Domestic and International Equity REIT Joint Ventures: Structuring Corporate Options

Abstract

We examine a sample of 185 Joint Ventures parented by publicly-traded Equity Real Estate Investment Trusts 1994–2001. These transactions are found to be motivated by a wide variety of corporate strategies. Shareholder returns for REIT parents are significantly positive, which is consistent with wealth effects previously reported for joint ventures formed by non-REIT real estate firms. In a subsample of joint ventures formed to structure partial dispositions of property, however, abnormal returns are significantly negative, which is consistent with the free cash flow theory of Jensen. REIT joint venture experience in Asia has been neutral for value, but may improve in the future if early ventures have created options for more efficient partnerships later. Copyright Springer Science + Business Media, Inc. 2006Real Estate, Joint Ventures, Internationa investment, REITS, Real options, Property diversification,

Home Bias in Asian REIT Portfolio Investment Strategies

“…The home bias premium for Asian REITs is positive and their probability of outperforming the benchmark is significantly higher for domestic investment opportunities compared to international ones. Our results are consistent with evidence on the loss in value related to the diversification of REIT portfolios (e.g., Campbell et al, 2006).…”

International Real Estate Review

“…This literature generally finds poor performance is the rule rather than the exception. For instance, seeCampbell, Sirmans, and White-Huckins (2006),Hess and Liang (2004), andDamodaran, John, and Liu (1997),Ravichandran and Sa-Aadu, (1988),Gyourko and Siani (1998), andMuhlhofer (2012).…”