The primary purpose of this Practice Briefing is to examine the implications of the recommendations of the Royal Institution of Chartered Surveyors (RICS) Review of Investment…
Abstract
Purpose
The primary purpose of this Practice Briefing is to examine the implications of the recommendations of the Royal Institution of Chartered Surveyors (RICS) Review of Investment Valuations to shift towards (explicit) discounted cash flow (DCF) valuations on valuers, clients, risk management and market data.
Design/methodology/approach
This Practice Briefing will develop a conceptual framework to articulate the impact of the shift towards explicit modelling assumptions in valuations. A comparative analysis is conducted to contrast traditional valuation approaches with an explicit DCF approach.
Findings
The proposed shift to DCF valuations in the real estate industry carries both subtle and profound implications. While on the surface, the move appears to bring minimal change since current valuations are already DCF-based, a deeper exploration reveals a potential transformation to the understanding, analysis and measurement of pricing and risks in commercial real estate.
Practical implications
The traditional techniques adopted in valuations have become pervasive in the industry, hindering more sophisticated modelling and analysis of individual assets and portfolios. Explicitly modelling assumptions in both the initial years of cash flow and perpetuity calculations would unveil fundamental relationships and rationales that have previously been buried within, and perhaps ignored by, an All Risks Yield (ARY).
Originality/value
This briefing identifies the cause of confusion when interpreting ARY differentials on implied target returns and risk and demonstrates how a change to explicit assumptions, such as growth and letting periods, would enhance transparency, enabling more informed client–valuer discussions, which in-turn will boost confidence in valuation accuracy, lead to more sophisticated asset modelling, market data, forecasting and market analysis.
Details
Keywords
The aim of this Real Estate Insight is to comment upon the outlook for real estate investment in the United Kingdom (UK) at the beginning of 2023 in light of global inflation…
Abstract
Purpose
The aim of this Real Estate Insight is to comment upon the outlook for real estate investment in the United Kingdom (UK) at the beginning of 2023 in light of global inflation brought about by the pent-up post-pandemic demand push for goods and services and the exacerbation of the Ukraine/Russia conflict.
Design/methodology/approach
This Real Estate Insight will comment upon changes in the investor's view of the UK economy and the relative attractiveness of the different property sectors and the shift in thinking post-pandemic.
Findings
This paper will consider a number of scenarios and possibilities flowing from the current uncertainties in the property market and the wider economy.
Practical implications
As with all property investment, the value and performance of the property assets is interlinked with the use and demand of different property types. Understanding the supply and demand drivers provides investors with a reasoned conjecture of how the property market may perform going forward.
Originality/value
This is a review of the UK market in relation to post-COVID-19 changes to supply and demand at both an operational and investment level.
Details
Keywords
Richard Barkham and Malcolm Frodsham
– The purpose of this paper is to provide an indication of the returns to commercial property lending over the last 30 years in the UK.
Abstract
Purpose
The purpose of this paper is to provide an indication of the returns to commercial property lending over the last 30 years in the UK.
Design/methodology/approach
There is no long-term index of the returns to commercial property lending in the UK. This paper provides a partial solution by simulating the performance of bullet loans of various vintages, based on the value movements of the IPD index.
Findings
On average over the long-term debt returns are higher than equity returns. However, in certain periods, the losses incurred by real estate lenders are very large.
Research limitations/implications
No account taken of risk mitigation strategies used by lenders such as cross-collateralisation.
Practical implications
Provides an alternative approach to that recommended by the recent IPF “Vision For Real Estate Finance” Document based on the use of ICR. Makes the case for a loan equivalent of the IPD index.
Social implications
Reduced chance of resource misallocation and recession due to excess real estate lending.
Originality/value
Very limited information on private real estate debt returns.
Details
Keywords
Discusses the extent to which quality improvement standards can help organizations. Asserts that the Malcolm Baldrige National Quality Award, the European Quality Award and the…
Abstract
Discusses the extent to which quality improvement standards can help organizations. Asserts that the Malcolm Baldrige National Quality Award, the European Quality Award and the British equivalent have each established criteria which can be used by organisations to assess progress and tangible results from their quality processes. Asserts that continuous review is essential to total quality success. Contends that Baldrige and the EQA provide a framework against which progress and achievement can be mapped. Looks at the risks associated with models such as the European one and with awards such as the EQA. Discusses the BSI guide to TQM. Concludes that a standard for TQM still has a long way to go.
Details
Keywords
The volume and range of food law enforcement in the field of purity and quality control has grown dramatically in recent times. Only those able to recall the subject from upwards…
Abstract
The volume and range of food law enforcement in the field of purity and quality control has grown dramatically in recent times. Only those able to recall the subject from upwards of half a century ago can really appreciate the changes. Compositional control now appears as more of a closely knit field of its own, keeping pace with the advances of food processing, new methods and raw materials. It has its problems but enforcement agencies appear well able to cope with them, e.g. the restructuring of meat, excess water content, fat content, the application of compositional standards to new products, especially meat products, but the most difficult of all areas is that of securing and maintaining acceptable standards of food hygiene. This is one of the most important duties of environmental health officers, with a considerable impact on health and public concern; and one of the most intractible problems, comparable in its results with the insidious onslaught of the ever‐growing problem of noise, another area dependent on the reactions of people; to use an oft repeated cliche — “the human element”.