Emerald | Journal of Property Valuation and Investment | Table of Contents

Property and Ptolemy, Copernicus and commerce: Toward a strategic perspective for global property involvements

literatinetwork@emeraldinsight.com (Stephen E. Roulac) — Tue, 01 Dec 1998 00:00:00 +0000

Abstract

Today, every enterprise, investor and household with property involvements is functionally involved in the international real estate markets, by virtue of the influence that global forces and participants in the multiple segments of the real estate markets have on local spatial patterns and therefore the demand for, and supply of, property goods and services. Property involvements for many reflect a Ptolemaic view of the universe, proceeding from the premise that the particular property is the focus and locus of concern, with other forces, factors and properties metaphorically rotating around the particular local property. A Copernican concept of commerce, by contrast, proceeds with the premise that property involvements follow from consideration of the dynamic interdependent interaction and implications of ideas, initiatives, and involvements, from multiple regions and perspectives. Even though involved in multiple markets with offices throughout the world, many employ multiple local insular strategies, being guided more by a Ptolemaic than Copernican perspective. With a strategic perspective for global property involvements, no longer is the operative paradigm built on the primacy of focus on the single local property.

Pricing upwards-only rent review clauses: An international perspective

Tue, 01 Dec 1998 00:00:00 +0000

Abstract

Complicated leasing terms make both the valuation of lease contracts and the calculation of effective rent levels difficult. These complications are compounded by the existence of option-like features in many contracts. For example, retail leases in the USA generally have overage rent clauses that allow the landlord additional rent if sales exceed a breakpoint, but set a minimum rent level under any sales conditions. Similarly, upward-only rent review clauses are common in the UK and Australia (as well as other commonwealth countries). Here the rent is fixed at the commencement of the contract, with the option to review the rental figure in line with market conditions at pre-determined intervals (normally every five years). If rents in the market have increased over the interim period, the rent of the subject property will be adjusted upwards accordingly and this higher level becomes the minimum possible future rent. However, if market rents have either remained static or decreased, the landlords would choose not to operate the rent review clause and the existing rent will continue. The US overage contract can be valued using a binomial approach. The upward-only adjusting leases cannot because the value of the option is “path-dependent”. Here, Monte Carlo valuation methods must be used. In this paper we describe both approaches. We show the relationship between the rents on these contracts relative to those without overage or with up and downward adjustment. The key determinants in establishing this relationship are the expected drift and the volatility of either sales (in the case of overage) or market rents (in the case of upward-only leases).

The extent and limitations of local commercial property market data

Tue, 01 Dec 1998 00:00:00 +0000

Abstract

Property analysts and researchers have a fundamental requirement for reliable property market data. Historically, data on the commercial and industrial property market are weak, although a number of property indices have now been published for 20 years. Considerable debate has arisen as to the appropriateness of these data for meaningful and reliable econometric analysis. A particular problem is the existence of serial correlation. This paper considers the form and the nature of spatial data and examines the implications for their interpretation and analysis. The primary concern is with rent and yield data with a particular focus on those derived from valuations. It is concluded that the use of valuation data does not appear to be a constraint or the source of serial correlation. In addition, its existence parallels that found in other economic time series data of longer standing. A possible solution is the disaggregation of the data to the local level, which may reduce the smoothing induced by aggregation.

A review of the factors that affect the value of licensed premises

literatinetwork@emeraldinsight.com (B.J. Gillham) — Tue, 01 Dec 1998 00:00:00 +0000

Abstract

The licensed property marked has never been busier. However, it is not one market but several. There is a drive by operators of the big theme pubs to acquire more units in retail trading areas where they compete head-on with retailers and caterers. Valuations reflect not only the huge profits to be made from these units but also stock market valuations of the companies themselves and the alternative use values of key A1/A3 sites. The traditional tenanted pubs, the town and village “local”, is also in keen demand from expanding specialist companies who need size to be ever more efficient. These companies are in competition with those who wish to provide securitised packages of assets. This paper discusses these trends and the effect that they have on the value and valuation of licensed premises.

Rent review update

literatinetwork@emeraldinsight.com (P.F. Smith) — Tue, 01 Dec 1998 00:00:00 +0000

News coverage

literatinetwork@emeraldinsight.com (Scarlett Palmer) — Tue, 01 Dec 1998 00:00:00 +0000

Property lending survey 1998

literatinetwork@emeraldinsight.com (David Isaac) — Tue, 01 Dec 1998 00:00:00 +0000

Editorial

literatinetwork@emeraldinsight.com (Gerald R. Brown) — Tue, 01 Dec 1998 00:00:00 +0000