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Real Estate Portfolio Ratings and Market Data

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  • Carsten Lausberg
  • Andreas Wiegner

Abstract

In recent years the quality of instruments for real estate risk management has greatly improved. External and internal ratings are in the center of this development, but compared to borrower ratings the stage of development is still rather low. In this paper we use a large sample of properties from German open-ended funds to demonstrate which methods are suitable for an external real estate rating. In the first part we place special emphasis on the market data, analyzing which data are available globally, checking their suitability for real estate ratings, and delineating the difficulties of the collection procedure. In the second part the article describes in detail how the market data is used in various kinds of ratingsó quantitative models based on cash flow simulation, qualitative models based on scorings, and mixed-form ratings. We show that a rating of real estate portfolios can greatly benefit from the advances that banks made in their internal ratings-based approaches following the New Basel Capital Accord. But due to several constraints, mainly in the market data, we come to the conclusion that quantitative methods alone are not sufficient (yet) for a holistic view on the risks of a real estate portfolio.

Suggested Citation

  • Carsten Lausberg & Andreas Wiegner, 2009. "Real Estate Portfolio Ratings and Market Data," ERES eres2009_250, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2009_250
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    File URL: https://eres.architexturez.net/doc/oai-eres-id-eres2009-250
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    Cited by:

    1. Carsten Lausberg & Stephen Lee & Moritz Müller & Cay Oertel & Tobias Schultheiß, 2020. "Risk measures for direct real estate investments with non-normal or unknown return distributions," Zeitschrift für Immobilienökonomie (German Journal of Real Estate Research), Springer;Gesellschaft für Immobilienwirtschaftliche Forschung e. V., vol. 6(1), pages 3-27, April.

    More about this item

    JEL classification:

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

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