Analys av fastighetsbolagens möjlighet att klara en ny lågkonjunktur. : En kvantitativ studie av fastighetsbolag i Europa
The goal of this thesis was to explore how real estate investment companies are affected by a weaker world economy. The reason to investigate this was that in the 90s in Sweden, the housing market crashed in conjunction with the bank collapse. Therefore I have looked at how the commercial real estate companies would be affected if we were to have a double dip recession, because it has been confirmed by Gyourko that commercial real estate market and the housing market tend to react in the same way on new fundamental information. This was examined through a sensitivity analysis, one investigated the effect of falling rent income and the second analysis looked at the effect of higher interest costs. I found that IAS 40 rule about unrealized profits of properties affected the results in a significant matter and therefore decided to include the regulation in my thesis. I used it to look at how it has affected the following ratios ROE, Sustainable growth rate, earnings per share, growth in earnings per share and solvency. The comparison was between a year prior to the regulation was taken into place, 2004, and five years after 2010. I choose the specific companies with a few limitations, those were that the companies’ origins and operates in Europe, have an annual report available from 2004 and 2010 and that they are a public limited liability company listed on an exchange in Europe. The results showed that the IAS 40 regulations have had a small impact of most of the tested ratios except one that was growth in profits. This particular ratio had seen an increase of 169% in average over this five year period, although 102% of the increase was due to unrealized profits from properties. This clearly indicates that the regulation have had a large impact in this particular ratio. In the analysis, the results showed that except the two most extreme versions that are four out of six showed an average result above one which is considered the minimum requirement for interest coverage. But after deducting unrealized profits from properties the worst case scenarios showed very low interest coverage of 0, 58 and 0, 15. It should be pointed out that such a drastic change in rent income is highly unlikely due to long lease contracts. In the geographical analysis it showed some differences but the low number of companies makes it hard to draw any conclusive results from it, however the most likely factor that the differences depend upon are nations different GDP growth and recovery from the financial crisis. The conclusions I have drawn from this thesis are that the real estate investment companies in Europe are in good shape if not something drastically change.
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