Browsing by Author "Thomas, Matthias"

Purpose - The purpose of this paper is to examine the sources of direct real estate portfolio returns and their relative performance against Investment Property Databank (IPD) benchmark returns. Active property management consists of the concepts of property transaction execution and operational management, which can be classified as the main drivers of excess return sources. Design/methodology/approach - Using a sample of three different portfolios managed by two institutional investors, the paper is able to estimate the relevant factors of active property management on annual excess returns for commercial and residential property sectors via a panel regression technique. Findings - Empirical evidence shows that property-specific effects exhibit significant sources of excess returns, but property management cannot be identified as their main driver. Furthermore, the sources of excess returns do not differ significantly across sectors; when controlled for property age and size, it is found that their influence is rather limited. Practical implications - Information about the drivers of excess returns and their variations among property types may lead to superior investment decisions during portfolio rebalancing, and thus promote more efficient capital allocation. Information about return factors, i.e. about property and operational management, can substantially improve property selection and market timing in the asset allocation process. Hence, investors basing their property investment strategies on the impact of selected return factors could enhance the risk-adjusted performance of their property portfolios. Originality/value - This paper aims to contribute to the existing literature by identifying and quantifying the excess return sources of a given property portfolio over a predefined benchmark. Due to the lack of property-related data, there is only limited research on the sources of direct property returns, such as property characteristics or active property management. The authors explore three main questions in this paper. First, they examine sources of excess returns over a benchmark index for several property sectors. Second, they analyze whether the drivers of excess returns vary significantly across these sectors. Third, they determine to what extent excess property returns are influenced by the "economic age" and "rentable area" of a building

This paper uses a sample of German commercial and residential property returns to estimate parameters for stable distribution functions. A quantile-based estimation methodology is used to examine distributions of income, capital growth, and total returns. There are controls for the effects of property characteristics and for possible differences between appraisal-based and transaction-based return distribution parameters. The findings reveal that the assumption of normality in return distributions can be rejected for virtually all subsamples of all property types, and for all years from 2000 to 2009. However, income return distributions are found to be less leptokurtic than those of capital growth. Building characteristics do not have a strong influence on distribution parameters, while transaction-based returns do differ from appraisal-based returns for retail and residential properties.