Gauging the investment potential of international real estate markets

Investing in real estate markets overseas means venturing into the unknown, where you meet unfamiliar political and economic environments, unstable currencies, strange cultures and languages, and so although the advantages of international diversification might appear attractive, the risks of international investment must not be overlooked. However, capital markets are becoming global markets, and commercial real estate markets are no exception, accordingly despite the difficulties posed by venturing overseas no investor can overlook the potential international investment holds out. Thus, what strategies are appropriate for capitalising on this potential? Three issues must be considered: (1) the potential of the countries real estate market in general; (2) the potential of the individual market sectors; and (3) the investment process itself. Although each step in foreign real estate investment is critical, the initial assessment of opportunities is especially important. Various methods can be used to achieve this but a formal and systematic analysis of aggregate market potential should prove particularly fruitful. The work reported here, therefore, develops and illustrates such a methodology for the over 50 international real estate markets.

The consistency of private and public real estate within mixed-asset portfolios

This study considers the consistency of the role of both the private and public real estate markets within a mixed-asset context. While a vast literature has developed that has examined the potential role of both the private and public real estate markets, most studies have largely relied on both single time horizons and single sample periods. This paper builds upon the analysis of Lee and Stevenson (2005) who examined the consistency of REITs in a US capital market portfolio. The current paper extends that by also analyzing the role of the private market. To address the question, the allocation of both the private and traded markets is evaluated over different holding periods varying from 5- to 20-years. In general the results show that optimum mixed-asset portfolios already containing private real estate have little place for public real estate securities, especially in low risk portfolios and for longer investment horizons. Additionally, mixed-asset portfolios with public real estate either see the allocations to REITs diminished or eliminated if private real estate is also considered. The results demonstrate that there is a still a strong case for private real estate in the mixed-asset portfolio on the basis of an increase in risk-adjusted performance, even if the investor is already holding REITs, but that the reverse is not always the case.

Monetary integration and real estate markets: an investigation of the impact of the introduction of a single currency on real estate performance

This paper assesses the impact of the monetary integration on different types of stock returns in Europe. In order to isolate European factors, the impact of global equity integration and small cap factors are investigated. European countries are sub-divided according to the process of monetary convergence. Analysis shows that national equity indices are strongly influenced by global market movements, with a European stock factor providing additional explanatory power. The global and European factors explain small cap and real estate stocks much less well –suggesting an increased importance of ‘local’ drivers. For real estate, there are notable differences between core and non-core countries. Core European countries exhibit convergence – a convergence to a European rather than a global factor. The non-core countries do not seem to exhibit common trends or movements. For the non-core countries, monetary integration has been associated with increased dispersion of returns, lower correlation and lower explanatory power of a European factor. It is concluded that this may be explained by divergence in underlying macro-economic drivers between core and non-core countries in the post-Euro period.

The transition of the Polish real estate market within a Central and Eastern European context

The real estate market in Poland is a relatively immature market, but one that has been experiencing substantial transformation. The development of the market has been encouraged by a number of factors, including changes arising as a result of new legislation and the migration of capital between capital markets. The progress of the real estate sector towards a western style competitive market has taken place within the gradual transformation of the Polish economy into a free market economy. As investment grade property is in relatively short supply in Poland, investors consider opportunities within the wider CEE block. An analysis of the risk-return characteristics of the three largest CEE real estate markets namely, Poland, Hungary and Czech Republic, shows that the returns in these markets have been negatively correlated with the UK. As these economies and markets evolve, and being part of the wider EU trading block, their economic performance will slowly converge and become more synchronized with their western counterparts. However, the catch-up of the CEE markets to western European performance cycles will be protracted and consequently there are likely to be significant ongoing portfolio risk reduction opportunities

Forecasting UK real estate cycle phases with leading indicators: a probit approach

This paper examines the significance of widely used leading indicators of the UK economy for predicting the cyclical pattern of commercial real estate performance. The analysis uses monthly capital value data for UK industrials, offices and retail from the Investment Property Databank (IPD). Prospective economic indicators are drawn from three sources namely, the series used by the US Conference Board to construct their UK leading indicator and the series deployed by two private organisations, Lombard Street Research and NTC Research, to predict UK economic activity. We first identify turning points in the capital value series adopting techniques employed in the classical business cycle literature. We then estimate probit models using the leading economic indicators as independent variables and forecast the probability of different phases of capital values, that is, periods of declining and rising capital values. The forecast performance of the models is tested and found to be satisfactory. The predictability of lasting directional changes in property performance represents a useful tool for real estate investment decision-making.

Application of a hybrid tracking algorithm to motion analysis

An algorithm for tracking multiple feature positions in a dynamic image sequence is presented. This is achieved using a combination of two trajectory-based methods, with the resulting hybrid algorithm exhibiting the advantages of both. An optimizing exchange algorithm is described which enables short feature paths to be tracked without prior knowledge of the motion being studied. The resulting partial trajectories are then used to initialize a fast predictor algorithm which is capable of rapidly tracking multiple feature paths. As this predictor algorithm becomes tuned to the feature positions being tracked, it is shown how the location of occluded or poorly detected features can be predicted. The results of applying this tracking algorithm to data obtained from real-world scenes are then presented.

Evaluation of satellite-based and model re-analysis rainfall estimates for Uganda

The dependence of much of Africa on rain fed agriculture leads to a high vulnerability to fluctuations in rainfall amount. Hence, accurate monitoring of near-real time rainfall is particularly useful, for example in forewarning possible crop shortfalls in drought-prone areas. Unfortunately, ground based observations are often inadequate. Rainfall estimates from satellite-based algorithms and numerical model outputs can fill this data gap, however rigorous assessment of such estimates is required. In this case, three satellite based products (NOAA-RFE 2.0, GPCP-1DD and TAMSAT) and two numerical model outputs (ERA-40 and ERA-Interim) have been evaluated for Uganda in East Africa using a network of 27 rain gauges. The study focuses on the years 2001 to 2005 and considers the main rainy season (February to June). All data sets were converted to the same temporal and spatial scales. Kriging was used for the spatial interpolation of the gauge data. All three satellite products showed similar characteristics and had a high level of skill that exceeded both model outputs. ERA-Interim had a tendency to overestimate whilst ERA-40 consistently underestimated the Ugandan rainfall.

Re-thinking commercial real estate market segmentation

Investments in direct real estate are inherently difficult to segment compared to other asset classes due to the complex and heterogeneous nature of the asset. The most common segmentation in real estate investment analysis relies on property sector and geographical region. In this paper, we compare the predictive power of existing industry classifications with a new type of segmentation using cluster analysis on a number of relevant property attributes including the equivalent yield and size of the property as well as information on lease terms, number of tenants and tenant concentration. The new segments are shown to be distinct and relatively stable over time. In a second stage of the analysis, we test whether the newly generated segments are able to better predict the resulting financial performance of the assets than the old dichotomous segments. Applying both discriminant and neural network analysis we find mixed evidence for this hypothesis. Overall, we conclude from our analysis that each of the two approaches to segmenting the market has its strengths and weaknesses so that both might be applied gainfully in real estate investment analysis and fund management.

Model-based groupware solution for distributed real-time collaborative 4D planning via teamwork

Construction planning plays a fundamental role in construction project management that requires team working among planners from a diverse range of disciplines and in geographically dispersed working situations. Model-based four-dimensional (4D) computer-aided design (CAD) groupware, though considered a possible approach to supporting collaborative planning, is still short of effective collaborative mechanisms for teamwork due to methodological, technological and social challenges. Targeting this problem, this paper proposes a model-based groupware solution to enable a group of multidisciplinary planners to perform real-time collaborative 4D planning across the Internet. In the light of the interactive definition method, and its computer-supported collaborative work (CSCW) design analysis, the paper discusses the realization of interactive collaborative mechanisms from software architecture, application mode, and data exchange protocol. These mechanisms have been integrated into a groupware solution, which was validated by a planning team in a truly geographically dispersed condition. Analysis of the validation results revealed that the proposed solution is feasible for real-time collaborative 4D planning to gain a robust construction plan through collaborative teamwork. The realization of this solution triggers further considerations about its enhancement for wider groupware applications.

European CMBS pricing: bond, mortgage and real estate characteristics

The recent global economic crisis is often associated with the development and pricing of mortgage-backed securities (i.e. MBSs) and underlying products (i.e. sub-prime mortgages). This work uses a rich database of MBS issues and represents the first attempt to price commercial MBSs (i.e. CMBSs) in the European market. Our results are consistent with research carried out in the US market and we find that bond-, mortgage-, real estate-related and multinational characteristics show different degrees of significance in explaining European CMBS spreads at issuance. Multiple linear regression analysis using a databank of CMBSs issued between 1997 and 2007 indicates a strong relationship with bond-related factors, followed by real estate and mortgage market conditions. We also find that multinational factors are significant, with country of issuance, collateral location and access to more liquid markets all being important in explaining the cost of secured funding for real estate companies. As floater coupon tranches tend to be riskier and exhibit higher spreads, we also estimate a model using this sub-set of data and results hold, hence reinforcing our findings. Finally, we estimate our model for both tranches A and B and find that real estate factors become relatively more important for the riskier investment products.

“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

Eight-plex iTRAQ analysis of variant metastatic human prostate cancer cells identifies candidate biomarkers of progression: an exploratory study.

BACKGROUND: Due to the heterogeneity in the biological behavior of prostate cancer, biomarkers that can reliably distinguish indolent from aggressive disease are urgently needed to inform treatment choices. METHODS: We employed 8-plex isobaric Tags for Relative and Absolute Quantitation (iTRAQ), to profile the proteomes of two distinct panels of isogenic prostate cancer cells with varying growth and metastatic potentials, in order to identify novel biomarkers associated with progression. The LNCaP, LNCaP-Pro5, and LNCaP-LN3 panel of cells represent a model of androgen-responsive prostate cancer, while the PC-3, PC-3M, and PC-3M-LN4 panel represent a model of androgen-insensitive disease. RESULTS: Of the 245 unique proteins identified and quantified (>or=95% confidence; >or=2 peptides/protein), 17 showed significant differential expression (>or=+/-1.5), in at least one of the variant LNCaP cells relative to parental cells. Similarly, comparisons within the PC-3 panel identified 45 proteins to show significant differential expression in at least one of the variant PC-3 cells compared with parental cells. Differential expression of selected candidates was verified by Western blotting or immunocytochemistry, and corresponding mRNA expression was determined by quantitative real-time PCR (qRT-PCR). Immunostaining of prostate tissue microarrays for ERp5, one of the candidates identified, showed a significant higher immunoexpression in pre-malignant lesions compared with non-malignant epithelium (P < 0.0001, Mann-Whitney U-test), and in high Gleason grade (4-5) versus low grade (2-3) cancers (P < 0.05). CONCLUSIONS: Our study provides proof of principle for the application of an 8-plex iTRAQ approach to uncover clinically relevant candidate biomarkers for prostate cancer progression.

An item response analysis of the motor and behavioral subscales of the unified Huntington's disease rating scale in huntington disease gene expansion carriers

Although the Unified Huntington's Disease Rating Scale (UHDRS) is widely used in the assessment of Huntington disease (HD), the ability of individual items to discriminate individual differences in motor or behavioral manifestations has not been extensively studied in HD gene expansion carriers without a motor-defined clinical diagnosis (ie, prodromal-HD or prHD). To elucidate the relationship between scores on individual motor and behavioral UHDRS items and total score for each subscale, a nonparametric item response analysis was performed on retrospective data from 2 multicenter longitudinal studies. Motor and behavioral assessments were supplied for 737 prHD individuals with data from 2114 visits (PREDICT-HD) and 686 HD individuals with data from 1482 visits (REGISTRY). Option characteristic curves were generated for UHDRS subscale items in relation to their subscale score. In prHD, overall severity of motor signs was low, and participants had scores of 2 or above on very few items. In HD, motor items that assessed ocular pursuit, saccade initiation, finger tapping, tandem walking, and to a lesser extent, saccade velocity, dysarthria, tongue protrusion, pronation/supination, Luria, bradykinesia, choreas, gait, and balance on the retropulsion test were found to discriminate individual differences across a broad range of motor severity. In prHD, depressed mood, anxiety, and irritable behavior demonstrated good discriminative properties. In HD, depressed mood demonstrated a good relationship with the overall behavioral score. These data suggest that at least some UHDRS items appear to have utility across a broad range of severity, although many items demonstrate problematic features.

Space heating and hot water demand analysis of dwellings connected to district heating scheme in UK

To achieve CO2 emissions reductions the UK Building Regulations require developers of new residential buildings to calculate expected CO2 emissions arising from their energy consumption using a methodology such as Standard Assessment Procedure (SAP 2005) or, more recently SAP 2009. SAP encompasses all domestic heat consumption and a limited proportion of the electricity consumption. However, these calculations are rarely verified with real energy consumption and related CO2 emissions. This paper presents the results of an analysis based on weekly head demand data for more than 200 individual flats. The data is collected from recently built residential development connected to a district heating network. A methodology for separating out the domestic hot water use (DHW) and space heating demand (SH) has been developed and compares measured values to the demand calculated using SAP 2005 and 2009 methodologies. The analysis shows also the variance in DHW and SH consumption between both size of the flats and tenure (privately owned or housing association). Evaluation of the space heating consumption includes also an estimation of the heating degree day (HDD) base temperature for each block of flats and its comparison to the average base temperature calculated using the SAP 2005 methodology.