Value Creation and the Impact of Corporate Real Estate Assets

Managers should invest in assets (i.e. relevant profitable investments) that maximize the value of their firm. Recent trend shows that many large companies have sold or outsourced corporate real-estate assets. The underlying motives for such behaviour are yet to be examined (at least in a French context). If real-estate matters, we should observe an association between proxies of value creation and the change in real-estate assets within a company. This paper investigates the association between surrogates of EVA and MVA generated by French listed companies and the weight of real-estate in their assetsí portfolio. Using a pool sample composed of the SBF 250 companies ñ over the period 1999-2004 ñ our empirical results show that, an increase in the proportion of real-estate assets (over total assets) is negatively associated with EVA, but specifically for firms in the service industries exhibiting low real-estate intensity. The regressions on MVA show a negative association with the change in the real-estate for firms outside the service industries. Those results suggest the sales of real-estate assets can be driven by value maximizing behaviour.