Risk management in the aftermath of Lehmann Brothers – Results from a survey among German and international real estate investors

Donner, Sascha

doi:10.1080/09599916.2010.499016

Cited by 5 publications

(3 citation statements)

References 14 publications

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“…Recent studies have shown that risk management thus far has not been sufficiently adapted to the property industry in comparison with other industries. Property development companies frequently assess risk associated with development projects using DCF models, scenario and sensitivity analyses while seldom or not apply sophisticated quantitative methods at all (Donner, 2010). Presently the development environment is highly unpredictable and volatile; it seems to become more complex by the day; therefore, there is need for development companies to adopt robust, resilient, and adaptive risk management techniques to confront severe uncertainties and emergence risks.…”

Section: The Future Of Risk Management In Property Development Projecmentioning

confidence: 99%

Application of Quantitative Risk Analysis in Property Development Projects in Nigeria: A Review

Nnamani¹,

Sam-Otuonye²,

Razali³

2018

25th Annual European Real Estate Society Conference

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Property development is a multifaceted, dynamic and risky enterprise. Property development projects are fraught with risks and uncertainties spanning through the stages of the development process. Risk and uncertainty, if not well managed, could have harmful impacts on development project by affecting time, quality, and cost of such project. In Nigeria, evidences abound of property development failures and abandonments with the attendant social, environmental and economic consequences. Development projects are abandoned before completion or completed projects are not disposed over six months. In other cases, completed projects are foreclosed by development lenders due to inability of the developers to service their loans. These problems could be attributed to development companies not employing formal strategic risk management in project evaluation. The aim of this paper is to review literature and previous research on application of risk management techniques in property development industry with a view to identify the possibility for further research in Nigeria. The review used various sources such as textbooks, journal articles, reports, masters' dissertations and doctoral theses relevant to the study. The review showed that, generally, risk management is still largely handled in a subjective manner. Any notion that developers are now applying a wide range of rigourous and sophisticated risk management techniques is erroneous as this is scarcely manifested in actual practice. In the Nigerian context, there is probably no research on risk management by development companies; few risk management studies were limited to risk analysis/assessment; while others focused on building construction risk which is just one of the stages in the property development process. This paper recommends the development of an advanced risk management framework applicable to the Nigerian property development industry.

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Section: The Future Of Risk Management In Property Development Projecmentioning

confidence: 99%

Application of Quantitative Risk Analysis in Property Development Projects in Nigeria: A Review

Nnamani¹,

Sam-Otuonye²,

Razali³

2018

25th Annual European Real Estate Society Conference

View full text Add to dashboard Cite

show abstract

“…Worzala and Newell (1997) identify differences between European and Southeast Asian property investors concerning investment strategies and rationales for international investment. Donner (2010) finds a clear lack of sophistication in the application of advanced financial risk management tools. He concludes that the property industry is less sophisticated than other industries, where professionalization came earlier and the investment goods are less heterogeneous and complex.…”

Section: Review Of Relevant Literaturementioning

confidence: 99%

Property investor behaviour: qualitative analysis of a very large transaction

Söderberg¹,

Westerdahl²

2013

Journal of Property Investment &Amp; Finance

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We study property investment decision-making from a behavioural perspective on the very micro level. We do this by analysing an extraordinary large transaction that took place in the Swedish property market 2008. In an open-bid transaction the properties of the corporation Vasakronan AB was sold for SEK 41.1 billion (equal to some €4.3 bn).By applying a qualitative empirical approach, we are able to investigate the processes of data-collection, property and market analysis, securing of financing and investment decision-making that take place within property companies as they produce a bid for the portfolio offered. Our investigation is an explorative case study, but the scale and complexity of the transaction secure it contains most critical moments in a general property investment decision-making process. By so doing, we approach the investment property market in a way that is so far under-researched.Managers in both the purchasing company and the company with the second highest bid were interviewed one person at a time. The interviewees were encouraged to speak freely most of the time, but we also supplied an interview guide with a number of themes as well as certain specific questions. The interviews are transcribed. The results, along with citations, are reported under headings that correspond to the main sub-processes of the investment decision-making.Detailed information about this remarkable transaction itself is revealed, but general insights are also gained about certain important market institutions rarely revealed by official records and reports from the players and authorities in the property market. Findings of the study are put in perspective by relating to normative property investment textbooks as well as earlier empirical surveys of investment behaviour in the property market.

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“…At least 400 -500 real estate is needed to completely reduce to the market-systematic risk. There are also difficulties in the application of MPT namely immobility, heterogeneity, indivisibility, high transaction costs, and limited sustainability (Donner, 2010).…”

Section: Berk Journal Of Financial Risk Managementmentioning

confidence: 99%

Managing Real Estate Exposure: An Empirical Analysis on Interest Rate Risk

Berk¹

2017

JFRM

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Real estate is an illiquid investment with cyclical returns, so risk management techniques should be used for sustainable returns. The risk management techniques include asset based, portfolio, insurance and derivatives solutions. Asset based solutions include the risk character of the real estate, based on where it's located and how well it is developed. Some property such as foreclosure and those require maintenance is riskier than others. Portfolio solutions allow real estate companies to include real estate with different location and segments such as office and retail. Using this, the risk is limited to the systematic component, where asset based-idiosyncratic risk is tried to be reduced when included enough number of assets to the basket. The management should be capable of determining which risks taking and which to transfer. Some risks such as earthquake, fire, vehicle crush, terrorist activities are rare in nature but can cause severe damage when it takes place. The insurance policies can cover these events which most of the time are reinsured. In addition derivatives are available to hedge some of the risks. These can be traded on the market or over-the-counter. By using derivatives it is possible to hedge interest rate risk, inflation, currency risks, and property price changes. To hedge interest rate risk which is also studied in this paper, instruments such as cap, swap, and collar are available. The research is investigating the role of interest rate risk in the performance of real estate management companies. The variables used in this research are 30 years treasury yield, and exchange closing price for CBRE Group Inc., Colliers International Group, and Jones Lang LaSalle Incorporated. The data is daily for the period 16 June 2004 and 19 June 2015. The methods used are Johansen Cointegration and Granger Causality. The results of the study indicate there is a short-run and long-run relationship between interest rate and real estate management firm stock performance. In other words, interest rate fluctuation is a critical risk in performance of real estate management companies. In the paper, it is also discussed risk mitigation ideas for controlling this and other risks that real estate management industry is exposed.

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Risk management in the aftermath of Lehmann Brothers – Results from a survey among German and international real estate investors

Cited by 5 publications

References 14 publications

Application of Quantitative Risk Analysis in Property Development Projects in Nigeria: A Review

Application of Quantitative Risk Analysis in Property Development Projects in Nigeria: A Review

Property investor behaviour: qualitative analysis of a very large transaction

Managing Real Estate Exposure: An Empirical Analysis on Interest Rate Risk

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