Purpose
The purpose of this paper is to analyze the securitization of rental streams, a new investment and finance product introduced in the USA in 2013 that enables fundraising from large ...residential portfolios owned by major investment funds and investment banking. The securities are made up of non-performance loans as well as real estate portfolios of financial entities.
Design/methodology/approach
An academic analysis of the European securitization market is performed, as well as a broad overview of the state of the art of the rental housing market and investment property market. Moreover, a market study of Real Estate Owned (hereinafter, REOs) and Real Estate Debts is carried out to determine both the present framework and future trends. Various financial entities and real estate management companies are examined through interviews and data collection to assess the reality of distressed assets and residential portfolios owned by major investors. It introduced the Broker’s Price Opinion concept, de loan-to-value concept and the London Interbank Offered Rate.
Findings
REO-to-rental securitization is a step forward toward the democratization of finance through the globalization of the residential market, improving risk sharing for major and retail investors. The securitization of rental streams in Europe has not taken off, despite several issuances in the USA since 2013 with significant success where first tranches obtained a credit qualification of triple-A from the majority of the main rating agencies.
Originality/value
At the end of 2013, a global investment firm launched an innovative finance and investment vehicle that securitized the cash flows originating from leased residential properties. That issue resulted in considerable success and in the development of a new alternative and innovative financing source for real estate activity. Taking into account that housing is a primary need of our society, there is a strong motivation for improving the residential market, and thus, REO-to-rental securitization could help take a step forward in making the housing market more efficient.
The recent financial crisis triggered the greatest recession since the 1930s and had a devastating impact on households' wealth and on their capacity to reduce their indebtedness. In the aftermath, ...it became clear that there is significant room for improvement in property risk management. While there has been innovation in the management of corporate finance risk, real estate has lagged behind. Now is the time to expand the range of tools available for hedging households' risks and, thus, to advance the democratization of finance. Property equity represents the major asset in households' portfolios in developed and undeveloped countries. The present paper analyzes a set of potential innovations in real estate risk management, such as price level-adjusted mortgages, property derivatives, and home equity value insurance. Financial institutions, households, and governments should work together to improve the performance of the financial instruments available and, thus, to help mitigate the worst impacts of economic cycles
The recent financial crisis triggered the greatest recession since the 1930s and had a devastating impact on households’ wealth and on their capacity to reduce their indebtedness. In the aftermath, ...it became clear that there is significant room for improvement in property risk management. While there has been innovation in the management of corporate finance risk, real estate has lagged behind. Now is the time to expand the range of tools available for hedging households’ risks and, thus, to advance the democratization of finance. Property equity represents the major asset in households’ portfolios in developed and undeveloped countries. The present paper analyzes a set of potential innovations in real estate risk management, such as price level-adjusted mortgages, property derivatives, and home equity value insurance. Financial institutions, households, and governments should work together to improve the performance of the financial instruments available and, thus, to help mitigate the worst impacts of economic cycles.
There is ample evidence to show that in the Spanish architecture, engineering and construction (AEC) sector, implementation is underway of the Building Information Modelling (BIM) methodology, which ...is changing the way architectural projects are designed and managed in all their phases. This paper focuses on the quantity surveying practice, carried out in Spain using the newly available digital tools. Through a review of the existing literature and the qualitative analysis of four case studies (CS), it aims to define the key points related to the new processes, roles and skills required by quantity surveyors in this new paradigm of BIM methodology. The information collected from different sources was coded for its qualitative analysis. The findings from the research show that having a rich database and all the available information to design a three dimensional (3D) model are vital for enhancing the quality of the quantity take-off and a project’s cost estimate. From the findings, a new role emerges for the quantity surveyor as a cross-disciplinary profile needed to improve the process. In Spain, there is still a shortfall in knowledge levels of cost management software and the implementation of BIM, which differs in direct relation to company size and type.
•Quantity surveying in Spain with BIM•Qualitative analysis of four case studies.•3D model database•New cross-disciplinary profile
The financial disintermediation mechanism known as “loan-based-crowdfunding” has recently come under regulation in several countries. This competitive investment and finance vehicle is already well ...established in the US and British markets.
By compiling empirical data from a reference crowdfunding platform, this article compares loan-based crowdfunding with traditional investment vehicles such as investment funds, equities or pension funds.
The conclusion of the study is that saving through crowdfunding allows the optimization of a portfolio comprising both institutional and retail investors.
Purpose:Analysis from a financial perspective of the SOCIMI, real estate investment vehicles regulated in Spain since 2009, which are equivalent to Real Estate Investment Trusts ...(REITs).Design/methodology:It has been used the inductive-deductive and experimental methodology.Findings:From the investors point of view, SOCIMI are real estate investment vehicles competitive in terms of profitability and risk being affected not only by the evolution of financial markets, but also by its underlying assets which are subject to the real estate market cycle. On the other hand, SOCIMI are helpful for funding capture in real estate companies but it is foreseen that its quotation will incorporate significant discounts over the Net Asset Value (NAV) of its underlying assets. For investors as well as for real estate company managers, the application of behavioral finance will enable a better investment and financing decision making in the real estate market with the contribution of analysis models which make possible the understanding of market inefficiencies.Originality/value:Further investigation over SOCIMI, the real estate investment vehicle, barely studied up to now, can help to improve decision making of investors as well as real estate companies interested in fund raising through this vehicle.
The present paper develops an econometric model of the real estate cycle, focused on the analysis of the residential market in Spain, and aims to predict the future evolution of the average and ...fundamental prices of the housing industry. Unlike traditional models, the Econometric Model developed incorporates not only an extrinsic and intrinsic approach, but also analytical assumptions and criteria inherited from the Behavioral School. Contrasting the Modern Financial School theory, the Behavioral Finance School assumes the presence of irrational investors in the market. Thereby irrational decisions substantially influence, in a persistent way, whether underestimating or overestimating, the evolution of asset prices. This irrational influence is the fundamental basis of both expansive and depressive phases that shape the real estate cycle.
Loan-based crowdfunding is being introduced in the Spanish market as an alternative financial and investment product supported by a legislation that provides transparency and legal certainty both ...investors and companies with financing needs.
This paper examines the impact of crowdfunding in Spain, the profitability-risk binomial, the diversifications effects as well as its advantages and disadvantages over alternative investment and finance vehicles. In addition, it is defined the factors that explain the pattern of the cost of borrowing through a regression analysis.
Based on the results obtained, it can be expected the beginning of a virtuos circle that will lead crowdfunding to become a part of the solution of financial market inefficiencies, primarily regarding the finance and profitability challenges of SMEs and savers, and a new tool for public-private promotion for projects with positive externalities.
El crowdfunding de préstamos está introduciéndose en el mercado español como un producto alternativo de financiación e inversión respaldado por una legislación que brinda transparencia y seguridad jurídica tanto a inversores como a las empresas con necesidades de financiación.
El presente artículo analiza el impacto en España del crowdfunding, el binomio rentabilidad-riesgo del producto y los efectos de la diversificación, así como sus ventajas y desventajas respecto a otros vehículos de inversión y financiación. Asimismo, se determinan las variables que explican el coste del capital de los préstamos mediante un modelo de regresión.
Los resultados obtenidos permiten prever el inicio de un círculo virtuoso que convierta el crowdfunding en parte de la solución a las ineficiencias del mercado financiero, primordialmente respecto los problemas de financiación y rentabilidad que acarrean las PyMEs y los pequeños ahorradores, y en una nueva herramienta de colaboración público-privada respecto aquellos proyectos que presenten externalidades positivas.
Loan-based crowdfunding is being introduced in the Spanish market as an alternative financial and investment product supported by a legislation that provides transparency and legal certainty both ...investors and companies with financing needs. This paper examines the impact of crowdfunding in Spain, the profitability-risk binomial, the diversifications effects as well as its advantages and disadvantages over alternative investment and finance vehicles. In addition, it is defined the factors that explain the pattern of the cost of borrowing through a regression analysis. Based on the results obtained, it can be expected the beginning of a virtuos circle that will lead crowdfunding to become a part of the solution of financial market inefficiencies, primarily regarding the finance and profitability challenges of SMEs and savers, and a new tool for public-private promotion for projects with positive externalities.
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