The Effect of Real Estate Share Deals on Commercial Property Price Indicators

In official real estate price statistics it is common to consider only actual asset deals as real estate transactions. These are, for instance, transfers of real estate ownership as recorded by Land Registry Offices or real estate sales documented in purchase agreements by real estate agents. In these cases the transfer refers to the reallocation of legal ownership of a real estate object. In the real estate trading market however, there is another way to transfer property. Real estate can be accommodated into a separate company, referred to as a Single Purpose Entity (SPE), that is specifically established to legally own the real estate. If using an SPE and if company A intends to transfer real estate to company B it may transfer shares of the SPE instead. In this scenario there is no shift of legal ownership of the property, but merely a shift of economic ownership as the SPE gets a new shareholder. These sales are not registered as real estate transactions and are therefore omitted from ‘traditional’ commercial property price indicators (CPPIs). Statistics based on either share or asset deals could therefore be distorted if the aim is to reflect market developments. In this research the size of real estate share deals in the Netherlands is studied to evaluate to what extent share deals should be included in CPPIs. Various official key registers in the Netherlands were linked to estimate sales numbers, total sales values and price developments of share deals. The results were compared to similar figures of asset deals. The outcomes will show the contribution of share deals to the volume and value of real estate transactions, and indicate possible price differences between share and asset deals.