2. Single Purpose Entities and their role in Commercial Property Price Indicators
Farley Ishaak, Ron van Schie & Jan de Haan
Luxembourg, January 20th 2019

3. Work in progress Content Introduction to SPEs Methodology
Why do investors utilize SPEs?
How do investors utilize SPEs?
What is the magnitude of SPE transactions?
Preliminary conclusions
Work in progress

4. Registered as property transfer
Introduction to SPEs
Company A
Ownership
Transfer
Registered as property transfer
(asset deal)
Company B

5. Registered as company transfer
Introduction to SPEs
Company A
Ownership
Company X
Registered as company transfer
(share deal)
Transfer
Company B
Single Purpose Entity

6. Introduction to SPEs Definition:
“An SPE refers to a legal entity that is created to satisfy a specific purpose (holding real estate)”
(Seligman & Stein, 2004; Rixon, 2012; Arden, Keller & Lewis, 2017)
Should share deals be considered in scope of a CPPI?
It would seem logical that entities engaging in the same activities, should be treated essentially the same.

7. Introduction to SPEs Interchangeable terms: Special Purpose Entity
Single Asset Entity
Special Purpose Vehicle
Similar terms:
Straw corporation
Nominee corporation
Bankruptcy Remote Entity
Bankruptcy Proof Entity

8. Methodology Research in progress…
Why and how do investors utilize SPEs?
> Literature review
> Expert interviews
What is the magnitude of SPE transactions?
> Data research: Chamber of Commerce, Land Registry Office, Tax authority and Real estate consultancies

9. Why do investors utilize SPEs?
Legal → SPEs are formed to reallocate liabilities (obstacles to bankruptcy)
Risk considerations buyer: depends on organizational complexity
Tax → SPE transactions may or may not be subject to tax.
Financial considerations buyer and seller:
depends on applicable income and transfer tax regulations
Privacy → SPEs contribute to an owners anonymity
Image considerations buyer and seller:
depends on buyers/sellers anonymity preferences

10. How do investors utilize SPEs?
Company A
Ownership
Company X
Transfer
Company B
Should share deals be considered in scope of a CPPI?

11. How do investors utilize SPEs?
Company A
Ownership
Transfer
Company W
Company X
Company Y
Company Z
Company B
Should share deals be considered in scope of a CPPI?

12. How do investors utilize SPEs?
Company B
Company A
Ownership
Company X
Company C
Company D
Company E
25%
Transfer
Should share deals be considered in scope of a CPPI?

13. How do investors utilize SPEs?
Multipurpose Entity
Company A
SPE
Ownership
Company X
Transfer
Transfer back
Company B
Non real estate assets
Should share deals be considered in scope of a CPPI?

14. How do investors utilize SPEs?
To what extent should we consider share deals as part of a CPPI?
None
All
Legal perspective
Only asset deals
Tax authority perspective
Defined set of share deals
Economic perspective
All share deals

15. Preliminary conclusions
Implications
Incoherence between countries due to differences in legislation/tax regulations.
Possible structural breaks in time series.
There are complex share deal constructions that should probably not be included in a CPPI.
The in- or exclusion of share deals could differ between data sources.

16. Preliminary conclusions
The way forward
There is a need to determine and harmonize the scope of a commercial property transaction.
We should eventually come up with clear and practically feasible thresholds for considering an event as a commercial property transaction.