A comparison between different participants' views on community property. Differences in risk assessment in comparisonto Office Buildings and Rental Housing Properties

Abstract: The market for community properties is a relatively new market for private investors. Previously, local governments usually owned these properties. The demands for community properties from property companies and institutions have increased over the past 10 years and an increasing number of local governments are selling their properties. One popular type of community property is elderly accommodations. This study aims to provide an overview of the greatest risks concerning elderly accommodations in comparison with office buildings and rental housing properties according to different operators. The study is based on a qualitative approach and information has mainly been obtained through interviews with ten operators. Elderly accommodations are generally viewed upon as a safe segment since they usually have long leases, often with a municipality, which is considered to be a very safe tenant. Investing in such properties is therefore often compared to buying a bond. The view on what is the greatest risk differs between the operators. According to most operators the greatest risk is in the residual value by the end of the lease contract. Yet we have not reached the end of the long contracts since these properties became popular on the market about 10 years ago. The residual value is mostly influenced by the political risk, the location and the alternative use of the property. This differs from office properties that are more dependent on the economic situation and rental residual places that are more dependent on the location than elderly accommodation properties. Research show that there have been changes in what the elderly demand in their living environment. Despite that most operators believe that changes in preferences will not have a substantial impact on the segment and that elderly accommodation properties is a safe product.