SPV (Special Purpose Vehicle)
An SPV (Special Purpose Vehicle) is a company set up to own and finance a single property or a defined project, isolated from other activity in the group. The structure is standard in Norwegian and international commercial property, and is used for single buildings, whole portfolios and development projects. The SPV owns the building; the group owns the SPV. When the property is sold, the SPV shares are usually sold instead of the property itself, a share deal.
The main motivation is risk isolation. If the SPV takes out a property loan to finance the building, the creditors' security is limited to the SPV's assets. Any default does not hit the parent company or other properties in the group (provided no guarantees have been given). This makes the structure attractive to property funds, institutional investors and developers who want to keep project risk off the parent company's balance sheet. Banks price this risk by building covenants in directly at SPV level: typically loan-to-value ratio, debt service coverage ratio and requirements for the tenant portfolio.
The SPV structure has several tax advantages. A share purchase does not normally trigger document duty (which is otherwise 2.5% of the purchase price on a direct property transfer), which gives a significant saving on larger transactions. Latent tax positions in the SPV (depreciation basis, gain positions, losses carried forward) can be used by the buyer if they are solid enough. In return, the buyer must take over the SPV's history in full, including any hidden obligations, guarantees and guarantee disputes that have not been visible in due diligence. Professional players therefore negotiate insurance cover (R&W insurance) that covers unexpected claims after closing.
For a buyer, a share deal is more complex than a property deal. Due diligence must cover both the property and the company: accounts, tax position, contracts, employees, disputes, capital requirements, and compliance with the Companies Act. The share purchase agreement is typically longer and more detailed than a property purchase agreement, and contains stricter warranties about the state of the company. Norwegian property funds use the SPV structure in almost all transactions above NOK 30 to 50 million, and institutional investors such as pension funds often require it as a condition of purchase.
In Placepoint you can follow SPVs through registered owner, ownership details and company structure and shareholder data in the property panel, so that an office building owned through an SPV is automatically linked to the parent company's total portfolio.
How it looks in Placepoint
In Placepoint you find this in the Property panel:
From Placepoint's glossary: SPV (Special Purpose Vehicle)
More information: Skatteetaten: eiendomsselskap.
English: Special Purpose Vehicle (SPV). A single-asset company set up to hold and finance one property or project, isolating risk and enabling indirect (share-deal) transactions instead of direct property sales.
Frequently asked questions
Why is property structured in an SPV?
Risk isolation, transaction flexibility and tax advantages. A sale of SPV shares can fall under the exemption method and does not normally trigger tax on the gain for companies, while a direct property sale triggers gains tax in the operating company. The exemption method does not apply unconditionally: shares in companies resident in low-tax countries outside the EEA or without real economic activity are excluded. The SPV structure is near universal in Norwegian commercial property.
What is the difference between an asset deal and a share deal?
Asset deal = direct sale of the property. Share deal = sale of the shares in the SPV that owns the property. A share deal is the norm for institutional deals; the buyer takes over the company with all its latent tax positions and any older obligations.
What pitfalls are there in a share deal?
Hidden obligations in the SPV: old charges, guarantees, uninvoiced claims, tax and VAT positions. Legal due diligence must check all annual accounts, tax returns and board minutes from incorporation to closing.
How is an SPV handled in Placepoint?
The property panel shows the ownership chain and company structure for each matrikkelenhet and can be used to identify SPVs across a portfolio purchase. Latent tax and cash flow are then calculated externally in the financial model.