Value creation and the impact of corporate real estate assets: An empirical investigation with French listed companies

Abstract : Purpose - The purpose of this paper is to investigate the impact of corporate real estate (CRE) ownership on value creation for non-financial French listed companies. Design/methodology/approach - Using a pool sample composed of SBF 250 companies over the period 1999-2004, this paper investigates the association between economic value added (EVA) and market value added (MVA) as proxies for the value generated by French listed companies and the proportion of real estate in their asset portfolio. Findings - The empirical results show that an increase in the proportion of real estate assets (over total assets) is negatively associated with EVA, but only for firms in service industries exhibiting low real estate intensity. The regression on MVA shows a negative association with the increase in the proportion of real estate for firms outside the service industries. Research limitations/implications - Recent trends show that many large companies have sold a significant portion of their CRE assets. The underlying motives for such behaviour are yet to be examined (at least for the French context). If real estate has any influence, an association should be observable between proxies of value creation and the change in the proportion of real estate assets, owned by a company. The results suggest that sales of CRE assets may be driven by value maximizing behaviour. Practical implications - In order to maximize the value of their firm, managers should apparently take value creation into consideration in their decisions to invest in or dispose of real estate assets. Originality/value - The paper suggests that in a French context, CRE disposals may generate value added in certain industries with specific CRE intensity.