REP Research Roundup: February 2024

News from the Department of Real Estate & Planning

Research Application

Claire Deng – Principal Investigator; Submitted to the Real Estate Research Institute

• Title: Green Properties, Socially Responsible Investing and Capital Raising
• Total bid: £11,025

Research Engagement

Joe Doak: Workshop coordinator at the Berkshire Heritage Fair, 24th February 2024 providing expert advice on researching local industrial and property histories.

Publications

Crosby, N. and Hordijk, A. (2024) The implementation of long-term prudent valuation models across the UK and Mainland Europe for financial regulation purposes. Journal of Property Research (In Press) 
Abstract
The Basel 3 guidance on bank regulation includes a new definition of real estate valuation which differs from existing bases. Prudently conservative valuation or prudent value includes four criteria which include the exclusion of “expectations of price increases” and it must be “adjusted to take into account the potential for the current market price to be significantly above the value that would be sustainable over the life of the loan”. “National supervisors should provide guidance” and “If a market value can be determined, the valuation should not be higher than the market value” (BCBS, 2017). Prudent value has synergies with existing post Global Financial Crisis (GFC) debates concerning long-term valuations for commercial real estate bank loan origination and monitoring purposes. This paper outlines the concepts of long-term and prudent values in more detail, reviews the literature on long-term valuation and develops a framework for prudent value. It also puts that literature into a wider perspective on the analysis of market cycles and portfolio disaggregation within performance measurement and suggests ways in which the property industry could implement the current Basel 3 prudent value proposals.

Deng, X. Liu, C. and Ong, S. E. (2022) Shadow bank, risk-taking, and real estate financing: evidence from the online loan market. Journal of Real Estate Finance and Economics. (In press)
Abstract
This paper examines whether and how individual risk-taking behavior affects real estate financing through shadow banks. Using the loan data from an online platform in China, we show that riskier households tend to employ online loans to meet the increasing down-payment in their home purchase. Individual investors are likely to fund riskier real estate loans with higher expected returns. Real estate loans experience higher ex-post default rates than other types of loans. The effect is more pronounced during the period of credit constraints.

Deng, X. , Anglin, P. M. , Gao, Y. and Sun, H. (2021) How do the CEO political leanings affect REIT business decisions? Journal of Real Estate Research, 43 (4). pp. 419-446. 
Abstract
Business decisions made by the real estate industry have a profound effect on the well-being of people who live, work, or shop in these buildings. While these decisions may be informed by evidence, the available evidence is often incomplete or imperfect. Therefore, the personal opinions or judgments of senior executives can have an effect. In this paper, we study these effects in two parts: risk-taking and environmental, social, and governance (ESG) activities. Since a person’s political learning is a relatively stable measure, and is associated with preferences for risk and ESG activities, we examine how the political leanings of the CEOs are related to these effects. Using the data from 2003 to 2016, we find that real estate investment trusts with Democratic-leaning CEOs tend to take more risks, as evidenced by higher levels of leverage and more risk in stock prices. We further find that Democratic-leaning CEOs are more broadly engaged in environmentally oriented ESG activities.

Li, J.  Guo, J. M. , Hu, N. and Tang, K. (2021) Do corporate managers believe in luck? Evidence of the Chinese zodiac effect. International Review of Financial Analysis, 77. 
Abstract
We study the responses of Chinese public firm chairpersons to their perceptions of bad luck pertaining to the Chinese zodiac year. We find that these perceptions of bad luck increase managers' sense of risk and lead them to increase their corporate cash holdings, even though the actual underlying risk remains unchanged. The effect is temporary and begins at the end of the quarter prior to the commencement of the zodiac year. When the zodiac year has passed, the level of risk perceived decreases and the bias disappears. The distortion between perceived and actual risk is significant, and the increase in cash holdings is both suboptimal and inefficient, in our view. Overall, these managerial reactions to the zodiac year are consistent with theories about belief in luck.

Ren, X. , Li, J. , Wang, X. and Lei, X. (2024) Female directors and CSR: does the presence of female directors affect CSR focus? International Review of Financial Analysis. (in press)
Abstract
This study examines the impact of female directors on CSR by drawing on social role theory and literature about female leadership style. Using a sample of Chinese firms from 2007 to 2021, we show a strong correlation between female directors and an enhancement in aggregate and particularly, internal CSR engagement. The relationship between female director and external CSR is negative but not significant. Further analysis reveals that in regions with stronger societal expectations towards females, the contributions of female directors to CSR activities become more pronounced. Our findings further demonstrate that a critical mass of female directors on the board is necessary to exert substantial influence on internal CSR initiatives. Notably, we find that female directors in independent and monitoring roles particularly effective in advancing internal CSR initiatives.

White, J. T., Kenny, T., Samuel, F. Foye, C. , James, G. and Serin, B. (2024) Are well-designed places possible? A model of design governance intervention in the planning, design and development of new neighbourhoods. Journal of Urban Design. 
Abstract
UK planning policies clearly state that well-designed places support the creation of sustainable places that generate positive economic, environment and social outcomes. Yet, for decades, the design value of ‘new build’ housing development has remained stubbornly low. Using data from a multiple case study of new housing developments across the UK’s four nations, this paper asks why this persists and explores how it might be overcome. It models nine key stages in the planning, design and development process for new housing illustrating where the ‘critical points of design governance intervention’ lie.

Wylie, A. (2020) Climate conscious professional kitchens? Analysing the Scottish food sector through a feminist lens. Feminismo/s, 35. 
Abstract
As we enter what has been defined as a climate emergency, governments are formulating policy responses that address sustainability through low carbon transitions. This article examines the relationship between policy representation in climate mitigation, business and food policies, and the implementation of sustainable practices in professional kitchens. The restaurant industry is a major consumer of natural resources as many practices throughout the supply chain are carbon intensive. Following Carol Bacchi’s «What is the problem represented to be?» framework, this article examines the extent to which policy representation of sustainability and food governance influences everyday practices in professional kitchens in Glasgow, Scotland, based on research undertaken in 2019. This study revealed that climate change, business and food policies promote the idea that sustainability will be achieved alongside economic growth, without considering the complexities of social inequalities. The policies significantly overlook the private sector responsibility to transform away from unsustainable practices, whilst the potential approaches to improve social and environmental sustainability are obscured. The article concludes by calling for policies to integrate issues of social justice in the representation of the problem to produce more transformative and socially equitable outcomes.

PhD News

Thesis Deposit

Du, D. (2022) Assembling for sustainable urban energy transition: UK institutional property owners’ consideration on deploying solar panels on buildings. PhD thesis, University of Reading.
doi access link

Conference Presentation

Doak, J (2023) On-line presentation to The History of Reading Society on ‘What About the Workers? Life and Love at Huntley & Palmer’s 1847-1978’, 13th December 2023.