Public REITs' governance and regulatory structure: effects on NAV discount

Biasin, Massimo; Giacomini, Emanuela; Quaranta, Anna Grazia

doi:10.1108/17539261011094704

Cited by 16 publications

(9 citation statements)

References 23 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Further systematic factor which are not explicitly analyzed in this study include regulation (Biasin et al, 2010) and short sales constraints (Brounen et al, 2013).…”

Section: Hypothesis 4: Nav Spreads Of Reocs and Reits Increase With Imentioning

confidence: 99%

New Insights into the NAV Spread Puzzle of Listed Real Estate: Idiosyncratic and Systematic Evidence

Weis¹,

Woltering²,

Sebastian³

2018

25th Annual European Real Estate Society Conference

View full text Add to dashboard Cite

This paper presents novel insights into the NAV spread puzzle of listed real estate. We find 1) that increasing company size reduces NAV discounts and increases NAV premiums which can be explained by economies of scale and the popularity of large stocks among investors. 2) Increasing companyspecific risk increases the discount as risk of potential default decreases attractiveness among investors. Contrary to existing research, rising leverage reduces the discount and increases the NAV premium accordingly, which can be explained by a potential positive leverage effect on the return on equity. 3) Long-term credit market indicators help to explain the NAV spread puzzle: An increase in the default spread, increases the discount and decreases the premium. However, the results for the short-term credit market indicator term spread do not help to solve the NAV spread puzzle. 4) Increasing positive stock market and property sector sentiment reduces NAV discounts as was found by past research accordingly and is in line with the noise trader theory. The analysis is based on monthly data over the 2005-2014 period for a global sample of 447 listed real estate companies (REITs and REOCs) in 12 countries. This rich setting offers substantial heterogeneity in NAV spreads, idiosyncratic and systematic factors across time and countries.

show abstract

“…Further systematic factor which are not explicitly analyzed in this study include regulation (Biasin et al, 2010) and short sales constraints (Brounen et al, 2013).…”

Section: Hypothesis 4: Nav Spreads Of Reocs and Reits Increase With Imentioning

confidence: 99%

New Insights into the NAV Spread Puzzle of Listed Real Estate: Idiosyncratic and Systematic Evidence

Weis¹,

Woltering²,

Sebastian³

2018

25th Annual European Real Estate Society Conference

View full text Add to dashboard Cite

show abstract

“…Besides that, a study conducted by Biasin et al (2010) revealed that the NAV discount is negatively affected by the share turnover and leverage of Italian REIT. Besides that, a study conducted by Biasin et al (2010) revealed that the NAV discount is negatively affected by the share turnover and leverage of Italian REIT.…”

Section: Literature Reviewmentioning

confidence: 99%

Contemporary Issues and Development in the Global Halal Industry

Manan¹,

Rahman²,

Sahri³

2017

View full text Add to dashboard Cite

“…Following a financial valuation perspective, the effects on (public) share prices of leveraging are uncertain and depend on which capital structure theory best explains the peculiar institutional and regulatory framework of (European) REITs generally characterized, below other, by a corporate tax free context ( (Biasin, Giacomini, & Quaranta, 2010;Feng, Ghosh, & Sirmans, 2007).…”

Section: The Effects On Share Value and Performance For Gav And Nav-bmentioning

confidence: 99%

Untitled

2009

CBR

View full text Add to dashboard Cite

Investors should always argue about management fees because of their impact on net performance that can be substantial. This especially for investments, like real estate, which require intensive management. However, different from traditional mutual funds that are usually related to the gross value of the assets under management, but similar to other financial industry sectors (e.g. hedge funds and private equity funds), REIT managers' compensation structure typically provides a basically fixed payment based alternatively on gross asset value (GAV) or net asset value (NAV). In addition, managers usually also gain a performance fee. The paper analyses how the two alternative compensation schemes influence REITs' investment decisions and capital structure and, consequently, REITs' share value and performance. The final issue addressed is whether-and under which conditions-one compensation scheme is superior to the other. Due to the (usual) market price discount on NAVs, both fee structures incentivise managers to leverage-even in a tax-free environment-in order to maximize the management fees. However, the leverage motivation is stronger for GAV-based than for NAV-based REITs, which are also expected to be more selective in investment decisions. Overall, considering initial fee percentage, GAV-based REITs are expected to execute higher management fees than NAV-based REITs due to the relevant leverage effect. Moreover, debt recourse produces different effects on share value if measured upon market price or net asset value. The empirical analysis focuses on public Italian REITs (2002-2012). The results seem to support the theoretical expectations. GAV-based REITs experience higher debt trends and levels than NAV-based REITs. At the same time, GAV-based REITs register lower real estate asset returns gross and net of management fees for both current and growth yields. Differences in the returns lead to permanent higher performances over total return indexes of NAV-based REITs compared to GAV-based REITs.

show abstract

Public REITs' governance and regulatory structure: effects on NAV discount

Cited by 16 publications

References 23 publications

New Insights into the NAV Spread Puzzle of Listed Real Estate: Idiosyncratic and Systematic Evidence

New Insights into the NAV Spread Puzzle of Listed Real Estate: Idiosyncratic and Systematic Evidence

Contemporary Issues and Development in the Global Halal Industry

Untitled

Contact Info

Product

Resources

About