“Financial alchemy” or a zero sum game? Real estate finance, securitisation and the UK property market

Following the US model, the UK has seen considerable innovation in the funding, finance and procurement of real estate in the last decade. In the growing CMBS market asset backed securitisations have included $2.25billion secured on the Broadgate office development and issues secured on Canary Wharf and the Trafford Centre regional mall. Major occupiers (retailer Sainsbury’s, retail bank Abbey National) have engaged in innovative sale & leaseback and outsourcing schemes. Strong claims are made concerning the benefits of such schemes – e.g. British Land were reported to have reduced their weighted cost of debt by 150bp as a result of the Broadgate issue. The paper reports preliminary findings from a project funded by the Corporation of London and the RICS Research Foundation examining a number of innovative schemes to identify, within a formal finance framework, sources of added value and hidden costs. The analysis indicates that many of the gains claimed conceal costs – in terms of market value of debt or flexibility of management – while others result from unusual firm or market conditions (for example utilising the UK long lease and the unusual shape of the yield curve). Nonetheless, there are real gains resulting from the innovations, reflecting arbitrage and institutional constraints in the direct (private) real estate market

What Tenants Want: UK occupiers’ requirements when renting commercial property and strategic implications for landlords

Businesses need property in order to generate turnover and profits. If real estate owners are to be able to provide properties and related services that are desirable, it is crucial that they understand tenants’ requirements and preferences. Changes in the way businesses operate might well lead to an overall reduction in space requirements in all sectors. Faced with reductions in demand, landlords will find themselves in an increasingly competitive marketplace for tenants. Of the array of strategies available to landlords, what strategies should they employ for maximum effect? This paper examines what United Kingdom tenants want from commercial property (retail, industrial and office). The first part provides an analysis of data from several hundred interviews with occupiers of commercial properties owned by some of the largest UK real estate investment companies. Results are presented for each of the asset classes separately. The second part compares the findings with previous research and discusses the strategic implications for landlords.

Financialisation, the valuation of investment property and the urban built environment in the UK

The financialisation literature has been criticised for its limited empirical base and its failure adequately to link the everyday world with that of high finance. The paper addresses these shortcomings by examining the calculative practice of property valuation. The way that valuations are performed affects their results and, therefore, the operation of the property market. The paper traces the evolving influence of finance capital on the valuation of commercial property in the UK by constructing a historiography of investment valuation since 1960. Traditional approaches to valuation have been increasingly challenged by those derived from financial economics. However, the former remains the dominant method for undertaking market valuation. Its grounding in comparison – a centring and standardising process – offers an explanation for some of the changes in the urban built environment that are ascribed to financialisation. This suggests that a more detailed and historically sensitive interpretation of financialisation is required.

The determinants of inward foreign direct investment in business services across European regions

The determinants of inward foreign direct investment in business services across European regions, Regional Studies. The role of forward linkages with manufacturing sectors and other service sectors as attractors of business services foreign direct investment (FDI) is studied at the regional level. Using data on 146 NUTS-2 regions, it is found that regions specialized in those (manufacturing) sectors that are high potential users of business services attract more FDI in the business services than other regions. Results are robust to the inclusion of the traditional determinants of foreign investments at the regional level as well as to controls for spatial dependence. The results suggest that regional policies aimed at attracting foreign investors in the business service industry might prove ineffective in the absence of a pre-existing local intermediate demand

Forces information and media services in Operation Granby 1990-91

The paper looks at the setting up of media services for British Army forces engaged in Operation Granby, the British participation in Operation Desert Storm, the liberation of Kuwait from Iraqi occupation in 1991. In particular, the piece focuses on the creation of a force newspaper and radio station.There is far more involved in the organisation of modern war than simply battles themselves One aspect is the importance of creating and maintaining morale, which can be achieved in a number of ways, especially by keeping troops informed of their progress, purpose and mission as operations unfold. This was specifically recognised by commanders in the Gulf War, who ensured the smooth transmission of information by the provision of media services for forces personnel throughout the War. Here S J Anglim concentrates on the difficulties inherent in setting up and running the Gulf Forces newspaper, The Sandy Times, a Radio service and producing video reviews, all of which played their part in ensunng high morale. He concludes that there are lessons to be learnt and implemented for the success of any future conflicts.

Plant-pollinator biodiversity and pollination services in a complex Mediterranean landscape

Mediterranean landscapes comprise a complex mosaic of different habitats that vary in the diversity of their floral communities, pollinator communities and pollination services. Using the Greek Island of Lesvos as a model system, we assess the biodiversity value of six common habitats and measure ecosystemic 'health' using pollen grain deposition in three core flowering plants as a measure of pollination services. Three fire-driven habitats were assessed: freshly burnt areas, fully regenerated pine forests and intermediate age scrub; in addition we examined oak woodlands, actively managed olive groves and groves that had been abandoned from agriculture. Oak woodlands, pine forests and managed olive groves had the highest diversity of bees. The habitat characteristics responsible for structuring bee communities were: floral diversity, floral abundance, nectar energy availability and the variety of nectar resources present. Pollination services in two of our plant species, which were pollinated by a limited sub-set of the pollinator community, indicated that pollination levels were highest in the burnt and mature pine habitats. The third species, which was open to all flower visitors, indicated that oak woodlands had the highest levels of pollination from generalist species. Pollination was always more effective in managed olive groves than in abandoned groves. However, the two most common species of bee, the honeybee and a bumblebee, were not the primary pollinators within these habitats. We conclude that the three habitats of greatest overall value for plant-pollinator communities and provision of the healthiest pollination services are pine forests, oak woodland and managed olive groves. We indicate how the highest value habitats may be maintained in a complex landscape to safeguard and enhance pollination function within these habitats and potentially in adjoining agricultural areas. (c) 2005 Elsevier Ltd. All rights reserved.

Risk pricing practices in finance, insurance and construction

A review of current risk pricing practices in the financial, insurance and construction sectors is conducted through a comprehensive literature review. The purpose was to inform a study on risk and price in the tendering processes of contractors: specifically, how contractors take account of risk when they are calculating their bids for construction work. The reference to mainstream literature was in view of construction management research as a field of application rather than a fundamental academic discipline. Analytical models are used for risk pricing in the financial sector. Certain mathematical laws and principles of insurance are used to price risk in the insurance sector. construction contractors and practitioners are described to traditionally price allowances for project risk using mechanisms such as intuition and experience. Project risk analysis models have proliferated in recent years. However, they are rarely used because of problems practitioners face when confronted with them. A discussion of practices across the three sectors shows that the construction industry does not approach risk according to the sophisticated mechanisms of the two other sectors. This is not a poor situation in itself. However, knowledge transfer from finance and insurance can help construction practitioners. But also, formal risk models for contractors should be informed by the commercial exigencies and unique characteristics of the construction sector.