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Private Property Vehicles: The Valuation of Interests in Limited Partnerships

Author

Listed:
  • Nina Kutsch

    (Department of Real Estate & Planning, University of Reading)

  • Pat McAllister

    (Department of Real Estate & Planning, University of Reading)

  • Graeme Newell

Abstract

This paper examines the extent to which the valuation of partial interests in private property vehicles should be closely aligned to the valuation of the underlying assets. A sample of vehicle managers and investors replied to a questionnaire on the qualities of private property vehicles relative to direct property investment. Applying the Analytic Hierarchy Process (AHP) technique the relative importance of the various advantages and disadvantages of investment in private property vehicles relative to acquisition of the underlying assets are assessed. The results suggest that the main drivers of the growth of the this sector have been the ability for certain categories of investor to acquire interests in assets that are normally inaccessible due to the amount of specific risk. Additionally, investors have been attracted by the ability to 'outsource' asset management in a manner that minimises perceived agency problems. It is concluded that deviations from NAV should be expected given that investment in private property vehicles differs from investment in the underlying assets in terms of liquidity, management structures, lot size, financial structure inter alia. However, reliably appraising the pricing implications of these variations is likely to be extremely difficult due to the lack of secondary market trading and vehicle heterogeneity.Â

Suggested Citation

  • Nina Kutsch & Pat McAllister & Graeme Newell, 2005. "Private Property Vehicles: The Valuation of Interests in Limited Partnerships," Real Estate & Planning Working Papers rep-wp2005-26, Henley Business School, University of Reading.
    • Handle: RePEc:rdg:repxwp:rep-wp2005-26
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    File URL: http://www.henley.reading.ac.uk/rep/fulltxt/2605.pdf
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    References listed on IDEAS

    as
    1. Ball, J'Noel & Srinivasan, Venkat C, 1994. "Using the Analytic Hierarchy Process in House Selection," The Journal of Real Estate Finance and Economics, Springer, vol. 9(1), pages 69-85, July.
    2. Richard J. Barkham & Charles W. R. Ward, 1999. "Investor Sentiment and Noise Traders: Discount to Net Asset Value in Listed Property Companies in the U.K," Journal of Real Estate Research, American Real Estate Society, vol. 18(2), pages 291-312.
    3. Allan Fife & Graeme Newell, 2002. "The Valuation of Fractional Interests," ERES eres2002_185, European Real Estate Society (ERES).
    Full references (including those not matched with items on IDEAS)

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