AGSM's Centre For Real Estate Research An Australian First

AUTHOR: Lachlan Colquhoun   DATE: 01.09.05   ISSUE 2, 2005

AMP Capital Investors, Westfield Holdings, GPT, UBS, Stockland, Macquarie Bank, Jones Lang Lasalle, the Australian Stock Exchange, Mirvac and Colliers are supporting CRER.

CRER's research program will focus on real estate valuation, investment and financing issues in Australia and Asia. Two observations have motivated the Centre’s intial focus on the commercial property market; first, the increasing role played by institutions in providing equity financing via real estate investment trusts and second, the apparent under utilization of land in major CBDs.

CRER will initially concentrate on the impact on performance, pricing and cost of capital of changes in the activities of Australian Listed Property Trusts. This project will later be extended to examine the related issues of (i) the link between the valuation of undeveloped land and the timing of development; and (ii) the pricing and performance of real estate investment trusts as they continue to expand beyond their core activity of real estate investment.

CRER's research program will focus on real estate valuation, investment and financing issues in Australia and Asia.

ILLUSTRATION: Gregory Baldwin

CRER will host an annual one-day symposium, bringing together academics and practitioners to discuss real estate issues, while each year a team of MBA and MBA (Executive) students will work with faculty and the Centre’s Advisory Council on practical problems identified by corporates working in the sector.

“Real estate is a very important part of the Australian economy and a significant asset for fund managers. There is very little research done in areas such as valuation and investment and financing decisions. CRER evolved through the realisation that there is little, if any research being done in business schools on what is a very important component of the Australian investment market,” says Professor Twite. “There has never been any formal attempt to create a specialised centre of this kind in the context of business school education and research, and I think it is very significant for that reason. The increasingly globalised nature of the real estate business requires a global research effort. Our partnership with McComb’s REFIC will achieve this by promoting international collaboration and sharing of expertise. ”

“CRER will help find answers to questions that practitioners in the industry think are important.”

Professor Garry Twite

Spokesmen for CRER’s corporate supporters were unanimous in the view that the initiative was a timely one, given the increased sophistication of the real estate industry. They also saw it as a valuable resource to develop their own people, and as a channel to research solutions specific to their own activities.

“Real estate is a very important part of the Australian economy and a significant asset for fund managers."

“The real estate market has evolved over the years with the development of complex vehicles and products,” says AMP Capital Investors' Chairman Jack Ritch.

“Products are being built around real estate assets for growing retirement and other savings pools, and it is really important that the people who are constructing those products have the greatest understanding of how they will behave.”

“Also, there are more international real estate assets available to Australian investors and more overseas investors in our market, so the more intelligence you can provide the better for everybody.”

“The real estate market has evolved over the years with the development of complex vehicles and products.”

Jack Ritch

From Westfield, Chief Financial Officer Peter Allen said he could see “huge benefits” flowing to Westfield and to the property industry from the foundation of CRER.

“One of the ways we look at ourselves is as a real estate investment bank, and that approach is a combination of both practical real estate knowledge and knowledge of finance.”

Products are being built around real estate assets for retirement and other savings pools

GPT’s Chief Executive, Kieran Pryke, welcomed CRER as “another level of professional development.”

“There haven’t been many courses which combine real estate and finance, that is one of the significant aspects about the Centre,” says Allen.

“We look forward to working closely with CRER and would see our interaction occurring at a range of different levels, including contributing to the development of the knowledge base of the real estate industry and utilising CRER as a valuable development tool for our people.”

At CRER, Professor Twite will be joined on the faculty by Dr Jinu Kim, Director of the Master of Property & Development (MPD) Program and Dr Linda Tay from the Faculty of the Built Environment at the University of New South Wales, and by Professor Sheridan Titman, who holds the McAllister Chair in Financial Services at the University of Texas.

"It is important that the people constructing new products understand how they will behave."

Professor Titman is also Director of the Real Estate Finance and Investment Centre at the McCombs School in Austin, Texas.

“CRER is going to be a significant help in finding answers to questions that practitioners in the industry think are important,” says Professor Twite.

“Things like how do we measure our return, how do we structure things, what other way can we do valuations.”

“It’s really about the impact that finance can have as a discipline on the question of valuation and financing the securitisation of real estate assets.”

Professor Twite says the dual teaching and research focus of the Centre will help prepare students who want to enter the industry, and also help practitioners research practical issues they are facing in their day to day business.

“In the teaching area there will be a suite of executive programs at two levels – a ‘Current Issues’ topic for senior executives and a second more fundamental course structured around retail finance,” says Professor Twite.

“It’s really about the impact that finance can have as a discipline on the question of valuation and financing the securitisation of real estate assets.”

“ These programs will attract people already in the industry or those entering it, while courses will also be offered to MBA students at the AGSM who may have no industry experience.”

He envisages a direct link between the industry and the research effort.

“Company’s we’ve been talking to are keen on getting their people to use CRER as a way of focussing on their own issues,” says Professor Twite.