Commercial Real Estate Investors
Friday, Jan. 3, 2020 10:15 AM - 12:15 PM (PDT)
- Chair: Zhonghua Wu, Florida International University
Slow-Moving Capital and Firesales In Real Estate Markets
Abstract"Owners of real assets often have informational advantages over other investors about asset-specific cash flows and local market conditions. Sudden declines in local property values can significantly constrain investors currently active in the local market. These investors may have
to sell their assets quickly and have less access to credit due to the decline in the value of their collateral. This opens up the market to outside investors who lack the same informational advantages. In this paper we document the characteristics of transactions in the commercial
real estate over a full boom and bust cycle. We find that in times of stress, the volume of transactions in hard-hit markets falls. The composition of transactions changes, with entry from out-of-market buyers. Out of market buyers consistently pay less for properties, by about 14 basis points, both during boom and bust markets."
Institutional Cross-Ownership and Firm Value: Evidence from Real Estate Investment Trusts
AbstractThis paper contributes to the ongoing debate about whether and how institutional cross-ownership (ICO) affects firm behavior. Using a sample of equity REITs, which provide significant advantages for isolating a monitoring channel, we find a robust and positive relation between ICO and REIT firm value. The positive relation between ICO and firm value is driven mainly by motivated investors and becomes stronger when we construct our ICO measures using blockholdings. Our difference-in-differences (DID) analysis, using mergers between institutional investors, suggests a causal relation exists between ICO and firm value. After investigating various channels through which ICO could affect firm behavior, we conclude that asset allocation decisions and performance are the most plausible explanations. Our finding that the monitoring associated with ICO aids managers in their portfolio disposition strategies further supports this conclusion. This enhanced monitoring leads to increased property portfolio returns as well as more geographic diversification.
Information Asymmetries, Financial Constraints and Institutional Investment: Evidence from the Real Estate Market
AbstractIn this paper we analyze the underlying economic mechanisms that might be driving the observed patterns in commercial real estate prices, as an interplay between buyer and seller characteristics (in terms of their size, capital constraints, management skill and market knowledge), and the timing and geographical location of these transactions. By jointly modelling the institutional investors’ decision to invest in a particular real estate market and the effect of such decision on real estate prices and holding periods, we find that, controlling for property characteristics, time-varying location characteristics, and investor characteristics: largest buyers (sellers) tend to pay (sell for) a price premium for the otherwise identical property at the time of purchase (sale), relative to the smallest buyers (sellers). Keeping investor size and investor financing constraints constant, more informed sellers tend to sell at a premium, while more informed buyers tend to buy at a discount. Furthermore, more informed sellers (buyers) hold properties for longer. These results point to a significant role of private valuations and investor market informedness in commercial real estate markets, when the financing choice is taken into account.
- R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location
- G1 - General Financial Markets