Skip to main content
Disciplines
Automotive Business IT + Informatics Construction + Real Estate Electrical Engineering + Electronics Energy + Sustainability Insurance + Risk Finance + Banking Management + Leadership Marketing + Sales Mechanical Engineering + Materials
Events
DE
EN
Books
Journals
Topic Page
Marketing
Start single access now
Access for companies
EXTENDED SEARCH
Log in
Top

1995 | Book

Introduction Read chapter Read first chapter

Alternative Ideas in Real Estate Investment

Editors: Arthur L. Schwartz Jr., Steven D. Kapplin

Publisher: Springer Netherlands

Book Series : Research Issues in Real Estate

Included in: Professional Book Archive

Login to get access
insite
SEARCH

About this book

Arthur L. Schwartz, Jr. and Steven D. Kapplin The focus of this volume of the ARES Monograph Series is new ideas in real estate investment. Within this volume, empiricial studies, literature reviews, and tutorials examine a broad range of important investment issues. Many new and innovative ideas are presented. This volume should be a rich source of real estate investment ideas for many years to come. Kapplin and Schwartz examine the returns of two types of REITs, as well as that of Master Limited Partnerships (MLP), over the 1987-1989 time period. Their sample consisted of 54 real estate securities; they conclude that these entities did not provide an effective inflation hedge. MLP returns exceeded that of the overall stock market, but the two REIT types did not provide rates-of-return in excess of the marked. An extensive review of the commercial real estate return literature is presented by Fletcher. He focuses upon studies that utilize commingled real estate fund (CREF) data. His detailed overview of the subject provides a much needed synthesis of the current literature. Roulac presents an extensive discussion of the differences in the per­ spectives of individual versus institutional investors. In his essay, he considers such factors as scale, diversification, and related issues. Addi­ tionally, he examines a wide range of literature from within academia, 1 INTRODUCTION 2 as well as the opinions of various real estate gurus. He concludes that behavioral factors override economic considerations.

Table of Contents

Frontmatter
Introduction
Abstract
The focus of this volume of the ARES Monograph Series is new ideas in real estate investment. Within this volume, empiricial studies, literature reviews, and tutorials examine a broad range of important investment issues. Many new and innovative ideas are presented. This volume should be a rich source of real estate investment ideas for many years to come.
Arthur L. Schwartz Jr., Steven D. Kapplin
1. Recent Performance of U.S. Real Estate Securities
Abstract
Investors can include real estate in a diversified portfolio in two ways. They can acquire direct investment in real property, or they can acquire a security backed by direct real estate investment. This paper examines the benefits of the latter—investment in real estate securities. Presently, there are four types of real estate securities: Real Estate Limited Partnerships (RELPs), Real Estate Investment Trusts (REITs), Finite Life REITs (FREITs), and Master Limited Partnerships (MLPs). This study examines only REITs, FREITs, and MLPs. Real Estate Limited Partnerships (RELPs) have been omitted from this study because RELPs are not publicly traded as are REITs, FREITs and MLPs (Kapplin and Schwartz, 1988a,b, 1989, 1986; Kensinger and Martin, 1986; The Stanger Register, 1989).
Steven D. Kapplin, Arthur L. Schwartz Jr.
2. Commercial Real Estate Investments and Returns: A Review of the Literature Using Cref Data
Abstract
In the past decade, empirical studies of multimarket investments in commercial real estate have typically relied on data taken either from real estate investment trusts or commingled real estate funds (CREFs). In this review, the findings of studies using the latter, CREF data, are briefly summarized.
Stuart Fletcher
3. Implications of Individual Versus Institutional Real Estate Investing Strategies
Abstract
Investor status is often perceived as a proxy for sophistication, competence and performance. Whereas individuals once dominated corporate securities markets, institutional investors have recently emerged as the dominant power player (Welles, 1975). Institutional investors presumably gain market share at the expense of individuals, since the compounding effect of superior performance resulting from their competitive advantages provides then still more funds to invest (Train, 1982), which phenomenon is magnified by declining individual savings and increasing spending rates. The growing complexity, sophistication and competitiveness of the corporate securities markets combine to favor the institutional over the individual investor (Ellis, 1975; Welles, 1975).
Stephen E. Roulac
4. Superior Real Estate Investment Performance: Enigma or Illusion? A Critical Review of the Literature
Abstract
The purpose of this paper is to critique the existing empirical evidence on the investment performance of real estate relative to alternative asset categories. The key issue which guides this review of the investment performance literature is whether abnormal real estate returns are merely an illusion which arises from the shortcomings associated with various real estate performance studies or are the result of an omission of more fundamental factors. We suggest that any superior return is a short-run phenomenon, because, according to capital market theory, all assets should exhibit similar risk and return characteristics in the long run. If real estate continues to possess superior performance in the long run, then this implies that fundamental factors have been omitted from the real estate pricing model. Moreover, we will propose that a world in which the capital asset pricing model holds might be compatible with the existing evidence, because most of the prior studies have focused on total risk rather than on systematic risk.1 Consequently, all assets can plot on the security market line in equilibrium, given a CAPM world, regardless of whether on asset (portfolio) such as real estate dominates another asset (protfolio) such as stocks from a mean-variance perspective.
Crocker H. Liu, Terry V. Grissom, David J. Hartzell
5. The Effect of Unbundling Asset Returns on Restricted Mixed-Asset Portfolios
Abstract
Research on mixed-asset portfolios has attracted increased attention in recent years (Brueggeman et al., 1984; Friedman, 1971; Hartzell and Webb, 1988; Webb et al., 1988; Webb and Rubens 1986, 1988). A mixed- asset portfolio is simply a portfolio that contains different types of assets, both financial (such as bonds and equities) and real (such as real estate). Many institutional investors (for example, life insurance companies, pension funds, and bank trust departments) cannot invest in all types of assets, due to various state and federal laws, as well as ERISA. Hence, their portfolios are “restricted.
James R. Webb, Jack H. Rubens
6. Real Estate Portfolio Diversification by Sources of Return
Abstract
The primary objective of diversification is to assemble an investment portfolio that contains a minimum level of risk relative to the expected return of the portfolio (“Minimum Variance Portfolio”). Investors such as REITS, pension funds, insurance companies, etc. diversity their real estate portfolios through selecting different property types (apartments, office buildings, etc.) and/or acquiring properties from different geographical locations.
John E. Williams
7. An Empirical Analysis of Efficient Real Property Liquidity Premiums
Abstract
The efficient valuation of real property is no different from the valuation of any other asset except that its relative illiquidity adds to the cost of being wrong. Some thirty years ago, it was postulated that investors are risk-averse and that they make decisions about risky assets on the basis of mean-variance efficiency (see Markowitz, 1959). That is, investors prefer higher returns for higher levels of perceived risk. This disposition toward risk aversity does not vanish with the efficient analysis of real property investments. Even those who subscribe to the more subjective methods of determining the acceptability of a project recognize the need for greater returns as compensation for “more risky” projects.
David N. Leggett
8. Farmland as an Inflation Hedge
Abstract
As inflation declined in the late 1980s from the double-digit rates of previous years, investor concerns of rising price levels diminished. However, viewed from the longer historical perspective of post-WWI performance, inflation has been at significant levels since the late 1960s. A major concern of investors is that their wealth portfolio provide positive real rates of return. During periods of inflation, some investiments increase in value more quickly than others, while some decrease in value.
Jack H. Rubens, James R. Webb
9. Performance Measures of Real Estate Firm Common Stock Returns
Abstract
According to investor folklore, real estate investments offer an above average rate of return and a hedge against inflation. Previous research on real estate returns suggests that investor folklore may have some basis of truth. The work of Brueggeman, Chen, and Thibodeau (1984), Ibbotson and Siegel (1984), Hartzell, Hekman, and Miles (1987), Kuhle, Walther, and Wurtzebach (1986), and Kuhle (1987) shows that real estate either earned excessive returns or provided a good hedge against inflation. In a review of the real estate return literature, Sirmans and Sirmans (1986–87) indicate that most studies find real estate returns exceed that of stock and bond investments.
John L. Glascock, Wallace N. Davidson III
10. A Tutorial on Partitioning Real Estate Investment Cash Flows Using the Internal Rate of Return
Abstract
Much has been written on the use of the internal rate of return (IRR) as an investment decision-making criterion. In a 1977 survey article, Jaffe (1977) cited 1,188 IRR references and classified them into four categories: (1) tutorial, (2) calculations and multiple solutions, (3) alternative measures, models and computations, and (4) reinvestment, risk and discounting, and ranking. Because of the possibility of multiple solutions when cash flows turn negative, and of the inherent assumption that cash flows generated can be continuously invested elsewhere at the project IRR, the consensus is that the net present value investment decision-making criterion is superior, and that the IRR’s principal use should be for ranking investment alternatives.1
Mark G. Dotzour, Donald R. Levi
11. Statistical Inference in Event Studies Using Multiple Regression
Abstract
The use of financial price data to measure the impact of corporate events has become common in real estate and finance. For example, Henderson (1990) indicates that during 1987 and 1988 20 event studies were published in the Journal of Finance and Journal of Financial Economics. In the real estate literature, event studies have covered primarily corporate restructuring topics.1
John J. Glascock, Imre Karafiath
Backmatter
Metadata
Title
Alternative Ideas in Real Estate Investment
Editors
Arthur L. Schwartz Jr.
Steven D. Kapplin
Copyright Year
1995
Publisher
Springer Netherlands
Electronic ISBN
978-94-009-0367-8
Print ISBN
978-94-010-6651-8
DOI
https://doi.org/10.1007/978-94-009-0367-8