European real estate equities: ownership structure and value of the firm

Abstract

PurposeThe relationship between ownership structure and firm value has long been of interest in the academic society. The purpose of this paper is to study the relationship between European real estate investment trusts' (REITs) ownership structure and the observed firm value as measured by market‐to‐book (M/B) ratio. In addition, the potential effects of differing REIT ownership structures on other financial ratios, such as return on equity (ROE) and return on assets (ROA), are analyzed. Finally, the potential impact of strategic/insider ownership on REITs is assessed.Design/methodology/approachSeveral “difference between means” tests are run. In each test, the studied group of REITs is divided into three groups according to set criteria. Then, the potential differences observed between the groups are documented, analyzed and reported. Finally, statistical significance of the potential differences among groups is tested.FindingsFirst, consistent with the previous studies, this study shows that increasing REIT block ownership results in lower M/B ratios as well as decreased dividend yield, ROE and ROA. In other words, the results suggest that, in terms of M/B ratio, the markets value REITs with low block holdings slightly higher than those with more block holders. However, the relationship is not totally explicit. Second, the relationship between strategic/inside ownership and firm value (and other financial measures) is somewhat obscure. The effects of strategic ownership are an interesting topic, also in terms of potential future research.Practical implicationsOne of the fundamental ideas behind REIT legislation is to provide investors with a liquid means of investing in indirect real estate by regulating the ownership structure of the vehicle. The results of this study suggest that the more dispersed the shareholder structure, the higher the firm value, potentially due to increased stock liquidity. This finding could serve as an indication to lawmakers that the REIT ownership regulations not only work in theory but in practice, too.Originality/valueFor the first time in an academic context, the relationship of European REIT ownership structures and firm value is studied in‐depth. Proven scientific methods are employed to discern potential, yet unrevealed patterns between REIT ownership and firm value.

Performance Assessment of Real Estate Investment Trusts (REIT) Listed in BIST Via Different Multi Criteria Decision Making Methods

“…Accordingly relationship between market value/book value and return of REITs are found out by Bers and Springer (1997), Goebel et al (2013) and Niskanen et al (2011). Similar results are valid for this relationship (Şahin, 2014; pp.…”

The significance and performance of French REITs (SIICs) in a mixed‐asset portfolio

“…This includes US REITs (Corgel et al , 1995; Feng et al , 2011; Lee, 2010; Zietz et al , 2003) and REITs in Australia (Newell and Peng, 2009). Given the more recent development of REITs in Europe, much of the previous property research regarding European property has focused on various aspects of European listed property companies rather than European REITs (Freybote et al , 2008; Hui and Chan, 2013; Kovac and Lee, 2008; Lee, 2009; Lizieri et al , 2003; McAllister and Lizieri, 2006; Morri and Cristanziani, 2009; Niskanen et al , 2011; Schindler, 2009; Schulte et al , 2011; Westgaard et al , 2008; Yang et al , 2005). The only research as yet concerning European REITs assessed issues relating to REITs in the UK (Baum and Devaney, 2008), REITs in Germany (Schacht and Wimschulte, 2008) and REITs in Turkey (Aktan and Ozturk, 2009).…”