between country of affiliation and theme.
Originality/value
This paper should provide a much clearer understanding of several aspects of real estate research in Europe.
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The purpose of this paper is to analyze the securitization of rental streams, a new investment and finance product introduced in the USA in 2013 that enables fundraising from…
Abstract
Purpose
The purpose of this paper is to analyze the securitization of rental streams, a new investment and finance product introduced in the USA in 2013 that enables fundraising from large residential portfolios owned by major investment funds and investment banking. The securities are made up of non-performance loans as well as real estate portfolios of financial entities.
Design/methodology/approach
An academic analysis of the European securitization market is performed, as well as a broad overview of the state of the art of the rental housing market and investment property market. Moreover, a market study of Real Estate Owned (hereinafter, REOs) and Real Estate Debts is carried out to determine both the present framework and future trends. Various financial entities and real estate management companies are examined through interviews and data collection to assess the reality of distressed assets and residential portfolios owned by major investors. It introduced the Broker’s Price Opinion concept, de loan-to-value concept and the London Interbank Offered Rate.
Findings
REO-to-rental securitization is a step forward toward the democratization of finance through the globalization of the residential market, improving risk sharing for major and retail investors. The securitization of rental streams in Europe has not taken off, despite several issuances in the USA since 2013 with significant success where first tranches obtained a credit qualification of triple-A from the majority of the main rating agencies.
Originality/value
At the end of 2013, a global investment firm launched an innovative finance and investment vehicle that securitized the cash flows originating from leased residential properties. That issue resulted in considerable success and in the development of a new alternative and innovative financing source for real estate activity. Taking into account that housing is a primary need of our society, there is a strong motivation for improving the residential market, and thus, REO-to-rental securitization could help take a step forward in making the housing market more efficient.
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Andreas Pfnür and Stefan Armonat
The purpose of this paper is to apply a numerical simulation of stochastic processes to the problem of real estate investment appraisal.
Abstract
Purpose
The purpose of this paper is to apply a numerical simulation of stochastic processes to the problem of real estate investment appraisal.
Design/methodology/approach
These uncertain operating costs are integrated into an enhanced dynamic simulation. To model the dynamics in the uncertainty of the cost schedule, a range of different types of stochastic processes is used. The operating costs are classified by cost drivers and an appropriate stochastic process is determined for each of the derived cost clusters. To optimise the capital structure in this application, heuristic optimisation with genetic algorithms is used.
Findings
The application of the model to real world investment situations shows that linear and deterministic modelling underestimates the risk‐generating effect of uncertain operating expenses, which often can lead to inefficient investment decisions.
Practical implications
In a further application of the model, the authors demonstrate the effect of uncertain operating costs on the optimal capital structure of real estate investments.
Originality/value
In contrast to models in the literature that are usually focussed on the income side, here the focus is on the uncertain dynamics of real estate operating costs as a key factor affecting return.
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