13 April 2005

(Updated) Fully funded PhD: ESRC CASE award

Updated, 14th October 2005: This studentship has been filled.

Applications are invited for an ESRC COLLABORATIVE (CASE) STUDENTSHIP: Liquidity in Commercial Property: the Buy Side of the Transactions Process

Supervised by Professor John Henneberry. Collaborating institution: Investment Property Forum Educational Trust

The Studentship covers fees and a subsistence allowance of £14,000 with an additional stipend of £2,000.

For an informal discussion about these opportunities please contact: Professor John Henneberry (j.henneberry@sheffield.ac.uk; 0114 2226911).

Project Title:

Two of the fundamental financial characteristics of investments are the nature of returns and the liquidity of assets. Property is an illiquid asset because of its 'lumpiness', heterogeneity, complex legal character, the absence of a single trading market and so on. Low liquidity creates, inter alia, two problems. First, it takes longer to realise an asset's market value. Second, there is the risk of the market price changing between the decision to sell and the sale being implemented, resulting in the actual return differing from the expected return (Hoesli and MacGregor 2000). The conventional understanding, thus expressed, embodies two assumptions: that it is the price mechanism that reconciles the requirements of the buyers and sellers of investment properties; and that the key period is the duration of the formal sales process. Both assumptions are challenged by recent research. Bond et al (2004) argue that adjustments to conditions in direct property investment markets come predominantly through changes in transaction rates and time to sale, rather than through the price mechanism. For the 187 transactions they studied, property value (price) had no effect on the length of the transaction process. They developed a six stage model of investment property sales. This identified the significance of particular institutional influences upon the selection of properties for sale that were exercised before the formal decision to sell was taken. These related to the portfolio management and organisational contexts of the process and, within this frame, to the motivation and readiness to sell. In combination, these factors had a significant impact on the speed and probability of a sale: that is, upon liquidity. But sales are only one 'half' of transactions and "... a parallel exercise on the buy side ... would be ... invaluable." (Bond et al 2004, page 104). Consequently, the aims of the research are:

• to characterise the buy side of the property transaction process;
• to explore its impact on transaction performance; and
• to consider the implications for property investment and for the operation of the property market.

The specific research objectives and the research methods that will be used to achieve them, together with the timescales, are given below.

Objective 1:

to develop a model of the property investment acquisition process.

This will be achieved through a combination of literature review (months 1-3 and then on-going) and in-depth interviews of expert practitioners working in investment institutions, property agencies and professional organisations (months 4-6). The student will be aided in this by his/her first placement (month 3) in a member organisation of IPF during which the selection of interviewees will be finalised and introductions to them for interview purposes will be effected.

Objective 2:

to refine the model and use it to analyse the general pattern of acquisition practice.

The vehicle for this will be a detailed investigation of a set of transactions (acquisitions), analysing data from the files of selected funds reflecting the main actors within the institutional investment sector. A limited number of interviews with practitioners involved with these transactions will inform the analysis (months 7-12). IPF will assist in selecting and gaining access to the subject case files and the related institutions. Wherever possible, files (or copies) will be analysed in Sheffield. However, some analysis and the related interviews will need to be conducted in situ, using the premises of an IPF member organisation as the working base (several periods of 2-5 working days, totalling approximately 1 month).

Objective 3:

to explore the interrelations between the organisational and portfolio contexts of the buyer, the specific approaches to acquisitions adopted and transaction performance.

This will be achieved by undertaking a small number of intensive, longitudinal case studies of acquisitions, involving a combination of document analysis, in-depth interviews and participant observation. The mean transaction total time for sales is 219 days (Bond et al 2004). Assuming that acquisitions times are of similar duration and allowing for set-up time and some longer transaction periods, one year (months 13-24) is planned for the conduct of the case studies. The selection of the case study organisations (type of institution, general approach adopted etc) and acquisitions (type of property, market sector etc) will be informed by the earlier stages of the research. IPF's assistance will be especially helpful in negotiating the institutions' participation. This stage of the work will involve a series of intensive periods of fieldwork based in various IPF member organisations' premises (approximately 3-4 months), depending on agreed arrangements.

Objective 4:

to assess the implications of the findings for property investment and the property market.

Essentially, this will be achieved through the process of writing the thesis (production of first draft, months 25-33; revisions and final submission, months 34-36). Two dimensions will be explored: the role of acquisitions in the transactions process and the scope for increasing liquidity by changes in buyers' approach; and the significance of the findings for transactions cost theory (see section 5b).

Anticipated Outcomes

The project is designed to improve understanding of a process of fundamental importance to economic performance and competitiveness, and thereby to parallel the objectives set out in the ESRC's Mission Statement. It will contribute to the development of theory and practice (see 5b) and research methodology in the property subject area. The student will become a trained social scientist with expertise in an underdeveloped subject area and with significant experience of the operation of a range of members of a major industry-based research organisation in the field of property investment.

Further information

Please contact John Henneberry with any questions or queries concerning the studentship at the Department of Town and Regional Planning, University of Sheffield, Sheffield, S10 2TN, or by telephone on 0114 222 6911 or email j.henneberry@sheffield.ac.uk.

The closing date for applications is: as soon as possible