Internal rents and corporate property management: a study into the use of internal rents in UK corporate organisations

Research in the late 1980s showed that in many corporate real estates users were not fully aware of the full extent of their property holdings. In many cases, not only was the value of the holdings unknown, but there was uncertainty over the actual extent of ownership within the portfolio. This resulted in a large number of corporate occupiers reviewing their property holdings during the 1990s, initially to create a definitive asset register, but also to benefit from an more efficient use of space. Good management of corporately owned property assets is of equal importance as the management of other principal resources within the company. A comprehensive asset register can be seen as the first step towards a rational property audit. For the effective, efficient and economic delivery of services, it is vital that all property holdings are utilised to the best advantage. This requires that the property provider and the property user are both fully conversant with the value of the property holding and that an asset/internal rent/charge is made accordingly. The advantages of internal rent charging are twofold. Firstly, it requires the occupying department to “contribute” an amount to the business equivalent to the open market rental value of the space that it occupies. This prevents the treating of space as a free good and, as individual profit centres, each department will then rationalise its holdings to minimise its costs. The second advantage is from a strategic viewpoint. By charging an asset rent, the holding department can identify the performance of its real estate holdings. This can then be compared to an internal or external benchmark to help determine whether the company has adopted the most efficient tenure pattern for its properties. This paper investigates the use of internal rents by UK-based corporate businesses and explains internal rents as a form of transfer pricing in the context of management and responsibility accounting. The research finds that the majority of charging organisations introduced internal rents primarily to help calculate true profits at the business unit level. However, less than 10% of the charging organisations introduced internal rents primarily to capture the return on assets within the business. There was also a sizeable element of the market who had no plans to introduce internal rents. Here, it appears that, despite academic and professional views that internal rents are beneficial in improving the efficient use of property, opinion at the business and operational level has not universally accepted this proposition.

“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

Quantifying the value of ecosystem services: a case study of honeybee pollination in the UK

There is concern that insect pollinators, such as honey bees, are currently declining in abundance, and are under serious threat from environmental changes such as habitat loss and climate change; the use of pesticides in intensive agriculture, and emerging diseases. This paper aims to evaluate how much public support there would be in preventing further decline to maintain the current number of bee colonies in the UK. The contingent valuation method (CVM) was used to obtain the willingness to pay (WTP) for a theoretical pollinator protection policy. Respondents were asked whether they would be WTP to support such a policy and how much would they pay? Results show that the mean WTP to support the bee protection policy was £1.37/week/household. Based on there being 24.9 million households in the UK, this is equivalent to £1.77 billion per year. This total value can show the importance of maintaining the overall pollination service to policy makers. We compare this total with estimates obtained using a simple market valuation of pollination for the UK.

Pollination services in the UK: how important are honeybees?

Pollination services are known to provide substantial benefits to human populations and agriculture in particular. Although many species are known to provide pollination services, honeybees (Apis mellifera) are often assumed to provide the majority of these services to agriculture. Using data from a range of secondary sources, this study assesses the importance of insect pollinated crops at regional and national scales and investigates the capacity of honeybees to provide optimal pollination services to UK agriculture. The findings indicate that insect pollinated crops have become increasingly important in UK crop agriculture and, as of 2007, accounted for 20% of UK cropland and 19% of total farmgate crop value. Analysis of honeybee hive numbers indicates that current UK populations are only capable of supplying 34% of pollination service demands even under favourable assumptions, falling from 70% in 1984. In spite of this decline, insect pollinated crop yields have risen by an average of 54% since 1984, casting doubt on long held beliefs that honeybees provide the majority of pollination services. Future land use and crop production patterns may further increase the role of pollination services to UK agriculture, highlighting the importance of measures aimed at maintaining both wild and managed species.

Investigating the phytotoxicity of the graminicide fluazifop-P-butyl against native UK wildflower species

BACKGROUND: The selective graminicide fluazifop-P-butyl is used for the control of grass weeds in dicotyledonous crops, and commonly applied in amenity areas to reduce grass productivity and promote wildflower establishment. However, evidence suggests that fluazifop-P-butylmight also have phytotoxic effects on somenon-target plants. This study investigates the effects of fluazifop-P-butyl on the emergence, phytotoxicity and above-ground biomass of nine perennial wildflower species and two grass species, following pre- and post-emergent applications at half, full and double label rates in a series of glasshouse experiments. RESULTS: While pre- and post-emergent applications of fluazifop-P-butyl caused reductions in seedling emergence and increased phytotoxicity on native wildflower and grass species, these effects were temporary for the majority of wildflower species tested, and generally only occurred at the double application rate. No differences in biomass were observed at any of the rates, suggesting good selectivity and no long-term effects of fluazifop-P-butyl application on the wildflower species from either pre-emergent or post-emergent applications. CONCLUSION: These results have direct relevance to the management of amenity areas for biodiversity, as they confirm the suitability of these wildflower species for inclusion in seed mixtures where fluazifop-P-butyl is to be applied to control grass productivity.