PROPERTY PORTFOLIO PERFORMANCE ANALYSIS

Abstract

A property portfolio cannot be assumed to be properly managed merely because there are no arrears of rent and all tenants' covenants are complied with. Otherwise, the property portfolio would have become an end in itself, rather than a means to increase the wealth of the investor. One technique recently developed to manage property portfolios as investment portfolios is the property portfolio performance analysis. This technique is based on concepts borrowed from the securities market. In view of the inherent differences between property and securities investments, this study aims to establish the meaningfulness and usefulness of property portfolio performance analysis. In particular, it is concerned with the need to analyze the past performance of a property portfolio. It reviews the general principles of analysing property portfolio performance and a hypothetical case study based on real properties is used to illustrate them. This forms the basis upon which to evaluate the technique, having due regard to the nature of property investments. It is found that portfolio performance analysis holds practical implications for the management of property portfolios. At the same time, many problems arise with its application, mainly the results of the special characteristics of property investments. However, as long as there are reasons for investing in property portfolios, principles must be enunciated against which to measure the performance of property portfolios. In this regard, property portfolio . performance analysis will be useful and meaningful albeit limited. The case is therefore one of further research rather than outright rejection of such analysis.