Chiu, Man Kin. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2008. / Includes bibliographical references (leaves 83-88). / Abstracts in English and Chinese. / Abstract --- p.i / Acknowledgement --- p.iv / Chapter 1 --- Introduction --- p.1 / Chapter 2 --- Literature Review --- p.11 / Chapter 3 --- The Model --- p.28 / Chapter 3.1 --- The Preliminaries --- p.28 / Chapter 3.2 --- The problem setting --- p.31 / Chapter 3.3 --- The optimal selling strategy and structural properties --- p.39 / Chapter 3.3.1 --- The optimal selling strategy --- p.39 / Chapter 3.4 --- The optimal investment decision-Making regarding capacity and investment time --- p.44 / Chapter 3.4.1 --- The optimal decision on the construction capacity --- p.45 / Chapter 3.4.2 --- The optimal decision on the starting time of the investment --- p.48 / Chapter 4 --- Numerical analysis --- p.55 / Chapter 4.1 --- The setting of the numerical example --- p.56 / Chapter 4.2 --- The numerical results --- p.63 / Chapter 4.2.1 --- The optimal capacity --- p.63 / Chapter 4.2.2 --- The optimal starting time of the construction --- p.69 / Chapter 4.2.3 --- The effect of the capacity constraint --- p.73 / Chapter 4.2.4 --- The effect of the time constraint --- p.78 / Chapter 5 --- Conclusion --- p.80 / Bibliography --- p.83

Investment in residential real estate involves almost all members of the public at some stage of their lives, whether this be one's first home or the purchasing of one‟s first investment property. Understanding how to maximise the return on one's investment is something that can benefit the investor from before the investment is made until after the property has been sold, if it is sold at all. Literature surveys have concluded that there are a number of variables to consider when maximising the return on investment. As residential real estate is not a perfect science, there are guidelines and routes that are more beneficial to the investor depending on the current market, environment and economic standing. A survey was undertaken by members of the public that are involved in residential real estate investment, relative to the maximisation of the return on investment in residential real estate. The salient findings include: Investors in residential real estate spend more than average to extensive time prior, to investment researching the chosen residential real estate property; Investors in residential real estate perform a feasibility study before committing to the development whereas; Investors in residential real estate make use of financial advisors/valuers/estate agents or other investors' knowledge bases in deciding whether to invest in a residential property development; Investors in residential real estate believe that their degree of knowledge about the residential property market and residential property investments are average to very high. Investors in residential real estate somewhat agree that residential real estate investors do not effectively manage their investments. It was recommended that investors make use of help and guidance when investing in residential real estate, perform a feasibility study and ensure that they know their market before investing in a project. It was also noted that location plays a large role when deciding on an investment opportunity worth investing into. By creating awareness and ensuring that all methods and guidelines have been used to maximise the returns that their proposed residential real estate investment, investors can ensure a stronger, healthier cash flow and reap the highest possible benefits from their residential real estate portfolio.

During the last fifteen years, the professional architecture literature has encouraged practicing architects to increase their involvement in real estate development. Such participation may take several forms ranging from early conceptual development to financial investment. A typical scenario involves a developer asking the architect to forgo all or part of his professional fee in return for an investment interest in the project. However, the literature has done little to equip these novice architects/investors with the practical tools necessary to make informed investment decisions. If an architect is considering such an investment, he must do so with an understanding of what he is giving up and what he can expect in terms of future benefits. / M. Arch.

Choosing the right investment option by a fund manager or analyst is the first step that contributes to the overall performance of any portfolio of assets. The decision making process is complicated. Markowitz portfolio theory (1952, 1959) laid the theoretical foundations for asset selection and management. However the decision maker is influenced by parameters outside the realm of financial theory and mathematical models (French and French 1997; French 2001). The actual behavior of decision makers can deviate from this normative model. This can be due to the problem solving behavior of the human brain. Human problem solving theory began with the work of Newell and Simon (1972) and Simon (1978). They argue that the human memory is characterized by limitations in terms of processing capacities (Newell and Simon 1972). Given the amount of data the decision maker has to analyze, the process of asset selection is complicated and difficult. Besides the volume of data, the information items may provide information relating to the same aspect of the asset making some of the data set redundant. Besides that, some of information contained in the data set might provide contradictory signals about the performance or characteristics of the asset. Thus the information set available to a decision maker is large, multi-channeled (different data providing different information) and multi-dimensional (for example real estate assets have information pertaining to legal aspects, financial aspects, physical aspects etc.). The limitations in the decision maker’s processing capabilities and the characteristics of the information cues make the asset selection process exceedingly difficult. French (2001) in a study of fund managers from U.K finds that asset allocation uses two sets of hard information during the process, namely historic data and current market perceptions. The study also finds differences between exposure levels of the funds dictated by theory (as per portfolio theory) and actual decisions made by companies (true asset allocations of funds). Gallimore, Gray and Hansz (2000) find medium-sized and small companies’ investment decision making does not follow any normative model due to the diverse nature of property markets in the United Kingdom. Past literature in the field of decision making finds that an expert’s decision making behavior differs from that of a novice. (Bedard and Mock (1992), Bouwman (1984) and Jacoby et al. (1984, 1985, 1986, 1987)). The primary purpose of this study is to understand the impact of experience on the decision making behavior of investors and see if their behavior differs from that of inexperienced individuals. In a controlled experiment design, two groups of subjects are tested. One group is composed of experienced subjects (experts) represented by real estate professionals such as acquisition analysts, fund/portfolio managers or real estate investors (experienced individuals investing either their own money or a client’s money in real estate). The other group tested is composed of students, who are inexperienced subjects (novices). Both groups are asked to choose between two investment cases in two different cities. The two options offered are both class A office properties, institutional grade. Fifteen sets of data are given for each investment option. Data for the cases is sourced from investment management companies, involved in managing funds on behalf of institutional clients. Using a process tracing technique, each subject’s behavior is observed and recorded while making the investment choice. These observations will give us insight into the actual (descriptive) behavior of experienced real estate professionals and inexperienced novices. It will help in isolating the impact of experience on the decision making behavior of real estate investors. This study finds mixed evidence relating to the difference in the behavior of novices and experts. On the five aspects that the two groups are tested, evidence that their behavior differs in three has been uncovered. They are search pattern, number of steps and time on task. However, for the other two aspects, sequencing and cue utilization, no difference was found.

The property development industry in cities such as Calgary, Edmonton, Denver and Houston experienced a boom characterized by compulsive speculative growth in the 1970's and then a dramatic collapse in 1982. In the wake of the collapse came a crisis in the financial as well as the development sector, which to 1987 is nowhere near resolved. The expansion and decline in the property development industry is seen as a subset of a classical business cycle fueled by the world oil and gas economy, Canadian government regional and economic policies, and changes in money supply and interest rates. These factors are recognized as being contributory, but not a sufficient explanation for the property boom and bust. Additional understanding is offered by an analysis of the decision making process in the development industry. The research, focusing on key decision makers, revealed that repeated decision errors made by developers on strategies related to growth, diversification, and financing contributed significantly to the industry problems. The sources of strategic errors were found to be associated with the key developers' personalities and their perception of the business environment, as well as group and organizational behaviour. In 1976-77 opportunities to gain windfall profits in real estate development encouraged developers to travel from city to city continent wide in search of opportunities. Their fast-paced activity brought key developers stunning successes. Their perceived brilliance attracted followers from the rest of the industry and captured the imagination of the financial community. In 1979-80, as land values began increasing at rates far faster than interest rates, land banking superceded land development as a principal activity. Developers not only borrowed to the maximum under conventional project lending, but they also invented the concept of "appraisal surplus" (the difference between market value and debt) as a measure of their enormous "equity". This in turn permitted them to raise additional capital corporately through debentures and share offering to purchase even more land. By 1981 companies were highly levered financially making them extremely vulnerable to the slightest changes in the marketplace. Rather than recognizing that they were swept up in a property' boom developers, individually and as a group, chose to continue to believe that their "exceptional ability" to turn a profit was the basis for their successes. As the boom accelerated developers abandoned all caution committing to some of their largest and most daring acquisitions at the very peak of the boom. Then, in 1982 the inevitable happened, the bust in the property market. Those public companies with huge financially levered land banks, whose strategies were predicated on continuing inflation and ever increasing market share failed. Those companies, often private, with low debt to equity ratios, conservative financial practices, and income property portfolios survived. Since both sets of companies operated in a similar environment, but one failed and the other survived, the argument that decision making was a crucial factor in understanding the boom-bust property cycle is strengthened. The understanding of change in the activity patterns and in the structure of the built environment is elucidated by the study of decision processes. Insights into decision making and business cycles create a new awareness of the development process. / Arts, Faculty of / Geography, Department of / Graduate