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Future yield after taxes (FYT): A more realistic yield rate than IRR or other types of yields?

Author

Listed:
  • Jan Paul Becker
  • Bertram Ingolf Steininger

Abstract

Standard performance key figures in the fund industry like the Internal Rate of Return (e.g. for earnings yields) or the ratio of lease-revenues to the purchase price (e.g. for returns on sales) measuring the performance of Closed-End Real Estate Funds (CEREF) or Alternative Investment Funds (AIF) should not encourage the investors´ decision to spend capital in real estate investments (and also funds): these above mentioned key figures do not allow the comparison of Returns On Capital Employed with other investment types (e.g. money market instruments, lending rates or minimum guaranteed insurance interest rates). Our new measurement ‘Future Yield after Taxes’ includes this requirement of comparison without demanding strict assumptions. Using a sample of 510 CEREF/AIF -- issued by 78 German initiators for the period of 1985 to 2015 –- we are able to show, that the measurements of these funds´ Return On Investment end in the investors´ capital weighted ROCE of about 7.29 %p.a. before and about 4.00 %p.a. after German tax revenues. These yield results seem to be riskier than expected. For our empirical analysis, we collected the financial data from regular prospects of the issuers.

Suggested Citation

  • Jan Paul Becker & Bertram Ingolf Steininger, 2017. "Future yield after taxes (FYT): A more realistic yield rate than IRR or other types of yields?," ERES eres2017_255, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2017_255
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    More about this item

    Keywords

    Alternative Investment Funds; Closed-End Real Estate Funds; Performance Measurement;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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