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

Stress testing credit risk: the Great Depression scenario

By employing Moody’s corporate default and rating transition data spanning the last 90 years we explore how much capital banks should hold against their corporate loan portfolios to withstand historical stress scenarios. Specifically, we will focus on the worst case scenario over the observation period, the Great Depression. We find that migration risk and the length of the investment horizon are critical factors when determining bank capital needs in a crisis. We show that capital may need to rise more than three times when the horizon is increased from 1 year, as required by current and future regulation, to 3 years. Increases are still important but of a lower magnitude when migration risk is introduced in the analysis. Further, we find that the new bank capital requirements under the so-called Basel 3 agreement would enable banks to absorb Great Depression-style losses. But, such losses would dent regulatory capital considerably and far beyond the capital buffers that have been proposed to ensure that banks survive crisis periods without government support.

Patents for plants: context and current status

One of the important themes in any discussion concerning the application of genetic transformation technology in horticulture or elsewhere is the role of Intellectual Property Rights (IPR). This term covers both the content of patents and the confidential expertise, usually related to methodology and referred to as “Trade Secrets”. This review will explain the concepts behind patent protection, and will discuss the wide-ranging scope of existing patents that cover novel genotypes of plants as well as all aspects of transgenic technology, from selectable markers and novel promoters to methods of gene introduction. Although few of these patents have any significant commercial value there are a small number of key patents that may restrict the “freedom to operate” of any company seeking to exploit the methods in the production of transgenic varieties. Over the last twenty years, these restrictions have forced extensive cross-licensing between ag-biotech companies and have been one of the driving forces behind the consolidation of these companies. Although such issues may have limited relevance in the horticultural sector, and are often considered to be of little interest to the academic scientist working in the public sector, they are of great importance in any debate about the role of “public-good breeding” and of the relationship between the public and private sectors.

Community based ecotourism as a panacea for protected areas: the use of common property theory in its analysis and development

Tourism is the worlds largest employer, accounting for 10% of jobs worldwide (WTO, 1999). There are over 30,000 protected areas around the world, covering about 10% of the land surface(IUCN, 2002). Protected area management is moving towards a more integrated form of management, which recognises the social and economic needs of the worlds finest areas and seeks to provide long term income streams and support social cohesion through active but sustainable use of resources. Ecotourism - 'responsible travel to natural areas that conserves the environment and improves the well- being of local people' (The Ecotourism Society, 1991) - is often cited as a panacea for incorporating the principles of sustainable development in protected area management. However, few examples exist worldwide to substantiate this claim. In reality, ecotourism struggles to provide social and economic empowerment locally and fails to secure proper protection of the local and global environment. Current analysis of ecotourism provides a useful checklist of interconnected principles for more successful initiatives, but no overall framework of analysis or theory. This paper argues that applying common property theory to the application of ecotourism can help to establish more rigorous, multi-layered analysis that identifies the institutional demands of community based ecotourism (CBE). The paper draws on existing literature on ecotourism and several new case studies from developed and developing countries around the world. It focuses on the governance of CBE initiatives, particularly the interaction between local stakeholders and government and the role that third party non-governmental organisations can play in brokering appropriate institutional arrangements. The paper concludes by offering future research directions."

Cycles and steps in British commercial property values

This paper examines cyclical behaviour in commercial property values over the period 1956 to 1996, using a structural times series (unobserved components) approach. The influence of the transition to short rent reviews during the late 1960s and the short and long-term impacts of the 1974 and 1990 property crashes are also incorporated into the analysis, via dummy variables. It is found that once these variables are taken into account a fairly regular cyclical pattern can be discerned, with a period of about 7.8 years. Furthermore, the 1974 and 1990 property crashes are shown to have had a major long-term impact on property value growth (presumably via their influence on investors' expectations).

India’s disappearing common lands: fuzzy boundaries, encroachment, and evolving property rights

Opportunistic land encroachment occurs in many low-income countries, gradually yet pervasively, until discrete areas of common land disappear. This paper, motivated by field observations in Karnataka, India, demonstrates that such an evolution of property rights from common to private may be efficient when the boundaries between common and private land are poorly defined, or ‘‘fuzzy.’’ Using a multi-period optimization model, and introducing the concept of stock and flow enforcement, I show how effectiveness of enforcement effort, whether encroachment is reversible, and punitive fines, influence whether an area of common land is fully defined and protected or gradually or rapidly encroached.

Structure property relationships in electrically conducting copolymers formed from pyrrole and N-methyl pyrrole

A series of copolymers containing differing proportions of pyrrole and N-methyl pyrrole were prepared electrochemically at various temperatures using acetonitrile as the solvent. The resultant electrical conductivity decreases universally with increasing fraction of N-methyl pyrrole. Films prepared with p-toluene sulfonate as the dopant show a marked variation in structural anisotropy as revealed by X-ray scattering with apparent copolymer content. There is a clear trend between the variation in electrical conductivity and this structural anisotropy. Different patterns of behaviour are observed for films prepared using perchlorate as the dopant and this is attributed to the role of the dopant and final structure in determining the relative reactivities of the pyrrole and N-methyl pyrrole monomers. These observations support the concept that the introduction of methyl substituents into a polypyrrole chain results in a twisted chain conformation. The structure and properties of the resultant copolymer films are particularly sensitive to the preparation conditions.

Why do research on commercial property management? Somebody HAS to!

This paper identifies some significant gaps in our knowledge of the configuration and performance of the property asset management sector. It is argued that, as many leading academic property researchers have focussed on financial vehicles and modelling, in-depth analysis of property assets and their management has been neglected. In terms of potential for future in-depth research, three key broad preliminary research themes or questions are identified. First, how do the active management opportunities presented, costs of management and the key management tasks vary with market conditions, asset type and life-cycle stage? Second, how is property asset management delivered and what are the main costs and benefits of different models of procurement? Finally, what are the appropriate metrics for measuring the performance of different property managers and approaches to property management? It is concluded that the lack of published materials addressing these issues has implications for educating property students.