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Modeling the Corporate Real Estate Decision



The corporate real estate decision has been viewed traditionally in a capital budgeting context. Due to recent capital market innovations, it is now more useful to view this decision from a combined capital budgeting/corporate financing framework. With the new combined perspective, all corporate real estate decisions should be reviewed on a regular basis. Given this need for frequent review, and the large number of variables involved, a formal model is helpful. The individual techniques needed for a model with this joint perspective are well known. The interactions between real estate valuation, accrual accounting and corporate valuation methodologies are quite complex, however, as demonstrated in this paper. Moreover, the application of the theoretical model to real life situations is a challenging task as shown in the analysis of recent corporate restructurings. Detailed information on a corporation's real estate holdings, and subjective estimates on the impact of changes in real estate holdings on the firm's cost of capital, debt capacity, systematic risk, and operating revenues and expenses is required.

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  • Mike Miles & John Pringle & Brian Webb, 1989. "Modeling the Corporate Real Estate Decision," Journal of Real Estate Research, American Real Estate Society, vol. 4(3), pages 47-66.
  • Handle: RePEc:jre:issued:v:4:n:3:1989:p:47-66

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    References listed on IDEAS

    1. Myers, Stewart C, 1974. "Interactions of Corporate Financing and Investment Decisions-Implications for Capital Budgeting," Journal of Finance, American Finance Association, vol. 29(1), pages 1-25, March.
    2. Ross, Stephen A., 1976. "The arbitrage theory of capital asset pricing," Journal of Economic Theory, Elsevier, vol. 13(3), pages 341-360, December.
    3. Roger G. Ibbotson & Laurence B. Siegel, 1984. "Real Estate Returns: A Comparison with Other Investments," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 12(3), pages 219-242.
    4. Ronald C. Rutherford & Hugh O. Nourse, 1988. "The Impact of Corporate Real Estate Unit Formation on the Parent Firm's Value," Journal of Real Estate Research, American Real Estate Society, vol. 3(3), pages 73-84.
    5. David Hartzell & John Hekman & Mike Miles, 1986. "Diversification Categories in Investment Real Estate," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 14(2), pages 230-254.
    6. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-275, May.
    7. Smith, Clifford W, Jr & Wakeman, L MacDonald, 1985. " Determinants of Corporate Leasing Policy," Journal of Finance, American Finance Association, vol. 40(3), pages 895-908, July.
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    Cited by:

    1. Chris Manning & Stephen E. Roulac, 2001. "Lessons from the Past and Future Directions for Corporate Real Estate Research," Journal of Real Estate Research, American Real Estate Society, vol. 22(1/2), pages 7-58.
    2. Tim J. Verhoeff & Monique H. Arkesteijn & Ruud Binnekamp & Hans de Jonge, 2014. "Optimising Juridical-financial Flexibility of Corporate Real Estate," ERES eres2014_124, European Real Estate Society (ERES).
    3. Linda Ellis Johnson & Arnold L. Redman & John R. Tanner, 1997. "Utilization and Application of Business Computing Systems in Corporate Real Estate," Journal of Real Estate Research, American Real Estate Society, vol. 13(2), pages 211-230.
    4. Robert A. Simons, 1993. "Public Real Estate Management--Adapting Corporate Practice to the Public Sector: The Experience in Cleveland, Ohio," Journal of Real Estate Research, American Real Estate Society, vol. 8(4), pages 639-654.

    More about this item

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services


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