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dr Rafał Wolski dr Magdalena Załęczna

18 th Annual ERES Conference Eindhoven, 15 th -18 th June 2011 Real estate as company asset – the study of chosen branches of the Polish market. dr Rafał Wolski dr Magdalena Załęczna. Real estate in company.

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dr Rafał Wolski dr Magdalena Załęczna

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  1. 18thAnnualERES ConferenceEindhoven, 15th-18th June 2011Real estate as company asset – the study of chosen branches of the Polish market dr Rafał Wolski dr Magdalena Załęczna

  2. Real estate in company • Appropriateuse of assetscanincreaseprofitability of company, however, inadequate management of assetscouldlead to insolvency. • Real estatehassomeadvantages and disadvantages from the point of view of the manager. • Someadvantages: • operationalfunction, • investment function, • collateralfor loans, • lease-back, Wolski R., Załęczna M., Real estate as company asset ...

  3. Real estate in company • Somedisadvantages: • high costs, • locationrisk, • specialknowledgeabout the real estate market mechanisms Wolski R., Załęczna M., Real estate as company asset ...

  4. Real estate in company • The functioning of the company requires the surface typical forthe industry. In addition to the function of operatingarea,real estate may also take the role of investment or inventory (Henzel 2004). • The first function – operational - is the most obvious and createsthe traditional and specific perception of real estate asthe factor of production, fixed cost (Gale, Case, 1989). Wolski R., Załęczna M., Real estate as company asset ...

  5. Real estate in company • Some managers and owners of companytreatthe real estate as an investment, theyexpect income in the form of rentsorfees and increase of the value of the real estate. • The results of theireffort depend on their knowledge of the mechanisms of the real estate market, particularitiesof real estate. Wolski R., Załęczna M., Real estate as companyasset ...

  6. Real estate in company • Takendecisionshould be in line with the strategic objectives of the company, activitiesshould be basedon the deliberated tools (Duckworth, 1993). • In the United States in the 1980s began the process of restructuring of the real estate held bycompanies.Thepractical discipline of Corporate Real Estate Managementwas developed. The objectives were:to reduce the cost and exploit the potential of real estate (Laposa, Charlton, 2001). • The outcome of this process was to reduce the value and quantity of property owned by companies. Wolski R., Załęczna M., Real estate as company asset ...

  7. Real estate in company • In Western Europetheseprocesseshavestartedlater and arevisiblenow. • Thereispossible to enumeratesomestrategies relating to realproperty used by the company (Nourse, Roulac 1993; Ali et al. 2008). Wolski R., Załęczna M., Real estate as company asset ...

  8. Real estate in company • These strategiesarefocused on: • the lowest cost of used surface, • flexibility in adaptationto the needs of the workers, • the promotion marketing, • sales promotion, • facilitation of production, • facilities in management and • the greatest value of real estate. Wolski R., Załęczna M., Real estate as company asset ...

  9. Real estate in company in Poland • The importance of real estate in resourcesof Polish companies is of greatimportance.Nowadaysabout64% of grossvalue of fixedassets of companiesarebuildings and structures. Due to the previoussocialistrules and transitiontherehasbeenstilla lack of a modern approach to real estate held by companies. • Resources of such significant values should be strategically managed and used as a source of added value for companies. Wolski R., Załęczna M., Real estate as company asset ...

  10. Real estate in company in Poland • On the basis of conductedstudies itisvisiblethatentrepreneurs see primarily the importance of operational functionof real estate. Theactive management and facility management arequitenewideas for Polishmanagers. (Rymarzak 2009, Nowacki 2011), qualitativestudies. • Financial factorsstudieshas been performed by authorson the fuel and energy industry companies (presenton thestock exchange in Warsaw) forthe period2002 -2009. Wolski R., Załęczna M., Real estate as company asset ...

  11. Real estate in company in Poland • The previous researchgave the evidencesthat with the growing involvement of companies in tangible fixed assets, theliquidity decreased. The results would suggest that the companiesfrom thisbranchdo not make use of the potential lying in real estate as collateral. The authorswanted to verifythisresults in the otherbranches of Polisheconomy. Wolski R., Załęczna M., Real estate as company asset ...

  12. Real estate in company in Poland • There are big differences among branches according to involvment in real estate, the was the reason authors chose transportation and storage and real estate activities to analyse – see table1. Wolski R., Załęczna M., Real estate as company asset ...

  13. Wolski R., Załęczna M., Real estate as company asset ...

  14. Real estate in company in Poland • The authors decided to conductanalysis of balance sheets of companiesreferring toreal estate as a part of fixedassets and long term investments. The authorsfocused on the questionhow involvement in the real estateaffects the level of liquidity of enterprises. For the analysis the classic indicators of liquidity were used: Current Ratio, Quick Ratio and Acid Test. Wolski R., Załęczna M., Real estate as company asset ...

  15. Data • In order to carry out the study a database of 815 companies operating on Polish market recorded by Notoria database was examined. On this basis seven companies in the transportation and storagesector and sixteen companies from the sector of real estate activitieswere identified. The 32 balance sheets for the transportation and storagesector and 92 balance sheets for real estateactivitiessectorwereexamined. The real estate activitiessector includes companies fromthe field ofconstruction, real estate development or property management. All balance sheets were supplemented with data on real estate investments. Wolski R., Załęczna M., Real estate as company asset ...

  16. Methodology • To determine the involvement of enterprises in real estate the participation rate of real estatein total assets (ReA) was calculated. Then, this index was analyzed, along with indicators of liquidity: Current Ratio (CR), Quick Ratio (QR) and Acid Test (AT). • Analysis proceeded with three stages. • The first analyzes the differences in the level of real estate involvementofcompanies from the transportation and storagesector and real estateactivitiessector. Wolski R., Załęczna M., Real estate as company asset ...

  17. Methodology • This was followed by aggregation of data. The time series of balance sheets set up into a group, portfolios of similar level of the share of real property in total assets. Balance sheets have been sorted in ascending order. After the allocation of balance sheets into portfolios ten observations were obtained. In every portfolio there were two to three balance sheets of transport companies and from seven to eight balance sheets in the case of real estate companies. For transport companies collected a total of 28 balance sheets, and 79 for the real estate activities companies. • Theaggregated data wereexaminedwithuse of the Pearson correlation and linear regression analysis. Wolski R., Załęczna M., Real estate as company asset ...

  18. Research results: • The share of real estate in the assets of the transport companieswas as an average of 28%, while in real estate activitiescompanieswas 10%. These results were akind of a surprise. Theauthors expectedthat these relationships wouldbe reversed. • Thepossibleexplanation for thisis the factthat CSO data comprise the wholeeconomy and 251 874 operators in section of transportation and storage and 182 454 operators in section real estate activities. Probablythereis a hugeconcentration of real estate involvement of somecompanieswhichwere not indatabase. Theanotherexplanationcan be seen in data from 2009 whicharediffrentcomparing to the data from previousyears. Wolski R., Załęczna M., Real estate as company asset ...

  19. Research results: • Pearson correlation analysis and linear regression analysis were performed. Contrary to the research hypothesis the correlation coefficients have negative signs in each of the cases. This means that always with increased involvement in the real estate companies experiencedliquidity drop. What draws attention is the lack of statistical significance in all testsin group of real estate activities companies. Wolski R., Załęczna M., Real estate as company asset ...

  20. Conclusions: • Regression and correlation analysis carried out in two groups of companies:in the transportation and storagesectorand real estateactivitiessector, did not show clearly the impact of property to the company's liquidity. However, the authorsaretempted to claim that the real estate limits liquidity of companies, at least those related to transportation and storagecompanies. Wolski R., Załęczna M., Real estate as company asset ...

  21. Conclusions: • There could be many reasons for this. The authors cannot clearly identify them, but one can speculate that financial managers cannot exploit the financial potential of real estate. They may not want to usemortgage. Wolski R., Załęczna M., Real estate as company asset ...

  22. Thankyou for yourattention dr Rafał Wolski rwolski@uni.lodz.pl dr Magdalena Załęczna mzaleczna@uni.lodz.pl Wolski R., Załęczna M., Real estate as company asset ...

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