Rationales for Real Estate Leasing versus Owning

Benjamin, John D.; Torre, Cris de la; Musumeci, Jim

doi:10.1080/10835547.1998.12090924

Cited by 18 publications

(15 citation statements)

References 20 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Widening the capital structure perspective, Benjamin et al (1998) examine the rationales of the rent-vs-buy decision. They underline the relevance of lessors’ skills in property management, such as exploiting economies of scale, solving free-rider problems and predicting residual values.…”

Section: Literature Reviewmentioning

confidence: 99%

Corporate real estate, capital structure and value creation

Bosch‐Badia

Montllor-Serrats

Panosa-Gubau

et al. 2017

JERER

View full text Add to dashboard Cite

Purpose This paper aims to analyse the corporate rent-vs-buy decision on real estate through the trade-off theory and default option in the framework of a corporation that aims to optimise its capital structure. Design/methodology/approach The methodological core of this paper comprises the trade-off theory that approaches the optimal capital structure by counterbalancing debt tax savings with bankruptcy costs. Impacts on the default option and the default barrier are made explicit. The paper also explores the practical applicability of the renting scenarios in the European context by examining the regimes of real estate investment trusts in different countries from the demand-side of commercial renting. Findings Analytical relationships with tax savings, bankruptcy costs, default option and default barrier are identified for the renting-vs-buying real estate decisions. Research limitations/implications The theoretical model assumes simplifications, such as constant debt, to make it operational. The paper centres exclusively on the trade-off capital structure theory. Practical implications This paper is an analysis of corporate real estate decisions together with capital structure. Applications are not only quantitative but also conceptual and strategic. Originality/value Identifying the main variables that govern the impact of corporate real estate decisions on capital structure and interweaving different approaches generates a conceptual framework that enlightens strategic thinking in this field.

show abstract

Section: Literature Reviewmentioning

confidence: 99%

Corporate real estate, capital structure and value creation

Bosch‐Badia

Montllor-Serrats

Panosa-Gubau

et al. 2017

JERER

View full text Add to dashboard Cite

show abstract

“…This opportunistic behaviour is described as the moral hazard problem. Klingberg and Brown (2006) state that the principal-agent problem is well recognised in real estate research due to the variety of topics covered from appraisals (Downs and Güner, 2012), brokerage contracts (Munneke and Yavas, 2001), transaction process (Lindqvist, 2011), leasing of commercial real estate (Benjamin et al, 1998) to asset management (Sirmans et al, 1999). Also in the property managers everyday work, the real estate owner has monitoring problems, as the individual property manager is responsible of large values.…”

Section: Incentives In Property Managementmentioning

confidence: 99%

Incentives in Swedish commercial real estate companies: the property manager function

Palm

2017

View full text Add to dashboard Cite

Purpose The purpose of this paper is to identify factors on the property management level for analysing incentives for an effective property management with a focus on organising it in-house. Design/methodology/approach This research is based on an interview study of 11 firm representatives from the Swedish commercial real estate sector with in-house property management. Findings The study concludes that the property management organisation in the in-house setting is governed in an informal way, with a large portion of “freedom with responsibilities” setup instead of regulations. Research limitations/implications The research in this paper is limited to the Swedish commercial real estate sector. Practical implications The insights into the paper regarding how decision makers create incentives for the property management organisation can provide inspiration to design incentives for effort. Originality/value It provides an insight regarding how the commercial real estate industry prioritises different work tasks and how incentives are created to enable effort.

show abstract

“…A good overview of the general arguments for real estate leasing vs owning can be found in Benjamin et al (1998). The starting point for their argument is that owning should be more efficient as it is difficult to create strong incentives for a tenant to take good care of a leased property.…”

Section: General Arguments For Owning and Leasingmentioning

confidence: 99%

“…It may explain the comparative advantage discussed above and there might be a number of other dimensions in which some operators have a comparative advantage, for example, in knowing how to maintain the property in an efficient way. Even if Benjamin et al (1998) does not use this term, this could be related to the popular formulations about focusing on “core business”. Economies of scale in management . An organisation that only needs a rather small space can have problems in managing this in an efficient way when there are economies of scale in management.…”

Section: General Arguments For Owning and Leasingmentioning

confidence: 99%

“…An organisation that only needs a rather small space can have problems in managing this in an efficient way when there are economies of scale in management. Even if Benjamin et al (1998) does not discuss this, the possibility to outsource management might weaken the argument for leasing. Accounting and tax aspects. The sale and leaseback of real estate can in some cases be motivated by the fact that the tax effect of paying rents is higher than the effects of building depreciation.…”

Section: General Arguments For Owning and Leasingmentioning

confidence: 99%

See 1 more Smart Citation

Owning vs leasing of real properties in the Swedish public sector

Lind

Lundström

2010

Journal of Corporate Real Estate

View full text Add to dashboard Cite

PurposeThe purpose of this paper is to give an overview of a number of studies about owning vs leasing in the Swedish public sector and relate this to more general determinants of the choice between owning and leasing.Design/methodology/approachThe empirical results presented are primarily based on a number of case studies.FindingsThe research shows that there have been a number of “rational” reasons for moving from owning to leasing: primarily better risk allocation and more efficient management of complex properties with both public and private tenants. In other cases, the excess supply of capital and the need to strengthen the balance sheet seems to have been more important.Research limitations/implicationsThe result is based on a rather small number of case studies and this limits the possibility to generalise the results.Practical implicationsThe results also indicate that moving from owning to leasing can reduce flexibility and that it is very important for careful analyses about the pros and cons in specific situations.Originality/valueThe paper offers insights into the choice between owning and leasing in the Swedish public sector.

show abstract

Rationales for Real Estate Leasing versus Owning

Cited by 18 publications

References 20 publications

Corporate real estate, capital structure and value creation

Corporate real estate, capital structure and value creation

Incentives in Swedish commercial real estate companies: the property manager function

Owning vs leasing of real properties in the Swedish public sector

Contact Info

Product

Resources

About