Developing an evaluation framework to assess the social and financial return in order to build a socially responsible real estate fund

Cattier, T. (2016) Developing an evaluation framework to assess the social and financial return in order to build a socially responsible real estate fund.

Abstract:Nowadays, still many investment and real estate portfolios focusing on commercial real estate in which the assessment is based, whether or not to invest, on the highest possible financial return with or without the lowest possible risk. To provide added value to the increasing vacancy of social real estate, the growing interest in social benefits in connection with SRI, excess capital in the financial markets and low interest rates, a study to investment in a real estate fund, with vacant social real estate, is attractive. This introduction has resulted in the following research goal: The central research question of this study is as follows: To answer the central research question in the first part of the study a literature study was carried out. It this study the real estate is bordered, the social indicators for this real estate is defined and the financial return is explained. Based on this information and additional theory a provisional evaluation framework is developed. This evaluation framework consists of an assessment model for the social and financial return, and a confrontation matrix for the composite understanding between both. In the second part of the study, the developed evaluation framework is applied to a business case. This business case is chosen on the basis of different object- and location criteria from the literature. Using this business case the evaluation framework is completed by employees of SBM. On the basis of this process the developed evaluation framework has been improved to present a better version of the framework. This improved version of the framework has been taken to the interviews. From the interviews it revealed that the process surrounding the evaluation framework is essential. For this reason, a process scheme has been added in which step by step illustrates how the evaluation framework needs to be used. Furthermore, it can be stated that the social assessment model a first step is towards a quantitative insight into a social value. The model is also suitable as an instrument for conducting a substantive discussion about the social effects of a real estate object. The model can be used to create a better negotiating position towards the municipality or a diversion or the purchase price, for example. However, the model should also be seen as a subjective tool. The rating model for the financial return is realistic and can be seen as useful. Like the assessment model of the social benefits, the financial model should also be seen as subjective tool through the many assumptions that must be made. The confrontation matrix with the social value on the X axis, the financial return on the Y axis and the four quadrants, can in general be seen as a good way to gain on a quick way insight how a certain real estate object scores in order to make portfolio management possible. To conclude, the development of a useful evaluation framework for assessing the social value and financial return quantitatively is possible within a strong defined context. However, is not feasible to make a social value only quantitative insightful. Given the subjective and specific nature of the social value a qualitative explanation is inevitable. There are also giving some recommendations based on this study. To provide better information for assessing a social value is recommended to conduct a broad field research. It is recommended to carry out an extensively field research by conducting various surveys and local observations. In addition, the developed social assessment model can be improved on some points. The criteria that are hardly to assess need to be removed from the model. In a general sense, it is important to use a certain method in order to come to the most relevant social indicators. In principle, clear social goals need to be formulated. It applies the principle of SMART (Specific, Measurable, Achievable, Realistic and Time-bound). From these goals initiatives or projects can be identified for possible effects with all stakeholders involved. It is recommended to do this in a so called ‘intersubjective’ setting. To increase the reliability and credibility of the social story of a real estate fund, with respect to the financial picture, it is important that the person who conveys has a solid track record. This is important in order to increase the receptivity towards the market. Regarding the combined insight and related confrontation matrix, it is advisable to formulate general business goals for the fund. These arise from the strategic real estate management and are related to the operation, purchase and sale principles.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:70 social sciences in general, 85 business administration, organizational science
Programme:Business Administration MSc (60644)
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