REIT and Commercial Real Estate Returns: A Postmortem of the Financial Crisis

Real Estate Economics - Tập 43 Số 1 - Trang 8-36 - 2015
Libo Sun1, Sheridan Titman2, Garry J. Twite2
1College of Business Administration, Cal Poly Pomona, Pomona, CA, 91768
2McCombs School of Business, University of Texas, Austin, TX, 78712

Tóm tắt

In the years surrounding the financial crisis, the share prices of equity Real Estate Investment Trusts (REITs) were much more volatile than the underlying commercial real estate prices. To better understand this phenomenon we examine the cross‐sectional dispersion of REIT returns during this time period with a particular focus on the influence of their capital structures. By looking at both the debt ratio and the maturity structure of the debt, we separate the pure leverage effect from the effect of financial distress. Consistent with leverage and financial distress costs amplifying the price decline, we find that the share prices of REITs with higher debt‐to‐asset ratios and shorter maturity debt fell more during the 2007 to early‐2009 crisis period. Although REIT prices rebounded with the bounce back in commercial real estate prices, financial distress costs had a permanent effect on REIT values. In particular, we find that REITs with more debt due during the crisis period tended to sell more property and issue more equity in 2009, when prices were depressed.

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Thông tin xuất bản

Real Estate Economics

Tập 43 Số 1

8-36

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