Journal of Financial Management of Property and Construction

Holt, Gary D.; Davis, Peadar Thomas; Akintoye, Akintola

2018 Journal of Financial Management of Property and Construction

doi: 10.1108/JFMPC-08-2018-058

Mintah, Kwabena; Higgins, David; Callanan, Judith

2018 Journal of Financial Management of Property and Construction

doi: 10.1108/jfmpc-05-2017-0017

Uncertainties in residential property investment performance require that real estate assets are designed in a flexible manner to respond to impacts of market dynamics. Though estimating the cost of flexibility is straightforward, assessing the economic value of flexibility is not. The purpose of this study is to explore the potential practical application of real option analysis to determine the economic value of a switching output flexibility embedded in a residential property investment in Australia. The study involves the exploration of an optimal strategy for investment in a residential development through real option analysis and valuation of a mixed use investment.Design/methodology/approachThe real option valuation model developed by McDonald and Siegel (1986) is adopted for the evaluation because the switching output flexibility is likened to a perpetual American call option with dividend payout.FindingsThrough real option analysis, the economic value of switching output flexibility of the mixed use building was determined to be higher than the initial upfront costs. Moreover, a payoff of about $4million was determined to be the value of the switching output flexibility, therefore justifying upfront investments in flexibility as an uncertainty and risk management tool.Practical implicationsThis application is an important demonstration of the practical use of options pricing techniques (real options analysis) and delivers further evidence needed to support the adoption of real option valuation in practice. Flexibility can also enhance risks and uncertainty management in residential property investment better than the adjustment of discount rates.Originality/valueThere is limited evidence on the use of real options techniques for the valuation of switching output flexibility in practice, and this comes as an original application; both the case study and data are all initial applications of switching flexibility in the Australian property market.

Konno, Yukiko; Itoh, Yuki

2018 Journal of Financial Management of Property and Construction

doi: 10.1108/jfmpc-02-2017-0006

This study aims to analyse, from a corporate finance and governance perspective, the reasons why managers decide to delist their companies from a stock exchange. On the basis of the five hypotheses of voluntary delisting, this study examines why listed companies delist themselves voluntarily in the construction and real estate sectors.Design/methodology/approachBy using actual data to examine contractors and real estate companies listed on the Tokyo Stock Exchange between 2004 and 2014, this study analyses whether these companies delist themselves voluntarily. The pooled binary logit model is used as the statistical method.FindingsIn both the construction and real estate sectors, the concentration of shareholders has a significantly positive effect on voluntary delisting, thus supporting the transfer of wealth effect hypothesis. In construction, market capitalisation has a significantly negative effect on voluntary delisting, thus supporting the maintenance cost reduction hypothesis. In the real estate sector, the ratio of market capitalisation to total assets has a significantly negative effect on voluntary delisting, thus supporting the undervalue elimination hypothesis.Originality/valueBy comparing the construction and real estate sectors, this study reveals both unique and common reasons for voluntary delisting in each sector. It also offers valuable insights to managers, regulators setting standards in securities markets and investors.

De Silva, Nayanthara; Weerasinghe, Nilmini; Madhusanka, H.W.N.; Kumaraswamy, Mohan

2018 Journal of Financial Management of Property and Construction

doi: 10.1108/jfmpc-09-2016-0041

The purpose of this paper is to identify enablers for setting up relationally integrated value networks (RIVANS) for total facilities management (TFM) as a holistic approach to bridge the Project Management (PM) phase to the facilities management (FM) phase, aiming for better service delivery while optimizing the life-cycle cost. These enablers are proposed as required driving forces for the industry to bridge current gaps through RIVANS for TFM so as to improve the value of the facility and deliver better value to its stakeholders over its life span.Design/methodology/approachA literature review elicited 11 typical better values that could be achieved by suitably linking the PM and FM supply chains in general. While these were tested in parallel research exercises in Hong Kong, the UK and Singapore, this paper reports on the specific findings from Sri Lanka, where a Web-based questionnaire survey was conducted to identify potential better values for proposed relational networks (including the clients, consultants, contractors and suppliers in the supply chain). Better values were then clustered under principal domains/components using factor analysis to establish synergetic enablers.FindingsIn total, 11 significant better values for TFM were identified and four enablers were extracted as building long-term integrated networks, establishing a common resource pool linking PM and FM, enhancing sustainability of TFM and developing a similar protocol between PM and FM.Originality/valueThe study carried out in this paper contributes to knowledge by identifying drivers to bridge the gap between PM and FM to best achieve clients’ long-term aspirations through a holistic life-cycle approach. Furthermore, all stakeholders in TFM can revisit their practices to establish and strengthen the identified enablers.

Alao, Oluwaseyi Olalekan; Jagboro, Godwin Onajite; Opawole, Akintayo

2018 Journal of Financial Management of Property and Construction

doi: 10.1108/jfmpc-07-2017-0026

This paper aims to determine the effect of the period of abandonment on the final cost and duration of resuscitated tertiary educational building projects as a basis for enhancing the performance metrics of the projects and improving the availability of facilities in tertiary institutions in Nigeria.Design/methodology/approachA structured questionnaire was administered on 47 professionals involved in the physical development of construction projects in Osun State public tertiary educational institutions to provide primary data for the study. Secondary data relating to initial and final costs, initial and final completion dates, dates of abandonment, period of abandonment, date of re-award, etc. were obtained from selected resuscitated projects. Data were analyzed using relative significance index and regression analysis.FindingsThe most significant effects of project abandonment were found to be disappointment of populace and over-stretching of existing facilities. The study showed a directly proportional and an exponential effect of period of abandonment on percentage cost overrun of resuscitated projects, which were represented by yc = −329.755 + 19.545x and yc = 6.1662e0.0506x, respectively. A linear relationship between period of abandonment and percentage time overrun was represented by yt = 0.467 + 0.816x.Research limitations/implicationsThe fact that the regression equations could not be validated because of paucity of data was identified as a limitation of this study.Practical implicationsThis study adds to the body of knowledge on abandonment of building projects from a quantitative perspective. Findings have implications for guiding long-term infrastructure development plans in public tertiary educational institutions.Originality/valueMaximum threshold at which abandoned projects may be resuscitated at an economic cost was established as 16 months. Findings further suggest that the economy of new construction would outweigh resuscitation of abandoned projects beyond this period.

Yogeshwaran, Gayathri; Perera, B.A.K.S.; Ariyachandra, M.R. Mahendrini Fernando

2018 Journal of Financial Management of Property and Construction

doi: 10.1108/jfmpc-06-2017-0019

Quantity surveying education in Sri Lanka (SL) presently does not appear to be catering to the industry needs indicating that it may not be up to the expected standard. Hence, the purpose of this study is to identify the gap between the competencies of graduate quantity surveyors (QSs) and the competencies that industry in SL expects from them.Design/methodology/approachA hybrid approach was used, consisting of desk reviews, expert interviews and a questionnaire survey. A comparative analysis identifying differences between two competency levels was carried out.FindingsAnalysis reveals that competencies of graduate QSs in areas of cost planning, strategic planning, risk management, value management, life cycle cost analysis, sustainability, surveying and levelling, research and development, building surveying and business management are at levels higher than industry needs. However, majority of competencies are at levels lower than industry expectations.Research limitations/implicationsThis research was focused only on competencies of QSs who have successfully completed a quantity surveying degree programme accredited by Institute of QSs SL, Royal Institution of Chartered Surveyors, Australian Institute of QSs and Pacific Association of QSs. It excluded non-graduates’ competencies as they gain competencies only through work experience.Practical implicationsThis study revealed the need for designing quantity surveying degree programmes to cater to industry needs to ensure that graduates from these programmes are acceptable to the industry.Originality/valueThis study made an original contribution to knowledge by identifying the gap that currently exists between industry needs and programme outcomes of quantity surveying degree programmes, which could be invaluable when improving quantity surveying education in SL.

Osei-Kyei, Robert; Chan, Albert P.C.; Dansoh, Ayirebi; Ofori-Kuragu, Joseph Kwame; Owusu, Emmanuel Kingsford

2018 Journal of Financial Management of Property and Construction

doi: 10.1108/jfmpc-06-2017-0020

The purpose of this study is to explore the motivations of governments for adopting unsolicited proposals for public–private partnership (PPP) project implementation.Design/methodology/approachA comprehensive review of literature was conducted to derive a list of motivations for adopting unsolicited PPPs. Subsequently, an empirical questionnaire survey was conducted with international PPP experts. Inter-rater agreement analysis, mean significance index and independent two-sample t-test were used for data analysis.FindingsResults reveal four very critical motivations for governments’ interest in unsolicited PPPs; these include: “enhanced private sector innovation and creativity in PPPs”; “lack of public sector capacity to identify, prioritise and procure projects”; “lack of private investors’/developers’ interest in projects at remote areas”; and “rapid implementation of PPP projects”. Further analysis shows that developing and developed countries view the significance of three motivations differently.Research limitations/implicationsThe major limitation lies in the fact that this study only focused on the general motivations/rationale for using unsolicited PPP proposals and did not thoroughly examine and consider the inherent property of motivations (i.e. push and pull theories). Therefore, future studies should explore the “pull and push” motivations for adopting unsolicited PPPs within a specific country or region.Originality/valueThe research outputs inform international private developers of the key expectations of governments/public departments when submitting unsolicited PPP proposals for consideration by the public sector. Furthermore, the outputs will enable governments/public departments and private proponents to derive performance objectives and standards for unsolicited PPP projects.

Babatunde, Solomon Olusola; Awodele, Oluwaseyi Alabi; Adeniyi, Onaopepo

2018 Journal of Financial Management of Property and Construction

doi: 10.1108/jfmpc-07-2017-0025

Foreign direct investment (FDI) inflows to both developed and developing countries have increased over the past three decades. However, investigation of opportunities and challenges associated with FDI on the host economy and its impact, especially on the construction sector through empirical assessment, have received scant attention. The purpose of this study is to address this gap in knowledge within the Nigerian context and examine the trend of FDI inflows to the construction sector for the period 2000-2013 inclusive. Relationships between contributions of the construction sector to Nigeria’s gross domestic product (GDP) are also studied.Design/methodology/approachThe study adopted a literature review, a questionnaire survey and archival data culminated in data analysis. The survey targeted financial experts in Nigerian financial institutions/local banks. Archival data included the annualised data extracted from the Central Bank of Nigeria statistical bulletins. The period examined witnessed stable economic conditions. Data collected were analysed using mean score, factor analysis and correlation.FindingsEight identified opportunities of using FDI were grouped into three principal factors: knowledge spillovers, capital for new investment and resilience during financial crises. The ten identified FDI challenges were grouped into three major factors: loss of ownership advantage and additional costs, crowding-out of-national firms and administrative bottleneck and overdependence. Based on the hypotheses tested, the study found a significant relationship between the contributions of FDI inflows in the construction sector and the total GDP of the host country.Practical implicationsThis study provides greater insight on the effects of FDI on a host economy in developing countries, which would help policymakers to examine existing policies and look for new ways of increasing foreign investment flow, especially in the area of Construction Facility Investment.Originality/valueThis study is important because it would enable policymakers in developing countries at large to promote FDI with special considerations for the construction sector of the economy.