Author: Mike Miles, John Pringle, and Brian Webb

Start Page: 47
End Page: 66
Volume: 4
Issue Number: 3
Year: 1989
Publication: Journal of Real Estate Research

Abstract: 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.