Institutional Real Estate Investing Processes, Due Diligence Practices and Market Conditions

Roulac, Stephen E.

doi:10.1080/10835547.2000.12089621

Cited by 6 publications

(32 citation statements)

References 28 publications

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“…According to research by Roulac (2000), more resources are devoted to due diligence in a difficult market rather than under more optimistic conditions. This is reflected by a UK investment surveyor interviewed for the research in 2010 who said:…”

Section: Fund Management Flood Risk and Due Diligencementioning

confidence: 99%

Flooding and UK commercial property investment: what is the risk?

Pottinger

Tanton

2014

Qualitative Research in Financial Markets

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The UK experienced widespread and disastrous flood events in 2007 and 2010, and the future incidence of flooding is predicted to increase. Understandably much media attention and research has focused on the impacts on people, their homes and jobs, and the future implications for flood risk insurance that has been a feature of the UK market. Research on flood risk and property undertaken at the College of Estate Management in 2006 found very little literature covering the effect of flooding on commercial property and the risks to property investment. Property is an important diversification asset in investment portfolios that underpins pensions, insurance and savings plans. Investors surveyed reported undertaking flood risk assessments in conjunction with property acquisitions, but none reviewed the flood risk status of property held in their portfolio, although they monitored other aspects of building performance. This is now changing and the IPD sustainable property index has introduced flood risk monitoring. This paper is based on research in 2010-2011 that examines the process of due diligence for flood risk adopted by commercial property investors to identify risks, inform purchase decisions and devise subsequent actions geared to mitigating and managing flood risk. Case studies illustrate the process, derived from interviews with major investment funds, their professional advisers and other stakeholder representatives, including environmental consultants, valuers, solicitors, lenders and the insurance industry. The paper explores the challenges to investment decision making and property valuation, given continuing uncertainties associated with flood risk predictions. The case is made for further research to establish the extent of UK investment property potentially at risk from flooding, the degree of risk to which it is exposed and to inform the way in which the risk is translated into valuation. Property represents about 4% of total investment assets under management in the UK (and 2.8% in the institutional market), but is significant in absolute terms given a market value estimated by IMA at £4.4trn. About 20% by value is in central London, known to be one of the most at risk cities globally for flooding-but there is otherwise no clear picture of where and how much commercial investment property could be at risk. This paper makes the case for finding out.

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Section: Fund Management Flood Risk and Due Diligencementioning

confidence: 99%

Flooding and UK commercial property investment: what is the risk?

Pottinger

Tanton

2014

Qualitative Research in Financial Markets

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“…Gallimore (2002), for example, concluded that improvements are necessary in the consistency of applied valuation models particularly input variables. Hutchison et al (1996) referred to the lack of consistency in the applied calculation methods and Roulac (2000) has criticised conventional approaches for their failures to adopt more scientific methods to value measurement.…”

Section: Nature Of Real Estate Valuementioning

confidence: 99%

“…More particularly, the relative contributions of different strategies, managerial tasks and functions to creating value in real estate development, investment and deal making have not been explicitly identified, analysed and measured. While Roulac (2000) implemented a comprehensive study of the importance of different factors in the investing decision, the relative contributions that these factors make to ultimate value creation in a real estate project has heretofore not been quantified.…”

Section: Introductionmentioning

confidence: 99%

Real estate value: creation and destruction

Roulac

Adair

McGreal

et al. 2006

J of Property Inv & Finance

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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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“…MacCowan & Orr [2008]) or property quality (see, e.g. Roulac [2000]). Similarly, the methodology did not allow respondents to mention any additional factors that might have significantly impacted their decisions.…”

Section: Identified Attributesmentioning

confidence: 99%

“…Similarly, the authors disregarded aspects such as sustainability and ESG criteria. Another study that is worth discussing at this point is that of Roulac (2000). An interesting finding from Roulac (2000) was that, among the legal/documentation group, which ranked as most important among all the groups, environmental reports were considered most relevant, yielding 9.14 out of 10.…”

Section: Identified Attributesmentioning

confidence: 99%

An Exploration of Real Estate Investment Decisions and the Significance of Green Certificates: Towards a Multi-Attribute Decision Model

Dreger¹

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Real estate investment decisions are a relevant but understudied topic. This study aims to fill this research gap by exploring real estate investment decisions in the German office market. Given the increasing trend and necessity to account for sustainability across all asset classes, and real estate in particular, I evaluate the role of green certificates in investment decisions in the German office market. I adopt an object-oriented ontological position and a phenomenological epistemology, enabling me to explore decisions without over- or undermining them. My research is split into two phases. In the First Research Phase, I explore decision-making expertise by conducting 22 semi-structured interviews with investment managers active in the German office market. This set of participants is diversified across different firm sizes, origins and investment focuses. As a result of the First Research Phase, I obtain an understanding of the decision-makers’ expertise and the criteria impacting their investment decisions. Furthermore, I devise ten attributes that describe investment decisions in the German office market. A cross-check with the participants and an external expert confirms that the set of attributes accurately represents real estate investment decisions. The Second Research Phase aims to develop the Multi-Attribute Utility Model (MAU) for Office Investments (OffIn-MAU), a model that supports investment decision-making in the German office market. The model allows the user to transform personal views into numbers and to assess up to ten core or value-add investment alternatives at once. To use the model, the respondents allocate relative importance scores to each of the ten attributes. The average of the resulting importance weights indicates the industry consensus on the relative attribute preferences. My research is the first to explore real estate investment decisions and to present a functioning, useful OffIn-MAU model that simplifies real estate decision-making. I have strong confidence in the results of my research because they are validated by a knowledgeable real estate expert and the participants themselves and have a high degree of coherence with the current state of the literature. My research also reveals considerable differences between accounting for environmental, social and governmental (ESG) criteria among core and value-add investments. Even within both risk classes, the high range of importance weights of the attribute and its standard deviations indicated significant variability in its perceived importance among the respondents. I conclude that sustainability in real estate is an emerging topic known to all investment decision-makers, while its importance for decision-makers varies and it affects core investments first. Nonetheless, considering increasing regulatory requirements and the prevalence of ESG criteria, sustainability will become even more relevant across all investment classes soon.

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Institutional Real Estate Investing Processes, Due Diligence Practices and Market Conditions

Cited by 6 publications

References 28 publications

Flooding and UK commercial property investment: what is the risk?

Flooding and UK commercial property investment: what is the risk?

Real estate value: creation and destruction

An Exploration of Real Estate Investment Decisions and the Significance of Green Certificates: Towards a Multi-Attribute Decision Model

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