Real Estate Performance, the Macroeconomy and Leverage

Delfim, Jean-Christophe; Hoesli, Martin

doi:10.2139/ssrn.3404051

Cited by 7 publications

(4 citation statements)

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“…Ling and Naranjo (1997) find that real estate returns in the U.S. are positively related to the growth rate of consumption, while they are negatively related to the real T-Bill rate, the term spread and unexpected inflation. In line with those results, Delfim and Hoesli (2019b) report that real estate returns are positively linked to real GDP growth, expected inflation, construction costs, money supply and a leading economic indicator, while they are negatively impacted by the inflation surprise and the term and credit spreads. Ho et al (2015) investigate the drivers of real estate returns for 16 Asian cities and the U.S. and find that macroeconomic variables are more useful to predict the returns for the office and retail sectors, than for the residential sector.…”

Section: Literature Reviewsupporting

confidence: 80%

The role of multi-family properties in hedging pension liability risk: long-run evidence

Hoesli,

Johner,

Lekander

2023

JPIF

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PurposeUsing data spanning 145 years for Sweden, the authors investigate the benefits of holding multi-family properties for investors who aim to hedge wage growth.Design/methodology/approachThe authors assess the risk-adjusted excess return that results from adding multi-family properties to a mixed-asset portfolio that aims to track wage growth. The authors also analyse the macroeconomic determinants of asset returns. Finally, the authors test whether a causal relationship exists between the growth rate of real wages and that of real net operating income.FindingsThe benefits from holding multi-family properties are the greatest for low-risk allocation approaches. For more risky strategies, the role of real estate is more muted, and it varies greatly over time. Holding real estate was most beneficial during the first two decades of the 21st century. Multi-family properties are found to be the only asset class to be positively related to wage growth. The authors show that the net operating income acts as the transmission channel between wages and property returns.Practical implicationsThe paper assesses whether the growing interest of pension funds for multi-family properties is warranted in the context of a portfolio that aims to track wage growth.Originality/valueUsing long term data makes it possible to use a rolling windows approach and hence to consider multiple outcomes for an allocation strategy over a typical investment horizon. This permits to assess the dispersion of performance across several periods rather than just one as is commonly done in the literature. The results show that the conclusions that would be drawn from looking at the past two or three decades of data differ substantially from those for earlier time periods.

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Section: Literature Reviewsupporting

confidence: 80%

The role of multi-family properties in hedging pension liability risk: long-run evidence

Hoesli,

Johner,

Lekander

2023

JPIF

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“…Ling and Naranjo (1997) find that real estate returns in the U.S. are positively related to the growth rate of consumption, while they are negatively related to the real T-Bill rate, the term spread, and unexpected inflation. In line with those results, Delfim and Hoesli (2019b) report that real estate returns are positively linked to real GDP growth, expected inflation, construction costs, money supply, and a leading economic indicator, while they are negatively impacted by the inflation surprise, and the term and credit spreads. Ho et al (2015) investigate the drivers of real estate returns for 16 Asian cities and the U.S. and find that macroeconomic variables are more useful to predict the returns for the office and retail sectors, than for the residential…”

Section: Literature Reviewsupporting

confidence: 79%

The Role of Multi-Family Properties in Hedging Pension Liability Risk: Long-Run Evidence

2023

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“…In contrast, Giacomini, Ling, & Naranjo (2015) claimed that within levered REITs, those leveraged higher than the targeted leverage level outperformed the lowly leveraged ones, which coincidentally supports the notion of a positive correlation between the degree of leverage and performance. Furthermore, a robust study by Delfim and Hoesli (2019) examines the effect of leverage on the performance of various types of real estate exposures using data from the United States from 1986 to 2017 (direct, non-listed, and listed) and it showed a significant impact on the relationship between them. More recent studies showed the effect of financial leverage on REITs' performance (Khairulanuwar & Chuweni, 2021;Haran et al, 2021;Morri et al, 2021;Milosevic-Avdalovic & Milenkovic, 2017).…”

Section: Financial Leveragementioning

confidence: 99%

The Impact of Financial Determinants on Malaysian Reits’ Performance

Sulaiman

Hing

Shahimi

et al. 2023

JBMA

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Property investment in Malaysia has experienced tremendous growth and is considered one of the prime investments by investors due to its stable return growth over the years. This study examined the effects of six financial determinants (earnings per share, debts to assets, price-to-book value, dividend yield, market capitalisation, and return on equity) on the annual return of Malaysian Real Estate Investment Trusts (REITs). The common performance indicator of company can be seen in the percentage change in stock price plus when the dividend paid at the end of the year is used to measure the annual return performance of REITs. A total of 154 firm year observations for a sample of 14 Malaysian REIT companies were examined for a period of 11 years (2008-2018) from the Bloomberg terminal. Multiple regression analysis was used to analyse the data. Findings showed that there is a positive relationship between earning per share, price-to-book value and dividend yield and REITs’ annual return. On the other hand, this study showed that there is no significant relationship between debts to assets and REITs’ annual return. The results also showed that market capitalisation and return on equity are negatively related to Malaysian REITs’ annual returns. Overall, the results highlighted two key features. First, earnings per share and return on equity should be used by investors and management to assess the profitability and operational efficiency of REITS. Second, the investors should use dividend yield as one of the key investment criteria when assessing REIT investment decisions. This study contributed to the literature in REITs by increasing the effects of the explanatory power of financial determinants on REITs’ annual returns.

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Real Estate Performance, the Macroeconomy and Leverage

Cited by 7 publications

References 0 publications

The role of multi-family properties in hedging pension liability risk: long-run evidence

The role of multi-family properties in hedging pension liability risk: long-run evidence

The Role of Multi-Family Properties in Hedging Pension Liability Risk: Long-Run Evidence

The Impact of Financial Determinants on Malaysian Reits’ Performance

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