felton
Uploaded by
19 SLIDES
333 VUES
190LIKES

Comprehensive Attribution Analysis of Property Level Total Return Metrics

DESCRIPTION

This analysis explores the detailed components of total return in property investments, dissecting income return and capital return. It explains how income effect, rental growth, capital rate changes, indexation, and lease effects contribute to overall performance. The methodology includes key formulas for calculating total return (TR) and its components, emphasizing the non-additive nature of these effects. Practical examples illustrate the impact of changing rental values and capital rates, along with demonstrated calculations to enhance understanding for investors and stakeholders.

1 / 19

Télécharger la présentation

Comprehensive Attribution Analysis of Property Level Total Return Metrics

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

Playing audio...

  1. Attribution analysis: the property level

  2. Total return • Income return = Y0-1/CV0 • Capital return is the change in value over the measurement period divided by the value at beginning of the period • CR = [CV1 - CV0]/CV0 • Total return is the sum of income return and capital return • TR = [Y0-1 + CV1 - CV0]/CV0

  3. Components of total return

  4. Residuals - the income effect • Rental growth and yield changes may not pass directly through to value • The residual – split into sample and income effects – describes the amount of capital growth that cannot be accounted for by changes in either rental value or cap rates (valuation yields) • Components are not additive • Sample effects are pure unexplained returns where, for example, capital value changes are reported but rental value changes are not • Income effects are everything else

  5. Components of capitalreturn

  6. The income effect • Changes in void rates • properties become vacant • empty properties are let • The expected cash flow changes as lease ends approach • Indexation

  7. Example • Rent passing £10,000 2008 • ERV £15,000 at Q4 2007 • Rises to £16,500 at Q4 2008 • 4 years to lease end at Q4 2007 • 3 years to lease end at Q4 2008 • Cap rate 6% at Q4 2007 • Falls to 5.75% at Q4 2008 • Indexation in NL with 1% inflation in 2008

  8. Valuation: Q4 2007 Core income: £10,000 YP perp @ 6.00% 16.6667 Capital value £166,667 Top slice: £5,000 YP perp @ 6.00% 16.6667 PV 4 yrs @ 6.00% 0.7921 Capital value £66,008 Total £232,674

  9. Valuation: Q4 2008 Core income (indexed): £10,100 YP perp @ 5.75% 17.3913 Capital value £175,652 Top slice: £6,400 YP perp @ 5.75% 17.3913 PV 3 yrs @ 5.75% 0.8456 Capital value £94,118 Total £269,770

  10. Total return • CV0 = £232,675 • CV1 = £269,770 • Y0-1 = £10,000 • TR = [Y0-1 + CV1 - CV0]/CV0 • TR = [£10,000 + (£269,770 - £232,675)]/£232,674 • TR = [£10,000 + £37,095]/£232,674 • TR = £47,095/£232,674 • TR = 20.24% • IR = 4.30%; CR = 15.94%

  11. Rental growth effect (1) Core income: £10,000 YP perp @ 6.00% 16.6667 Capital value £166,667 Top slice: £6,500 YP perp @ 6.00% 16.6667 PV 4 yrs @ 6.00% 0.7921 Capital value £85,811 Total £252,478

  12. Rental growth effect (2) • CV0 = £232,674 • CV1 = £269,770 • Y0-1 = £10,000 • TR = [Y0-1 + CV1 - CV0]/CV0 • TR = [£10,000 + (£252,478 - £232,674)]/£232,674 • TR = [£10,000 + £19,804]/£232,674 • TR = £29,804/£232,674 • TR = 12.81% • IR = 4.30%; CR = 8.51%

  13. Cap rate effect (1) Core income: £10,000 YP perp @ 5.75% 17.3913 Capital value £173,913 Top slice: £5,000 YP perp @ 5.75% 17.3913 PV 4 yrs @ 5.75% 0.7996 Capital value £69,531 Total £243,444

  14. Cap rate effect (2) • CV0 = £232,674 • CV1 = £243,444 • Y0-1 = £10,000 • TR = [Y0-1 + CV1 - CV0]/CV0 • TR = [£10,000 + £243,444 - £232,674]/£232,674 • TR = [£10,000 + £10,770/£232,674 • TR = £20,770/232,674 • TR = 8.93% • IR = 4.30%; CR = 4.63%

  15. Indexation effect (1) Core income: £10,100 YP perp @ 6.00% 16.6667 Capital value £168,333 Top slice: £4,900 YP perp @ 6.00% 16.6667 PV 4 yrs @ 6.00% 0.7921 Capital value £64,688 Total £233,021

  16. Indexation effect (2) • CV0 = £232,674 • CV1 = £233,021 • Y0-1 = £10,000 • TR = [Y0-1 + CV1 - CV0]/CV0 • TR = [£10,000 + (£233,021 - £232,674)]/£232,674 • TR = [£10,000 + £347]/£232,674 • TR = £10,347/£232,674 • TR = 4.45% • IR = 4.30%; CR = 0.15%

  17. Lease effect (1) Core income: £10,000 YP perp @ 6.00% 16.6667 Capital value £166,667 Top slice: £5,000 YP perp @ 6.00% 16.6667 PV 3 yrs @ 6.00% 0.8396 Capital value £69,968 Total £236,635

  18. Lease effect (2) • CV0 = £232,674 • CV1 = £236,635 • Y0-1 = £10,000 • TR = [Y0-1 + CV1 - CV0]/CV0 • TR = [£10,000 + (£236,635 - £232,674)]/£232,674 • TR = [£10,000 + £3,961]/£232,674 • TR = £13,961/£232,674 • TR = 6.00% • IR = 4.30%; CR = 1.70%

  19. Components of capital return 15.94% 15.94% 4.63% 0.72% 1.70% 8.51%

More Related