Ownership changes and efficiency on the commercial real estate market: A qualitative analysis of the development in Sweden Hans Lind It is time to finish the present value mathematics part of the exercises.

Introduction Large ownership changes in last 10-15 years on the commercial real estate market Mostly looked upon from investor perspective But how will it be “the right owner”?

A theoretical perspective Institutional change driven by invention of more efficient structure Old version (macro) : Marx New version (micro) : Transaction cost economics based on Coase Efficient in the sense of better use of resources, possible with pareto-sanctioned changes

Who is the right owner? For whom is the value highest? A cash flow perspective: Higher value if: Higher revenue Lower cost Reduce risk, handle risk better Better use of real options

Ideal type (1): Foreign institutional investors buying new properties Office properties in good locations Easily managed Work with local partner No big problem from an efficiency perspective But why own instead of lend?

Ideal type (2): Specialised property companies buying hotels and shopping centres Sellers less specialised Management intensive properties, strong connection between property and service Should lead to increased efficiency

Ideal type (3): Foreign firms buying mispriced properties Example: Market does not take contractual structure or risk into account Temporary owner with small consequences from an efficiency perspective? Sometimes create more efficient units by breaking up wrongly structured portfolios

Ideal type (4): Owner-occupiers selling properties (e. g Ideal type (4): Owner-occupiers selling properties (e.g. sale-lease back affairs) Unclear argument: Focus on core business Problematic feature: Sell in order raise capital, makes long run commitment that reduce flexibility Sometimes a way to allocate risk to someone who can reduce it

Ideal type (5): High-leveraged "opportunistic" actors Buy because they can raise capital at low cost Capital providers have mispriced risk And also try to improve net operating income by reducing maintenance The most problematic case from a long run efficiency perspective Just a way to cheat capital providers?

Final comments Some of the changes about to be reversed More long run actors with management skill buying (back) properties? Local actors buying back properties? New “innovative ways” to cheat weak capital providers