Real Estate Risk Factors and Portfolio Allocation

2018 ◽  
Author(s):  
Martin Hoesli ◽  
Jean-Christophe Delfim
Keyword(s):  
Risk Factors ◽  
Real Estate ◽  
Portfolio Allocation

International Real Estate Review

2016 ◽  
Vol 19 (4) ◽  
pp. 411-434
Author(s):  
Su Chan ◽  
◽  
Ko Wang ◽  
Jing Yang ◽  
◽  
...  
Keyword(s):  
Risk Factors ◽  
Interest Rate ◽  
Real Estate ◽  
Numerical Analyses ◽  
Theoretic Model ◽  
Equity Financing ◽  
Game Theoretic ◽  
Game Theoretic Model

In this study, we use a simple 2-period game theoretic model to determine a mutually acceptable interest rate for a construction loan. This mutually acceptable interest rate is the rate that makes a developer indifferent between using 100% equity financing and a construction loan. It is also the highest interest rate that a developer is willing to pay and a bank is willing to lend. The three risk factors identified in the model are the loss, leverage and first-phase loan ratios. Our analytical and numerical analyses indicate that the derived mutually acceptable interest rate has desirable properties as the rate increases with an increase in the three identified risk factors.

Analysing project risks in Ghana’s real estate industry

2018 ◽  
Vol 16 (4) ◽  
pp. 413-428
Author(s):  
Charles Amoatey ◽  
Doreen Danquah
Keyword(s):  
Risk Factors ◽  
Real Estate ◽  
Construction Industry ◽  
Project Managers ◽  
Environmental Risks ◽  
Real Estate Industry ◽  
Content Type ◽  
Market Risks ◽  
Project Risks ◽  
Technical Risks

Purpose The purpose of this paper is to analyse project risks in Ghana’s real estate construction industry in terms of likelihood of occurrence, severity of impact and controllability. Design/methodology/approach A quantitative research approach was used in this study to address the research objective. The study population consisted project managers, architects, surveyors and contractors from 17 members of the Ghana Real Estate Developers Association (GREDA) in Ghana. Random stratified sampling technique was used to select 97 participants from these firms. A structured questionnaire was used to collect primary data, whereas descriptive statistics were used to present findings. Findings All risks identified have some level of likelihood of occurrence, extent of severity of impact and controllability. Market risks, technical risks and environmental risks are more likely to occur. Market risks, technical risks and environmental risks had the highest severity of impact. Financial risks, market risks, managerial risks and technical risks are the most controllable. Among all risks, environmental risks are the direst because they have high likelihood of occurrence and severity of impact but very low controllability. Real estate construction firms (developers) are therefore expected to prioritize remedy of environmental risks. Research limitations/implications The study is based on self-reported perception of project parties on the likelihood, severity of impact and controllability of real estate project risk factors. Firms outside of GREDA were not included in the survey. Therefore, generalisation of these risk factors for the entire construction industry should be done with caution. Practical implications The research results show that Ghanaian real estate developers are aware of the existence of the risks which impact on the performance of the industry. To effectively and efficiently manage these risk factors, project parties must understand the likelihood of occurrence, severity of impact and controllability of the risk factors, as well as individual firm’s responsibilities and capabilities to manage them. Such knowledge helps project managers to prioritise risks in managing them in the face of scarce resources. From an academic research perspective, the paper contributes to a conceptual risk assessment framework for the real estate industry. Originality/value The paper’s main contributions relate to the introduction of real estate construction sector-specific factors to project risk management modelling.

Approach to Prioritizing the Commercial Real Estate Development Risk

2021 ◽  
Vol 15 (2) ◽  
pp. 114-126
Author(s):  
Malka Thilini ◽  
Nishani Champika Wikcramaarachchi ◽  
P.A.N.S. Anuradha
Keyword(s):  
Risk Factors ◽  
Risk Management ◽  
Real Estate ◽  
Management Strategies ◽  
Commercial Real Estate ◽  
Property Development ◽  
Analytic Hierarchy ◽  
Investment Projects ◽  
Risk Management Strategies ◽  
Development Risk

After 30 years of war in Sri Lanka, the demand for real estate has increased tremendously across the nation. Similarly, numerous real estate sub-sectors have avidly participated in the worldwide boom. However, with failures and poor functioning of many investment projects, the industry's risk management reputation has been put in jeopardy, followed by the coronavirus (COVID-19). Though it is less popular among Sri Lankan property developers, risk management strategies in development projects have become a pressing requirement. This paper's goal is to look at commercial property development risk elements from the perspective of a real estate developer in relation to Social, Economic, Environmental, Technological, Political, and Pandemic Risks. The research first evaluates risk variables using a super decision software model based on the Analytic Hierarchy Process (AHP), then prioritizes the most important risk factors, and lastly examines effective risk management measures for successful real estate developments. The data collection has been carried out using interviews through telephone conversations with the help of a structured questionnaire. Accordingly, 35 risk factors have been assessed altogether. For the three projects, the synthesized values were 1.0000, 0.510763, and 0.604037, respectively. Based on the analysis of superMatrix calculation, project A is regarded as the best alternative project in such circumstances. Pandemic Risk, Economic Risk, and Political Risk have all had a significant impact on the primary risk criteria. Therefore, COVID-19 Pandemic Risk Emergence, Workforce Availability, Duration, Delays in Council Approval/License Approval Process and Natural Disaster Impact were identified as the highest influenced sub-risk factors. Identifying the risk factors on this avenue will also help in making better investment decisions while increasing the unpredictable nature of the real estate field and future satisfaction of loan team investment goals within the country.

scholarly journals Risk Factors of European Non-Listed Real Estate Fund Returns

2016 ◽  
Author(s):  
Jean-Christophe Delfim ◽  
Martin Hoesli
Keyword(s):  
Risk Factors ◽  
Real Estate

scholarly journals Real Estate Due Diligence Process in International Real Estate Transactions in Latvia

2015 ◽  
Vol 3 (1) ◽  
pp. 91-102 ◽  
Author(s):  
Janis Viesturs ◽  
Armands Auziņš
Keyword(s):  
Risk Factors ◽  
Real Estate ◽  
Due Diligence ◽  
Legal Systems ◽  
The Real ◽  
The Real Estate ◽  
Limited Availability ◽  
Number Of Individuals

Abstract International real estate transactions, especially in countries with different legal systems, are characterised by the fact that each transaction is unique in its complexity, confidentiality, different risk factors, and the limited availability of information regarding the real estate. The Due Diligence (DD) process is an instrument that can help avoid or at least reduce risks and assist in making important decisions regarding real estate transactions. The term “Due Diligence” has a number of different meanings. The aim of this paper is to determine the etymology of this term and to identify its most common contemporary meaning. Each DD process is to be recognised as a project requiring management because of the potentially high number of individuals that could be involved.

The Influence of Non-Risk Factors on Real Estate Holdings of Pension Funds

1991 ◽  
Vol 47 (6) ◽  
pp. 44-55 ◽  
Author(s):  
Richard M. Ennis ◽  
Paul Burik
Keyword(s):  
Risk Factors ◽  
Real Estate ◽  
Pension Funds

The diverging role of the systematic risk factors: evidence from real estate stock markets

2015 ◽  
Vol 33 (1) ◽  
pp. 81-106 ◽  
Author(s):  
Stephan Lang ◽  
Alexander Scholz
Keyword(s):  
Risk Factors ◽  
Time Series ◽  
Asset Pricing ◽  
Real Estate ◽  
Systematic Risk ◽  
Content Type ◽  
Risk Return ◽  
Systematic Risk Factors ◽  
Relationship Of

Purpose – The risk-return relationship of real estate equities is of particular interest for investors, practitioners and researchers. The purpose of this paper is to examine, in an asset pricing framework, whether the systematic risk factors play a significantly different role in explaining the returns of listed real estate companies, compared to general equities. Design/methodology/approach – Running the difference test of the Fama-French three-factor and the liquidity-augmented asset pricing model, the authors analyze the effect of the systematic risk factors related to market, size, BE/ME and liquidity in a time-series setting over the period July 1992 to June 2012. By applying the propensity score matching (PSM) algorithm, the authors bypass the “curse of dimensionality” of traditional matching techniques and identify a comparable control sample of general equities, in terms of the relevant firm characteristics of size, BE/ME and liquidity. Findings – The empirical results indicate that European real estate equity returns load significantly differently on the size, value and liquidity factor, while the influence of the market factor seems to be equivalent. In addition, the authors find an economically and statistically significant underperformance of European real estate equities, after accounting for the diverging role of systematic risk factors. Running the conditional time-series regression, the authors further reveal that these findings are predominately caused by the divergent risk-return behavior of real estate equities in economic downturns. Practical implications – Due to the diverging role of the systematic risk factors in pricing real estate equities, the authors provide evidence of potential diversification benefits for investors and portfolio managers. Originality/value – This is the first real estate asset pricing study to dissect the unique risk-return relationship of real estate equities by employing propensity score matching.

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