Abstract
The large‐scale operational corporate real estate disposals, which have lately become more and more common in Europe, can create many benefits to corporations. Firstly, the corporations can get an immediate capital injection without additional external financing to support growth or to better capital structure. Secondly, corporations can in the best case obtain more property industry knowledge, economies of scale, tax advantages and increased flexibility through property disposals. However, it is also important to notice that sometimes the best expert is an internal property manager and that large corporate real estate deals can be slow and costly to structure. Furthermore, if the outsourcing is not planned well, agency problems and inflexibility could arise. In addition, off‐balance sheet financing is becoming more difficult due to changes in accounting rules. In all, it is crucial to have a solid property strategy that supports the overall business goal before structuring large‐scale disposals.
Highlights
Throughout the history there has been a vigorous debate on the importance of shareholder value relatively to other measures such as employment, social responsibility and the environment when valuating corporations and their success (Copeland, Coller, Murrin 2000)
NappiChoulet (2002) indicates that when Anglo-Saxon investment capital flooded in to the continental and northern European corporations, it meant a rapid change from the traditional stakeholder corporate governance culture towards a more shareholder-oriented governance model
We must add that financing real estate by leasing can be logical if the corporation can invest the money that is saved with higher internal rate of return criterion (IRR) than its weighted average cost of capital (WACC) and if, at the same time, the leasing is not much more expensive and does not create major additional risks
Summary
Throughout the history there has been a vigorous debate on the importance of shareholder value relatively to other measures such as employment, social responsibility and the environment when valuating corporations and their success (Copeland, Coller, Murrin 2000). This debate has usually been cast in terms of shareholder versus stakeholder value. NappiChoulet (2002) indicates that when Anglo-Saxon investment capital flooded in to the continental and northern European corporations, it meant a rapid change from the traditional stakeholder corporate governance culture towards a more shareholder-oriented governance model. Louko less property assets on balance sheet than corporations in Europe (Table 2)
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