Preliminary Proposition of aGeneral Theory of Property Investment

Decision Making

European Real Estate Society Conference

Vienna, Austria, July 2013

Professor David Parker

Slide 2

Overview

• Property Investment Decision Making:– Australian REITs– Australian Unlisted Wholesale Funds

• Literature Review• Hypothesis• Testing• Findings• Conclusions and Areas for Further Research

Slide 3

Overview

• Property Investment Decision Making:– Australian REITs– Australian Unlisted Wholesale Funds

• Literature Review• Hypothesis• Testing• Findings• Conclusions and Areas for Further Research

Slide 4

Overview

“Extraordinary financial losses and market disruption in the late 1980s and early 1990s are eloquent, if damning, testimony to the proposition that the quality of many real estate decisions is less than distinguished.”

Roulac (1994)

Slide 5

Literature Review

• Books, journals, conference papers

• REIT or unlisted wholesale fund specific

• Normative model

• Rational analysis

Slide 6

Literature Review

• Envisioning Stage

• Planning Stage

• Dealing Stage

• Executing Stage

Slide 7

Literature Review

• Envisioning Stage:– Vision– Style– Goals– Strategic Plan– Objectives

Slide 8

Literature Review

• Planning Stage:– Property Portfolio Strategy– Strategic Asset Allocation– Tactical Asset Allocation– Stock Selection– Asset Identification

Slide 9

Literature Review

• Dealing Stage:– Preliminary Negotiation– Preliminary Analysis– Structuring– Advanced Financial Analysis– Portfolio Impact Assessment

Slide 10

Literature Review

• Executing Stage:– Governance Decision– Transaction Closure/Documentation– Due Diligence/Independent Appraisal– Settlement– Post Audit

Slide 11

Overview

• Property Investment Decision Making:– Australian REITs– Australian Unlisted Wholesale Funds

• Literature Review• Hypothesis• Testing• Findings• Conclusions and Areas for Further Research

Slide 12

Hypothesis

Stage Step Step Step Step Step

Envisioning Vision 

Style Goals Strategic Plan Objectives

Planning Property Portfolio Strategy

Strategic Asset Allocation

Tactical Asset Allocation

Stock Selection Asset Identification

Dealing Preliminary Negotiation

Preliminary Analysis

Structuring Advanced Financial Analysis

Portfolio Impact Assessment

Executing Governance Decision

Transaction Closure / Documentation

Due Diligence / Independent Appraisal

Settlement Post Audit

Slide 13

Overview

• Property Investment Decision Making:– Australian REITs– Australian Unlisted Wholesale Funds

• Literature Review• Hypothesis• Testing• Findings• Conclusions and Areas for Further Research

Slide 14

Testing

• Semi structured interviews• Senior executives• 11 ASX200 REITs• 9 unlisted property fund managers• Analysis - 0/1 matching

Slide 15

Overview

• Property Investment Decision Making:– Australian REITs– Australian Unlisted Wholesale Funds

• Literature Review• Hypothesis• Testing• Findings• Conclusions and Areas for Further Research

Slide 16

Findings - REITs

Slide 17

Findings - Unlisted

Slide 18

Findings - Combination

Slide 19

Overview

• Property Investment Decision Making:– Australian REITs– Australian Unlisted Wholesale Funds

• Literature Review• Hypothesis• Testing• Findings• Conclusions and Areas for Further Research

Slide 20

Conclusions

• Findings supportive of hypothesis

• Commonality of responses

• Sufficient to preliminarily posit a general theory of property investment decision making?

Slide 21

Areas For Further Research

• Small public and private property funds?

• Individual investors?

• Outside Australia?

• “Good” property investment decisions?

Preliminary Proposition of aGeneral Theory of Property Investment

Decision Making

European Real Estate Society Conference

Vienna, Austria, July 2013

Professor David Parker