This paper models the lessee's default options and estimates the economic value of the options for a lessee using a discrete time binomial American option pricing model. Results show a positive relationship of the option premium with the original rent and a negative relationship with the...

Purpose – The use of modern portfolio theory (MPT) in the construction real estate portfolios has two serious limitations when used in an ex ante framework: the intertemporal instability of the portfolio weights; and the sharp deterioration in performance of the optimal portfolios outside the...

Purpose – Aims to examine financial risk management. The UK valuation profession has been criticised for inconsistencies and failures to reflect risk and uncertainty in certain valuation assignments such as the pricing of urban regeneration land. Also the Investment Property Forum/Investment...

Purpose – This paper summarises the main research findings from a detailed, qualitative set of structured interviews and case studies of private finance initiative (PFI) schemes in the UK, which involve the construction of built facilities. The research, which was funded by the Foundation for...

Purpose – The purpose of this paper is to propose and discuss practical approaches on how to address risk and uncertainty within valuation reports, particularly when there is only insufficient comparable transaction evidence available. Design/methodology/approach – A four stage approach to...

Purpose – This paper aims to test the predictability of the three asset classes, namely direct property, bond and property stocks in Singapore. Design/methodology/approach – Using the generalized method of moment (GMM) estimation methodology, the authors first estimate the excess returns of...

Purpose – The purpose of this paper is to critically review the German mortgage lending value (MLV) and to adapt it in order to find a new concept that could serve as the basis for an internationally accepted standard for valuations for lending purposes. Design/methodology/approach – The...

Purpose – The aim of the paper is threefold: to provide an overview of gearing in the Australian real estate investment market; formally examine the relationship between property returns, risk and gearing; and provide some guidance in evaluating “optimal” gearing levels for real estate...

Purpose – The Australian REIT (A‐REIT) market has undergone significant change over the past ten years with a shift from passive investment strategies to more active investment strategies in an attempt to deliver higher return performance. However, this has dramatically changed the risk...

Purpose – The purpose of this paper is to provide conclusive evidence that infrastructure constitutes a separate asset class and cannot be classified as real estate from an investment point‐of‐view. Furthermore, optimal allocations are determined for direct and indirect infrastructure...