This book draws together the most recent developments in REIT management from academic research and professional practice. It is based on current, original academic research, including structured interviews with the managers of a wide range of different types of REITs as well as the research and publications of others, together with the author's 25 years experience in REIT management. It provides a theoretically robust and practically relevant up to date guide to the property investment decision making process for REITs.
Presenting new insights, the author breaks the REIT property investment decision making process down into three phases comprising six stages with 30 sequential steps. Each chapter focuses on one stage of the property investment decision making process and introduces the key people in the REIT management team relevant to the activities in that chapter. The theory and principles are considered and illustrated by application to Super REIT, a $15bn diversified REIT.
Global Real Estate Investment Trusts: People, Process and Management fuses not only how REITs should undertake property investment decision making - based on how it is undertaken and the underlying property theory, capital market theory and finance theory - but also why each part of the decision making process is important.
This book provides the first sole-authored scholarly work specifically on REITs as a business enterprise and REIT property investment decision making as an holistic and cyclical process. The focus is on principles, making it relevant in each of the four major REIT markets around the world: USA, Europe, Asia and Australasia.
An essential book for REIT managers and all those practising professionals involved in the REIT industry - including property practitioners, researchers, lawyers, accountants, bankers and directors around the world.
Table of Contents
About the Author xiForeword xiii
Preface xv
Acknowledgments xvii
Introduction xix
1 Envisioning 1
1.1 People and process 4
1.1.1 People 4
1.1.2 Process 7
1.1.3 People and process 11
1.2 REITs: an introduction 11
1.2.1 Transparency in governance 12
1.2.2 REIT models 13
1.2.3 REITs: summary 13
1.3 Preparing Phase 13
1.4 Envisioning Stage 14
1.5 People 16
1.5.1 Governing Entity 17
1.5.2 Chief Executive Officer (CEO) 19
1.5.3 Chief Financial Officer (CFO) 21
1.5.4 Support Teams 22
1.5.5 Fund Management Team 23
1.5.6 People 24
1.6 Vision 24
1.7 Style 26
1.7.1 Active vs. passive 27
1.7.2 Top down vs. bottom up 28
1.7.3 Value vs. growth 28
1.7.4 Core, value added and opportunistic 29
1.7.5 Style 30
1.8 Goals 30
1.9 Strategic Plan 32
1.9.1 Strategic models 32
1.9.2 Strategic planning process 33
1.9.3 Strategic Plan 35
1.10 Objectives 35
1.11 Super REIT 36
1.12 Summary 38
1.13 Key points 39
References 41
2 Planning 43
2.1 People 44
2.1.1 Portfolio Management Team 44
2.1.2 Strategy Team 46
2.1.3 Research Team 46
2.2 Property Portfolio Strategy 48
2.2.1 Targeting risk-return performance 48
2.2.2 Properties vs. portfolios 51
2.2.3 New vs. existing portfolios 53
2.2.4 Iterative process 55
2.2.5 Property Portfolio Strategy 56
2.3 Strategic Asset Allocation 59
2.3.1 Modern portfolio theory 61
2.3.2 Capital market theory and the Capital Asset Pricing Model 65
2.3.3 Strategic Asset Allocation 68
2.4 Tactical Asset Allocation 69
2.4.1 Spatial based approaches 71
2.4.2 Style based approaches 72
2.4.3 Other approaches 73
2.4.4 Tactical Asset Allocation 75
2.5 Stock Selection 75
2.5.1 Generic criteria 76
2.5.2 Specifi c criteria 77
2.5.3 Stock Selection 80
2.6 Asset Identifi cation 80
2.6.1 Market efficiency 81
2.6.2 Information processing 84
2.6.3 Asset Identifi cation 91
2.7 Super REIT 91
2.8 Preparing Phase 93
2.9 Summary 93
2.10 Key points 95
References 96
3 Dealing 99
3.1 People 101
3.1.1 Capital Transactions Team 101
3.2 Preliminary Negotiation 102
3.3 Preliminary Analysis 104
3.3.1 Qualitative Preliminary Analysis 105
3.3.2 Quantitative Preliminary Analysis 105
3.3.3 Preliminary Analysis 109
3.4 Structuring 109
3.4.1 Structuring the commercial transaction 110
3.4.2 Structuring the funding transaction 112
3.4.3 Documenting the proposed transaction 114
3.5 Advanced Financial Analysis 115
3.5.1 Target rate of return 117
3.5.2 Theoretical basis of mis-pricing 122
3.5.3 Pricing models 124
3.5.4 Decision rule 130
3.5.5 Advanced Financial Analysis 133
3.6 Portfolio Impact Assessment 133
3.6.1 Risk-return balance 133
3.6.2 Portfolio metrics 134
3.6.3 Short form documentation 135
3.6.4 Portfolio Impact Assessment Step 135
3.7 Super REIT 135
3.7.1 Preliminary Negotiation 136
3.7.2 Preliminary Analysis 137
3.7.3 Structuring 140
3.7.4 Advanced Financial Analysis 140
3.7.5 Portfolio Impact Assessment 152
3.7.6 Outcomes of implementing the
Dealing Stage 153
3.8 Summary 155
3.9 Key points 156
References 158
4 Executing 159
4.1 People 161
4.1.1 Investor Interface Team 162
4.2 Governance Decision 163
4.2.1 Delegation of authority 163
4.2.2 Information required by decision maker 164
4.2.3 Governance Decision 169
4.3 Transaction Closure 169
4.3.1 Commercial Transaction Closure 169
4.3.2 Funding Transaction Closure 170
4.3.3 Transaction Closure 170
4.4 Documentation 171
4.4.1 Negotiation of Documentation 171
4.4.2 Sign-offs 174
4.4.3 Execution and exchange 175
4.4.4 Documentation 175
4.5 Due Diligence 176
4.5.1 Fiduciary duty 177
4.5.2 Operationalising Due Diligence 177
4.5.3 Due Diligence 180
4.6 Independent Appraisal 180
4.6.1 Requirement for appraisal 181
4.6.2 Appraisal issues 182
4.6.3 Appraiser appointment 185
4.6.4 Appraiser instruction 186
4.6.5 Appraisal report 187
4.6.6 Independent Appraisal 188
4.7 Transacting Phase 188
4.8 Super REIT 189
4.8.1 Governance Decision 190
4.8.2 Transaction Closure 190
4.8.3 Documentation 190
4.8.4 Due Diligence 191
4.8.5 Independent Appraisal 191
4.8.6 Outcomes of implementing the Executing Stage 192
4.9 Summary 192
4.10 Key points 193
References 195
5 Watching 197
5.1 People 199
5.1.1 Compliance and Risk Management Team 200
5.2 Settlement 201
5.2.1 Settlement check list 202
5.2.2 Asset management plan 203
5.2.3 Settlement 203
5.3 Post Audit 204
5.3.1 Timing 204
5.3.2 Basis 205
5.3.3 Learning process 205
5.3.4 Post Audit 206
5.4 Performance Monitoring 207
5.4.1 Planning 207
5.4.2 Comparative analysis 208
5.4.3 Reporting 210
5.4.4 Performance Monitoring 210
5.5 Performance Measurement 210
5.5.1 Return measurement 212
5.5.2 Performance relative to an index or benchmark 227
5.5.3 Risk measurement 230
5.5.4 Performance Measurement 232
5.6 Portfolio Analysis 233
5.6.1 Recurrent analysis 234
5.6.2 Attribution analysis 234
5.6.3 Recursion 238
5.6.4 Portfolio Analysis 239
5.7 Super REIT 240
5.7.1 Settlement 241
5.7.2 Post Audit 241
5.7.3 Performance Monitoring 241
5.7.4 Performance Measurement 242
5.7.5 Portfolio Analysis 242
5.7.6 Outcomes of implementing the Watching Stage 242
5.8 Summary 243
5.9 Key points 244
References 245
6 Optimising 247
6.1 People 250
6.1.1 Asset Management Team 250
6.1.2 Property Management Team 251
6.1.3 Facilities Management Team 252
6.2 Asset Management 253
6.2.1 Proactive components 254
6.2.2 Reactive components 258
6.2.3 Asset Management 259
6.3 Property and Facilities Management 260
6.3.1 Property Management 260
6.3.2 Facilities Management 261
6.3.3 Outsourcing Property and Facilities Management 262
6.4 Transformation 263
6.4.1 Refurbishment Transformation 263
6.4.2 Redevelopment Transformation 265
6.4.3 Mandatory lease related Transformation 267
6.4.4 Optional lease related Transformation 267
6.4.5 Transformation 268
6.5 Portfolio Rebalancing 269
6.5.1 Proactive components 269
6.5.2 Reactive components 271
6.5.3 Portfolio Rebalancing 272
6.6 Disposal 272
6.6.1 Disposal process 273
6.6.2 Disposal method 274
6.6.3 Disposal Step 275
6.7 Observing Phase 276
6.8 Super REIT 276
6.8.1 Asset Management 277
6.8.2 Property Management and Facilities Management 278
6.8.3 Transformation 278
6.8.4 Portfolio Rebalancing 278
6.8.5 Disposal 279
6.8.6 Outcome of implementing the Optimising Stage 279
6.9 Summary 280
6.10 REIT real estate investment decision making process 281
6.11 Key points 282
References 283
Glossary 285
Index 291
